I have several clients that are equity rich but cash poor. I receive referrals from Financial Planners to evaluate retirees’ options from the real estate finance side. Reverse Mortgages are viable options.
Reverse mortgages have come a long way. What was once considered a “last resort” is now used by many homeowners as a flexible retirement (or purchase) strategy. If you’re 62 or older (55 with the Proprietary program) and own your home (or have strong equity), this loan can give you access to cash without selling or making monthly mortgage payments.
Most people know a reverse mortgage allows you to tap into your home’s equity without making monthly payments. But many are surprised to learn you can also use a reverse mortgage to purchase a new primary residence. This can be a game-changer for downsizing, upsizing, or relocating, all without the burden of a monthly mortgage payment. Even if you can purchase a home “all cash” should you?
In today’s world of high property values, especially here in Los Angeles and Ventura Counties, a reverse mortgage, whether a government FHA-insured Home Equity Conversion Mortgage (HECM) or a proprietary “jumbo” loan may be more relevant than ever. Note: I have multiple wholesale lender options. Not all lenders or guidelines are created equal.
Is It a Fit for You or a Family Member?
Reverse mortgages aren’t one-size-fits-all. But for the right scenario — particularly in areas like Los Angeles and Ventura Counties, where home values have soared — it can be a powerful financial tool.
- Eliminate existing monthly mortgage payment
- Cash out to consolidate high interest rate consumer debt (credit cards, car payments, etc)
- Cash out for home improvements or maintenance
- Purchase a home without a monthly house payment
- Supplement monthly retirement or salary income
- Create cash flow for living expenses or in-home care
- Set up a standby line of credit for emergencies
- Vacation or investments
It’s worth exploring the options.
Who Qualifies for a Reverse Mortgage?
To qualify for a reverse mortgage in 2025, here’s what you’ll need:
- Age:
- For a FHA HECM: at least 62 years old
- For proprietary reverse mortgages: 55+ (depends on the lender)
- Property Type:
- Single-family homes
- 2- to 4-unit properties (you must live in one unit)
- FHA-approved condos (for HECMs)
- Some proprietary programs allow for non-FHA condos and higher-valued homes
- Equity:
- You must have significant equity — generally at least 50% or more depending on your age, property value, and loan type
- Primary Residence Only:
- The home must be your main residence — not a rental or vacation property
- Financial Assessment:
- Lenders will evaluate your ability to maintain property taxes, homeowners insurance, HOA dues (if any), and basic upkeep. This isn’t income-based like a traditional loan, but you still must show financial capacity.
How Much Can You Qualify For?
The loan amount is based on:
- Your age (the older you are, the more you can access)
- Your home’s value
- Interest rates at the time of loan origination
- The program type: HECM or proprietary
2025 Lending Limits:
- HECMs: Max home value considered = $1,149,825 (higher appraised property value is acceptable, but loan amount will be maxed out using$1,149,825 as the value
- Proprietary reverse mortgages: Loans available up to $4 million+, depending on lender and property value
| Feature | HECM (FHA-Insured) | Proprietary / Jumbo Reverse Mortgage |
|---|---|---|
| Minimum Age | 62+ | Typically 55+ (varies by lender) |
| Maximum Home Value Considered | $1,149,825 (nationwide cap) | Up to $4 million+ (based on lender guidelines) |
| Eligible Property Types | Primary residence: 1–4 units, FHA-approved condos, some manufactured homes | Primary residence, high-value homes, non-FHA condos, some more flexibility |
| Loan Amount Access | ~35–60% of home value (age + rate dependent) | ~40–60%, increases with age and property value |
| Lump Sum Option | Limited to 60% upfront in year one (unless paying off large debt) | Full available amount may be accessed at closing |
| Line of Credit Option | Yes – grows over time (HECM LOC) | Yes – may have draw period limits (varies) |
| FHA Mortgage Insurance | Yes – upfront & annual MIP required | None (no FHA involvement) |
| Interest Rates | Generally lower (fixed or adjustable) | Typically higher (rates vary by lender and program) |
| Non-Recourse Loan? | Yes – borrower/heirs never owe more than home value | Yes – same protection applies |
| Non-Borrowing Spouse Protection | Yes – HUD protections if documented | Varies by lender – must be clearly outlined |
| Counseling Requirement | HUD-certified counseling required | Usually required by lender, not HUD-based |
| Ideal For | Homes under $1.2M, FHA-friendly properties, borrowers age 62+ | High-value properties, borrowers age 55–62, those seeking full lump sum or greater loan proceeds |
Examples (approximate):
- A 72-year-old with a $1,000,000 home may access $450,000–$525,000 under a HECM
- A 60-year-old with a $2,000,000 home could access $700,000+ under a proprietary reverse
Want a specific estimate for your home? I can run the numbers based on your age and property value.
