Reverse Mortgages
Convert Home Equity into Tax-Free Income
Reverse mortgages through Howell Mortgage Group allow homeowners aged 62 and older to convert a portion of their home equity into tax-free cash without selling the property or making monthly mortgage payments. Available as lump sums, monthly installments, or lines of credit, reverse mortgages provide financial flexibility during retirement while the borrower retains full ownership and title to the home.
What Is a Reverse Mortgage?
A reverse mortgage is a loan that allows homeowners aged 62 or older to borrow against the equity in their home without making monthly mortgage payments. Instead of the borrower paying the lender each month, the lender pays the borrower. The loan balance grows over time as interest and fees accumulate, and repayment is deferred until the borrower sells the home, moves out permanently, or passes away.
The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration. HECMs are offered through FHA-approved lenders and are subject to FHA lending limits and counseling requirements. Proprietary reverse mortgages are available for homes valued above FHA limits.
Borrowers retain full ownership and title to the home throughout the life of the loan. They must continue to pay property taxes, homeowners insurance, and maintain the property in good condition. The loan becomes due when the last surviving borrower permanently leaves the home.
Requirements and Qualifications
Age Requirement
At least one borrower must be 62 years of age or older. Younger spouses may be listed as non-borrowing spouses to protect their right to remain in the home.
Property Condition
The home must meet FHA minimum property standards. Required repairs may be completed with loan proceeds in some cases.
Primary Residence
The property must be your principal residence. You must live in the home as your primary address and cannot use a reverse mortgage on a second home or investment property.
HUD Counseling
All HECM borrowers must complete a counseling session with a HUD-approved counselor before the loan application can be processed.
Home Equity
You must own the home outright or have a substantial amount of equity. Any existing mortgage balance must be paid off with the reverse mortgage proceeds at closing.
Financial Assessment
Lenders evaluate your ability to pay property taxes, insurance, and maintenance costs. A Life Expectancy Set-Aside may be required if there are concerns.
How Reverse Mortgages Work
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Initial Consultation
Speak with a reverse mortgage specialist to understand how the loan works, what you can expect to receive, and whether it aligns with your retirement goals. -
HUD Counseling
Complete the required counseling session with a HUD-approved agency. This independent session ensures you fully understand the terms, costs, and alternatives. -
Application and Appraisal
Submit your application and an FHA-approved appraiser will determine your home value, which dictates the maximum amount you can borrow. -
Underwriting Review
The lender verifies your financial assessment, property title, insurance, and tax payment history to finalize loan approval. -
Choose Your Disbursement
Select how you receive funds: lump sum, monthly payments for a set term or for life, a line of credit you draw from as needed, or a combination of these options. -
Closing and Funding
Sign the loan documents. After a three-day right of rescission period, funds are disbursed according to your chosen payment plan.
Benefits of Reverse Mortgages
No Monthly Payments
You are not required to make monthly mortgage payments. The loan is repaid when you sell the home, move out permanently, or pass away.
Non-Recourse Protection
If the loan balance exceeds the home value when the loan comes due, neither you nor your heirs owe more than the home is worth. FHA insurance covers the difference.
Tax-Free Proceeds
Reverse mortgage disbursements are considered loan advances, not income, so they are not subject to federal income tax.
Flexible Payout Options
Choose a lump sum, monthly installments, a growing line of credit, or any combination based on your cash flow needs.
Stay in Your Home
You retain full ownership and the right to live in your home for as long as you meet the loan obligations including taxes, insurance, and maintenance.
Who Should Consider a Reverse Mortgage?
Reverse mortgages serve homeowners who are 62 or older, have significant home equity, and want to supplement retirement income without selling their property. The ideal candidate is someone who plans to stay in the home long-term and needs additional cash flow for living expenses, medical costs, home improvements, or paying off an existing mortgage to eliminate monthly payments.
Retirees with limited pension or Social Security income who are house-rich but cash-poor benefit the most from converting equity into usable funds. The line of credit option is particularly valuable because unused credit grows over time at the same rate as the loan balance, providing an increasing financial cushion.
Reverse mortgages are not suitable for homeowners who plan to move within a few years, as the upfront costs are significant and the loan must be repaid in full upon departure. Heirs should also be involved in the discussion, as the loan balance reduces the equity available to beneficiaries.
How Does This Compare?
Feature | Reverse Mortgage (HECM) | Home Equity Loan | HELOC |
|---|---|---|---|
Non-Recourse | Yes (FHA insured) | No | No |
Proceeds | Lump sum, monthly, LOC | Lump sum | Draw as needed |
Repayment Trigger | Move, sell, or pass away | Fixed schedule | End of draw period |
Income Verification | Financial assessment | Full income docs | Full income docs |
Age Requirement | 62+ | None | None |
Monthly Payments | None | Fixed monthly | Interest-only draw period |