I pulled this word by word from the AARP handbook. There are also single-purpose reverse mortgage loans offered by states or local governments — these are often designated for paying property taxes or covering home repairs — as well as proprietary reverse mortgages with fees and terms that can vary by lender. Proprietary reverse mortgages may offer higher loan amounts, with some lenders offering loans of over $1 million, and age requirements can vary. But proceed with caution: proprietary reverse mortgages “are not insured if a lender goes out of business,” Trawinski says.

How much can you borrow with a reverse mortgage? With a HECM, the maximum loan limit in 2025 is $1,209,750. But the amount you can actually borrow depends on your principal limit factor (PLF), the percentage of your home value that you can access using a HECM. The PLF is set by HUD and is based on the current interest rate and your age.

Let’s say a 62-year-old borrower with a 7.25 percent mortgage rate has a PLF of 0.301. For a home valued at $500,000, the borrower could access around $150,000. But after including closing costs, mortgage insurance and origination fees, that amount drops to $130,000.

Don’t worry: you don’t have to crunch the numbers yourself. A lender can do it for you, typically at no charge.

How do you qualify for a reverse mortgage? Your eligibility for a HECM will depend on your home’s value, your age, and the amount of equity you have. Typically, you’ll need at least 50 percent equity to qualify, Boies says. (Your home will need to be appraised as part of the application process to confirm its value.) HECM lenders will conduct a financial assessment to examine cash flow and determine if you have the financial capability to stay current on property taxes, insurance, and maintenance. You also must not be in default status on any federal debt, such as income taxes or student loans.
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Are interest rates for reverse mortgages fixed or adjustable? Most HECMs have adjustable interest rates, meaning the rate can change monthly or annually, based on economic conditions. But lenders set a “cap” that limits rate increases in a given month or year and over the life of the loan. HECMs have a 2 percent annual cap and a 5 percent lifetime cap.

Adjustable HECM interest rates include two components: the actual market interest rate plus a margin added by the lender. The margin amount is fixed for the life of the loan.

Reverse mortgage interest rates tend to be a bit higher than rates for home equity loans or home equity lines of credit.

What happens to your reverse mortgage if you pass away? If you die, your heirs will need to pay off the loan’s balance. They’ll have six months to satisfy the debt, though they may be able to get a 90-day extension. Heirs can choose to either sell the property or purchase it for 95 percent of its appraised value.

What are the potential drawbacks of a reverse mortgage? Reverse mortgages have a few downsides. There’s always a risk when borrowing against your home equity, since it can result in foreclosure if you don’t adhere to the loan’s terms. With reverse mortgages, avoiding foreclosure requires staying current on your property taxes, home insurance, and home maintenance, and continuing to live in the home as your primary residence. In addition, a reverse mortgage eats into your home equity. As a result, it can deplete the equity that you have left to pass on to heirs.

Moreover, scams are common in the reverse mortgage industry. In just the last few years, the Consumer Financial Protection Bureau (CFPB) has taken action against at least seven reverse mortgage lenders and servicers for issues like poor communication, inadequate staffing, preventable foreclosures, and deceptive marketing and advertising practices.

The CFPB cautions older adults to look out for scams targeting veterans or involving home contractors. (A contractor may try to convince you to take out a reverse mortgage to pay for repairs or improvements to your home.) If you think you may be a victim of a reverse mortgage scam, file a complaint with the CFPB.

The New Real Estate Boomers: Purchasing with Reverse Mortgages
In October of 2008, HUD rolled out its reverse mortgage product, and in March of 2009, it perfected it. With rates expected to rise and the tax credit set to expire, many real estate professionals are looking for new and underserved markets to reach out to. Since HUD has perfected its reverse mortgage, the Home Equity Conversion Mortgage (HECM) , and the market for US residents 62 or older is expected to nearly double between now and 2050, perhaps now is their time.

A reverse mortgage is a loan where home equity is converted into a lump sum payment or a series of payments to the homeowner or a combination of the two. There is no requirement for payment until all borrowers no longer live in the home, but the borrower must keep the home in good repair, taxes current, insurance current, and (if applicable) association dues current while they do. The benefits of purchasing with a reverse mortgage are as follows:

Seniors can preserve their savings
Seniors who can’t qualify for a forward mortgage due to income or credit often can qualify for a reverse mortgage
Seniors can own their home for as long as they are alive, keep taxes current, keep insurance current, and live in the home as their primary residence without needing to make a payment
Seniors can enjoy financial security and independence (as this is a non-recourse loan)
Seniors won’t have to worry about passing on a mortgage debt to an heir.

I have been originating Reverse Mortgages in the South since 2007. I am a broker which means I have more choices and I have this down to a science. If you call the big lenders, they will tell you 2-4 months. We close in 20-30 days. Put my experience to work for you. Scott Underwod (205) 908-2993 or Scott@reversemortgagealabama@gmail.com