How Age Impacts Loan Amounts
The older you are, the more money you can access. That’s because the lender’s risk decreases with age. Here’s the general idea:
- At 62: You may be eligible for 35–45% of your home’s value
- At 75: Closer to 50–60%
- At 85+: Potentially 65%+, depending on interest rates
Younger borrowers can still qualify (especially with proprietary programs at age 55+), but the available loan amount is more conservative.
| Borrower | Age | Home Value | Program | Est. Loan Access |
|---|---|---|---|---|
| Sandra (purchase) | 65 | $950,000 | HECM for Purchase | ~$400,000 reverse + ~$550,000 down |
| David | 72 | $1,000,000 | HECM | ~$500,000–$550,000 |
| Olivia | 60 | $2,000,000 | Proprietary | ~$800,000+ |
| Marco | 75 | $2,000,000 | Proprietary | ~$990,000 |
What Happens If One Borrower Passes Away?
If both spouses are on the loan as co-borrowers, the surviving spouse can remain in the home with full rights under the reverse mortgage.
If one person was not on the loan (often due to being underage at the time), they may still qualify as an “eligible non-borrowing spouse” — meaning they can remain in the home, but can’t access more loan proceeds. This is one reason why planning and proper structuring matter.
When Is the Loan Repaid?
The reverse mortgage becomes due when:
- The last borrower (or eligible non-borrowing spouse) moves out or passes away
- The home is sold
- Property taxes or insurance go unpaid
- The home is not maintained or is no longer the borrower’s primary residence
When repayment happens, the home can be sold, and the loan is paid off from the sale proceeds. If the loan balance is greater than the home’s value, FHA insurance covers the difference (HECMs are non-recourse). Heirs can also choose to keep the home by paying off the reverse mortgage balance.
Things To Be Aware Of
- Interest rates maybe lower on a HECM Reverse, but the origination costs may appear high as FHA has an Upfront Mortgage Insurance (incorporated into the loan amount)
- Borrowers must take a mandatory third party counseling, before a loan application can be taken. This to make sure a borrower is informed, there’s no elder abuse, and of capacity to enter into the financial arrangement.
- The lender will allow flexibility for non-residency for a period (medical reasons, etc). But if residency is not maintained over time, the loan will become due.
- Lenders will give time flexibility for estates to sell property or refinance to pay off the loan… as long as there’s proof things are moving forward
- When borrowers or beneficiaries attempt to rent the property and keep the Reverse in place, that is considered fraud and an immediate payoff would be required, and foreclosure potentially implemented.
Let’s Talk Strategy
I originate both HECM and proprietary reverse mortgages and can walk you through what’s available for your specific property and situation. Whether you’re planning for yourself, your parents, or your clients, it pays to get the right guidance upfront.
Because the HECM is a FHA insured loan, the property must meet certain condition guidelines. I prefer to do a cursory walk-thru of a property before starting the process. I don’t want a borrower to pay for an appraisal to find out there are issues, that can should be resolved before putting money out. Very few Loan Officers will supply that service.
Reach out to schedule a no-pressure consultation and see what’s possible
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free to contact me
Ron Henderson GRI, SRES, SFR, RECS, CIAS, CREN, GREEN
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – Southland Regional Association of Realtors (2025)
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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