A Financial Planner’s
Guide to
Reverse Mortgages

• No required monthly payments – improves retirement cash flow
• Growing line of credit – unused funds increase over time
• Tax-free access – no impact on Social Security or Medicare
• Sequence risk buffer – reduces need to sell investments in down markets
• Tax-efficient income planning – helps manage IRA/401(k) withdrawals
• Flexible access – draw funds only when needed
• Non-recourse protection – never owe more than home value

• Must be 62 years or older
• Must be primary residence
• No monthly payment required
• Must be in first Lien Position

You can pay off a mortgage with a reverse mortgage

• Lump sum
• Line of credit
• Monthly checks
• Combination of above

A reverse mortgage can be done on an irrevocable or revocable trust, but it must be approved by lender prior to counseling/application.

Yes, but it has to have been the Borrowers spouse when the loan closed and throughout the duration of the Borrowers lifetime

It must have been properly disclosed to the lender

Non- borrowing spouse must occupy and continue to occupy the home as their primary residence

Yes, they can remain on title, without occupying residence
Any title holders MUST do HUD counseling, sign certificate and security instruments

We use a lenient residual income method

Credit Requirements:

• 24 months of on time property tax payments
• 12 months of on time homeowners insurance (HOI)
• Overall history of good credit
• If the borrower does not meet income or credit guidelines, the lender will require a Lifetime Set-Aside to cover property taxes and homeowners insurance

The amount needed to cover all mandatory obligations (such as paying off an existing mortgage, closing costs, or required set-asides), plus up to 10% of the Principal Limit, or 60% of the total Principal Limit, whichever is greater.

After 365 days, any remaining funds become available.

A Power of Attorney can be used in a Reverse Mortgage transaction, but HUD requires strict compliance to ensure validity:

• If the borrower is competent, they may choose to use a POA for convenience.
• If the borrower is incompetent, the lender must obtain both a durable POA and a physician’s letter confirming incapacity

Conservators – court must approve the Reverse Mortgage, and conservator must do HUD counseling

• Used for Right sizing / Downsizing
• Moving close to grandkids / family
• Recetly divorced
• Self Employed with low income

The borrower

Spouse of the borrower (regardless if they live in the home or not)

Anyone on title

Two identical mortgages / notes to be recorded (One in favor of the lender and one in favor of HUD)

Lien is 150% of the appraised value

Up to $4,000,000 loan limit ($2,000,000 in MA)

Lower cost