Reverse Mortgage Frequently Asked Questions

Whether you’ve heard about a “HECM Mortgage,” “Home Equity Conversion Mortgage,” “HECM Reverse Mortgage,” “HECM Loan,” or “Reverse Mortgage,” it’s all the same thing: the FHA-insured loan program designed to let homeowners age 62 and older tap into their home equity and get cash to use as they wish. Unlike a traditional forward mortgage—where the borrower must begin repaying the loan right away—you don’t have to repay funds received through a reverse mortgage until after the final borrower no longer lives in the home, or if you fail to meet the terms of your loan, such as paying your property taxes and insurance and maintaining your home. There are no monthly mortgage payments required. For more answers to HECM FAQs, check out our Reverse Mortgage 101 page.

The short answer is, it depends. There are several variables that determine just how much of the home value you’ll be able to access. For instance, the borrowing limit (known as the “principal limit”) can depend on factors such as your age, home value as determined by an appraisal, the amount of outstanding loans against your house, and current interest rate. To get a better idea of how much cash you could receive, check out our Free Quote Calculator for a customized estimate.

Because a reverse mortgage does not require monthly mortgage payments, the loan repayment process doesn’t have to begin until you’re no longer living in the home, or if you do not meet the terms of the loan – which includes keeping current with property taxes, insurance, and home maintenance. You can read more on repaying the loan here.

Yes. If there’s an existing mortgage on your home, the proceeds from the reverse mortgage are first used to pay off that loan—and since no monthly mortgage payments are required, you can eliminate that monthly mortgage expense and keep more cash to use as you see fit. You’ll have to continue to keep current with property taxes, insurance, and maintenance.

With a reverse mortgage, your heirs can inherit the house, just as they would with any other mortgage. When the loan becomes due, they can decide how to repay the loan balance. Most often, the home is sold and proceeds are used to repay the lender. If there’s any money left over, it goes to your estate. And unlike a traditional mortgage, a reverse mortgage has non-recourse protection—which means that you or your heirs will never owe more than the home’s value when it is sold. You can read more on what adult children need to know here.

Reverse mortgage proceeds can be taken as a one-time, tax-free payment¹, steady, tax-free monthly payments¹, a line of credit² as a “safety net” for future use, or any combination of these methods.

1. Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.
2. Line of credit option is only available for adjustable rate HECM products.

Like traditional “forward” mortgages, your interest rate determines the amount of interest you’ll pay on your loan. And when it comes to reverse mortgage, there are two rate-type products: Fixed rate and adjustable-rate (ARMs). With a fixed-rate reverse mortgage, the interest rate remains the same for the life of the loan, but requires a single lump-sum disbursement at the time of closing. With an ARM product, payment can be received via single lump-sum disbursement, line of credit, term, or tenure options. The annual adjustable rate comes with a periodical change of up to 2% with a lifetime cap rate of 5% over the start rate. Generally, these interest rates are slightly lower than those of fixed-rate mortgages, but offer greater flexibility with multiple payment options. For up-to-the-minute rates, and to see what you can qualify for at any given time, check out our Free Quote Calculator.

No, reverse mortgage funds are considered non-taxable. What’s more, you can avoid making taxable withdrawals from 401(k) or other retirement plans by replacing the money with a tax-free reverse mortgage.* To learn more, watch our video on the tax implications of a reverse mortgage.

*Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.

Yes. While reverse mortgages do not require monthly mortgage payments, you may choose to make periodic payments as often as you’d like. You must keep current with property taxes, insurance, and maintenance. But unlike some other types of loans, with a reverse mortgage there are no prepayment penalties.

Once you’ve decided that a reverse mortgage is right for you, all borrowers are required to meet with a FHA-approved counselor, either by phone or in person. This is an important step that certifies that you fully understand how a reverse mortgage works before you complete your reverse mortgage application. Plus, it’s a great opportunity to make sure that all your questions have been answered by a third party and that you’re clear on all the details: the process, the financial implications, your options, and more. You can read more on counseling here.

Just like a traditional “forward” mortgage, the process of getting a reverse mortgage involves a number of steps and will take some time—but Longbridge will be there with you at every step along the way. For details, read our blog post on what to expect.

