With a reverse mortgage, you always keep ownership of your home. Your name stays on the title, and the lender never takes ownership—now or in the future. Even after the last surviving spouse permanently moves out, the lender does not own the home.
How much money you may qualify for depends on several factors, including your age (or the age of the younger spouse if you’re married), your home’s value, current interest rates, and upfront costs. In general, the older you are, the more money you may be able to access.
There are limits on how much money you can take out during the first year. For example, if you qualify for $100,000, you can usually access up to $60,000 (60%) in the first 12 months. Beginning in month 13, you can take as much or as little of the remaining funds as you want.
There are some exceptions to this first-year limit. If you have an existing mortgage or other liens on your home, you may withdraw enough money to pay them off at closing, plus an additional 10% of your total available funds. Using the same example, that would allow access to $70,000 instead of $60,000.
All reverse mortgage borrowers must go through a financial assessment to make sure they can continue to afford living in the home over time. This includes paying property taxes, homeowners insurance, and basic living expenses. The lender reviews income sources such as Social Security, pensions, and investments, along with bank statements and tax returns. If there have been past credit issues, such as late payments, the borrower is given the opportunity to explain them.
- The lender looks at your monthly income and subtracts ongoing expenses like taxes, insurance, debts, and living costs. What’s left is called “residual income.” This amount is compared to government guidelines based on where you live and how many people are in your household to determine whether you have enough income left each month.
If you pass the financial assessment, you can move forward with the reverse mortgage and use the available funds however you choose. If you do not meet the income requirements, the loan may be denied, or some (or all) of the loan proceeds may be set aside specifically to pay future property taxes and homeowners insurance. This set-aside is designed to help ensure those important expenses are covered for as long as the funds last.