Reverse Mortgages — Convert Home Equity Into Tax-Free Income
Reverse mortgages through PierPoint Mortgage 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. Call (844) 241-7720 for a consultation.
Overview
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.
Eligibility
Reverse Mortgage Requirements
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.
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.
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.
Property Condition
The home must meet FHA minimum property standards. Required repairs may be completed with loan proceeds in some cases.
HUD Counseling
All HECM borrowers must complete a counseling session with a HUD-approved counselor before the loan application can be processed.
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.
Process
How Reverse Mortgages Work
1
Initial Consultation
Speak with a PierPoint reverse mortgage specialist to understand how the loan works, what you can expect to receive, and whether it aligns with your retirement goals.
2
HUD Counseling
Complete the required counseling session with a HUD-approved agency. This independent session ensures you fully understand the terms, costs, and alternatives.
3
Application and Appraisal
Submit your application and an FHA-approved appraiser will determine your home value, which dictates the maximum amount you can borrow.
4
Underwriting Review
The lender verifies your financial assessment, property title, insurance, and tax payment history to finalize loan approval.
5
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.
6
Closing and Funding
Sign the loan documents. After a three-day right of rescission period, funds are disbursed according to your chosen payment plan.
Advantages
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.
Tax-Free Proceeds
Reverse mortgage disbursements are considered loan advances, not income, so they are not subject to federal income tax.
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.
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.
Flexible Payout Options
Choose a lump sum, monthly installments, a growing line of credit, or any combination based on your cash flow needs.
Ideal Borrower
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.
Comparison
How Does This Compare?
FAQ
Frequently Asked Questions
Do I lose ownership of my home with a reverse mortgage?
No. You retain full ownership and title to your home throughout the life of the reverse mortgage. You continue to live in the home as your primary residence and are responsible for property taxes, insurance, and maintenance.
How much money can I get from a reverse mortgage?
The amount depends on your age, home value, current interest rates, and the HECM lending limit. Generally, older borrowers with higher home values and lower interest rates receive larger disbursements. Your PierPoint specialist can provide an estimate during the initial consultation.
What happens when the reverse mortgage borrower passes away?
The loan becomes due. Heirs can repay the loan and keep the home, sell the home and keep any remaining equity above the loan balance, or surrender the home to the lender. If the loan balance exceeds the home value, heirs owe nothing beyond the home itself.
Are reverse mortgage proceeds taxable?
No. Reverse mortgage disbursements are loan advances, not income, so they are not subject to federal income tax. They also do not affect Social Security benefits, though they may impact Medicaid eligibility if not spent within the month received.
Can I sell my home if I have a reverse mortgage?
Yes. You can sell your home at any time. The reverse mortgage balance is repaid from the sale proceeds, and any remaining equity belongs to you. There are no prepayment penalties on HECM reverse mortgages.
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Available Across 15 States
PierPoint Mortgage is licensed and lending in Alabama, Colorado, Connecticut, Florida, Georgia, Louisiana, Michigan, Mississippi, New York, North Carolina, Ohio, Oregon, Pennsylvania, and Washington.
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