Reverse Mortgage FAQ

A reverse mortgage is a loan available to homeowners age 62 and older that allows you to convert part of your home equity into cash without selling your home or making monthly mortgage payments. The most common type is the HECM (Home Equity Conversion Mortgage), which is insured by the Federal Housing Administration (FHA).

Instead of making monthly payments to a lender like you do with a traditional mortgage, the lender makes payments to you. The loan is repaid when you sell the home, move out permanently, or pass away. You continue to own the home and live in it throughout the life of the loan.

To qualify for a HECM reverse mortgage in Utah, you must meet the following requirements:

• At least one borrower must be age 62 or older
• The home must be your primary residence
• You must have significant equity in the home (typically 50% or more)
• The property must meet FHA minimum property standards
• You must complete a counseling session with a HUD-approved agency
• You must pass a financial assessment demonstrating your ability to pay property taxes, insurance, and maintain the home

Utah does not impose any additional state-level requirements beyond the federal HECM guidelines. Visit our eligibility page for a detailed breakdown of each requirement.

The amount you can access depends on several factors: your age (older borrowers qualify for more), your home's appraised value (up to the current HECM lending limit of $1,149,825), current interest rates, and any existing mortgage balance that must be paid off.

Generally, borrowers can access between 40% and 70% of their home's value. With Utah's strong housing market and significant home appreciation over the past decade, many Utah homeowners have substantial equity available. A free consultation can provide a personalized estimate based on your specific situation.

Yes, absolutely. You retain full ownership and title to your home throughout the entire life of the reverse mortgage. A reverse mortgage is simply a lien against your property, exactly like a traditional mortgage. You can sell the home at any time, make improvements, and leave it to your heirs.

The key obligations you must meet are living in the home as your primary residence, paying property taxes and homeowner's insurance, and maintaining the property in reasonable condition.

When the last borrower (or eligible non-borrowing spouse) passes away, moves out permanently, or sells the home, the loan becomes due. Your heirs then have several options:

• Sell the home and use the proceeds to repay the loan. Any remaining equity belongs to the heirs.
• Refinance the reverse mortgage into a traditional mortgage if they want to keep the home.
• Pay off the balance using other funds to keep the home.
• Walk away with no financial obligation. HECM loans are non-recourse, meaning heirs will never owe more than the home is worth, even if the loan balance exceeds the home's market value.

Heirs typically have up to 12 months to decide how to handle the property, with possible extensions available.

No. Reverse mortgage proceeds are considered loan advances, not income, so they are not subject to federal income tax or Utah state income tax. This means receiving reverse mortgage funds will not increase your tax burden or push you into a higher tax bracket.

Reverse mortgage proceeds also generally do not affect Social Security or Medicare benefits. However, they may impact needs-based programs such as Medicaid or Supplemental Security Income (SSI). If you receive or plan to apply for these programs, consult with a benefits counselor or tax advisor before proceeding.

If both you and your spouse are age 62 or older and both are listed as borrowers on the reverse mortgage, the surviving spouse can remain in the home with all the same protections. The loan does not become due until the last surviving borrower permanently leaves the home.

If your spouse is under 62 and listed as a "non-borrowing spouse," current HECM rules provide protections that allow them to remain in the home after the borrowing spouse passes away, as long as they continue to meet certain conditions (living in the home as their primary residence, paying taxes and insurance, maintaining the property). The available loan amount may be lower when there is a non-borrowing spouse, as the calculation accounts for the younger spouse's age.

Reverse mortgage costs include several components:

• Origination fee: Charged by the lender, capped by FHA regulations. For homes valued at $125,000 or less, the maximum is $2,500. For higher-value homes, it is 2% of the first $200,000 plus 1% of the amount above $200,000, with a cap of $6,000.
• Mortgage Insurance Premium (MIP): An initial premium of 2% of the home's appraised value, plus an annual premium of 0.5% of the outstanding loan balance.
• Third-party closing costs: Title insurance, appraisal, recording fees, and other standard closing costs.
• Interest: Accrues on the outstanding loan balance over time. Available as fixed or adjustable rates depending on the disbursement option chosen.
• Servicing fee: A monthly fee charged by the loan servicer, typically $30-$35 per month.

Most of these costs can be financed into the loan rather than paid out of pocket, reducing your upfront expenses. Your lender is required to provide a detailed breakdown of all costs before you commit.

A reverse mortgage does not eliminate the possibility of foreclosure, but the circumstances that could lead to it are specific and avoidable. The loan can be called due and payable if you:

• Fail to pay property taxes
• Fail to maintain homeowner's insurance
• Allow the home to fall into serious disrepair
• Move out of the home for more than 12 consecutive months

As long as you meet these basic obligations, which most homeowners are already doing, you can live in your home for as long as you choose. If the financial assessment identifies concerns about your ability to pay taxes and insurance, the lender may set up a Life Expectancy Set-Aside (LESA) to cover these costs automatically from your loan proceeds.

Reverse mortgage proceeds are not counted as income for Medicaid purposes. However, funds that remain in your bank account at the end of the month may be counted as assets, which could affect your Medicaid eligibility.

For example, if you receive a lump sum from a reverse mortgage and do not spend it within the same calendar month, the remaining funds may push your countable assets above Medicaid's limit. To avoid this, some borrowers choose the monthly payment or line of credit option and only draw funds as needed.

If you are currently receiving Medicaid benefits in Utah or anticipate applying for Medicaid in the future, it is important to consult with a benefits counselor or elder law attorney before proceeding with a reverse mortgage. Proper planning can help you access your home equity without jeopardizing your benefits.

Yes. Federal regulations require all HECM borrowers to complete a counseling session with a HUD-approved housing counselor before submitting a loan application. This requirement exists to protect consumers and ensure you fully understand the terms, costs, alternatives, and implications of a reverse mortgage.

The counseling session typically takes about an hour and can be completed in person or over the phone. The cost is usually around $125, though some agencies offer it free of charge. After completing the session, you will receive a counseling certificate that is valid for 180 days. Your lender cannot process your application without this certificate.

Utah residents can access HUD-approved counseling through several national and regional agencies. Your reverse mortgage professional can provide referrals to approved counselors in your area.

The two main types of reverse mortgages serve different needs:

HECM (Home Equity Conversion Mortgage): The most common reverse mortgage, insured by the Federal Housing Administration. It has a lending limit of $1,149,825, strong consumer protections (including non-recourse provisions), requires HUD counseling, and offers multiple disbursement options. The vast majority of reverse mortgages in Utah are HECMs.

Jumbo (Proprietary) Reverse Mortgage: Offered by private lenders for higher-value homes that exceed the HECM limit. Jumbo reverse mortgages can offer larger loan amounts, but they may have different terms, potentially higher interest rates, and fewer regulatory protections than HECMs. They do not require FHA mortgage insurance, which can reduce some costs.

For most Utah homeowners, a HECM provides the best combination of protections, flexibility, and access to equity. Jumbo reverse mortgages are worth exploring if your home is valued significantly above the HECM limit, which may apply to properties in areas like Park City, certain Salt Lake City neighborhoods, or other high-value Utah markets.