The short answer is, you can use the proceeds from a reverse mortgage in any way you wish. Click here for ideas on how you can use a reverse mortgage to meet your financial goals in retirement.

The HECM program requires you to meet with a government-approved independent counselor for your protection—so you fully understand the benefits of the program, as well as your responsibilities, to make sure it’s the right option for you.

Once your reverse mortgage closes and funds, your loan will be set up in the Longbridge servicing system. A welcome packet containing a Welcome letter, New Loan Reference Guide, and a Privacy Notice will be sent to your mailing address on file. These documents are mailed in a plain white envelope, so be on the lookout for them to arrive 7-10 days after your loan funds with Longbridge Financial.

From there, you simply receive your funds in the manner you chose, as long as you continue to meet the terms of your loan (keeping current with property taxes, homeowners insurance, and maintaining your home in good repair).

With a reverse mortgage, you’re responsible for keeping current with property taxes, homeowners insurance, and home maintenance—as well as any HOA dues, if applicable.

If your loan is set up with a fully funded Life Expectancy Set-Aside (LESA) account (similar to an escrow account), the Longbridge servicing department pays your property charges from the established LESA. If you have a partially funded LESA, funds are sent to you, so you can pay your local tax office directly.

Each year, around the anniversary of your loan’s closing date, you’ll receive a request to certify your occupancy of the home, and attest that the home is still your primary residence. You can do this:

•  By phone through an automated service, by calling our Borrower Care team at (866) 654-0020
•  On your personal borrower portal at reversedepartment.com
• By faxing, emailing, or mailing a form from the borrower portal to us as instructed on the form.

Or, you can have a form mailed to you during your closing month that you complete and return.

If there are repairs required to your home (as listed on a Repair Rider to your loan agreement) and you have a Repair Set-Aside account established to pay for those repairs with reverse mortgage funds, you’re required to complete them by the due date listed on the Repair Rider. 

If you selected a term or tenure disbursement plan, each month our Servicing department will send your monthly payment by the first business day of the month. We highly recommend that you enroll in the Electronic Funds Transfer (EFT) process to accept your monthly payments via direct deposit to your bank account.

Remember that, as you move through the loan process from application to closing, our team will be by your side every step of the way. At Longbridge, we pride ourselves on our commitment to giving you the educational resources you need to make informed decisions for your financial well-being. Our reverse mortgage consultants will be ready to answer your questions at any point in the process.

And once your loan closes and funds, if you ever need assistance with servicing your reverse mortgage, you can consult the answers to common questions and other information available on your borrower portal—or you can reach a Borrower Care Representative at (866) 654-0020, Monday through Thursday 8:00am – 7:00pm ET, and Friday 8:00am – 5:00pm ET.

If you move out or permanently relocate to a full-time care facility, your loan becomes due and payable. But you’ll still have options to avoid foreclosure: you can pay your loan in full, sell your property to repay the full balance, or you may qualify for a short sale. You may also have a deed in lieu of foreclosure option.  

If you’re away from home temporarily for more than 2 months, you must notify us immediately and provide a temporary mail forwarding address by calling (866) 654-0020 or completing a “Change of Mailing Address” form found here: reversedepartment.com/common-forms. When you return home, remember to change your mailing address back, using the same form.   

As with any loan, your reverse mortgage will have to be repaid when the last living borrower or eligible non-borrowing spouse passes away. Similar to the permanent move-out scenario above, your heirs will have the same options to avoid foreclosure. We encourage you to bring your heirs into the conversation early on, and keep them in the loop through the life of your loan. Your heirs can find information about what to expect when inheriting a home with a reverse mortgage in our Guide for Heirs. 

Depending on the type of reverse mortgage you have, when your loan becomes due and payable, you or your heirs will have the option to request extensions to allow for additional time to satisfy the reverse mortgage repayment. More information is outlined in our Guide for Heirs. You can also call our Servicing department at (866) 654-0020 to notify us of the situation. One of our trained customer care representatives can help you through the process and explain your options in more detail.