Reverse Mortgages in California (HECM)

To qualify for a California reverse mortgage (HECM), you must be at least 62 years old, own your home outright or have a low enough mortgage balance that the reverse mortgage can pay it off, occupy the home as your primary residence, complete HUD-approved counseling, and demonstrate the ability to keep up with property taxes, insurance, and basic upkeep. There is no minimum credit score, no income requirement in the traditional sense, and no employment requirement.

The reverse mortgage 'principal limit' depends on three factors: 1) the age of the youngest borrower (older = more equity available), 2) current expected interest rate, and 3) the lower of the home value or the FHA lending limit ($1,209,750). A 70-year-old California borrower with a $900,000 home and 7% expected rate can typically access $400,000 – $475,000. The exact amount is calculated using HUD's Principal Limit Factor tables.

Yes. With a reverse mortgage, YOU remain on title as the legal owner of the home. The lender holds a mortgage lien (just like a regular mortgage) but does not own the property. You can sell anytime, leave the home to heirs, or refinance the reverse mortgage. The lender becomes involved only when the loan must be repaid (typically at sale or after the last borrower permanently leaves).

When the last borrower on the loan passes away, the heirs have several options: 1) sell the home, pay off the reverse mortgage balance, and keep any remaining equity; 2) refinance the reverse mortgage into a traditional mortgage and keep the home; or 3) deed the home back to the lender if the balance exceeds the home value (HECM loans are 'non-recourse' — heirs are never personally liable for any shortfall). Heirs typically have 6 months to decide, with two 90-day extensions possible.

No. Reverse mortgage proceeds are loan advances, not income, so they are not taxable. They also do not affect Social Security or Medicare benefits. However, they CAN affect needs-based government benefits like Medi-Cal and SSI if the cash is held in accounts above program asset limits. Always consult a CPA and benefits counselor before drawing large lump sums.

California reverse mortgages have notably higher upfront costs than traditional mortgages: 1) FHA upfront mortgage insurance premium of 2% of home value (capped at the FHA limit), 2) origination fee up to $6,000, 3) appraisal $600-$1,000, 4) HUD counseling fee around $125, 5) standard title, escrow, and recording costs. Total upfront costs commonly run 4-6% of home value, but most are rolled into the loan balance — no out-of-pocket required.

Yes — this is the HECM for Purchase program. A California homeowner aged 62+ can purchase a new primary residence using a reverse mortgage, typically with a 50% – 60% down payment from existing savings or sale proceeds. The reverse mortgage covers the rest, and there is no monthly mortgage payment. This is increasingly popular for seniors downsizing from a paid-off home to a newer, single-story, or 55+ community home.

It depends on the situation. A reverse mortgage can be an excellent retirement-funding tool for the right borrower — someone with substantial equity, limited monthly income, and a strong desire to age in place. It can be a poor choice for someone who plans to move within 2-5 years (high upfront costs don't get amortized) or someone who wants to leave their home to heirs without complications. Save Financial provides honest, no-pressure consultations and turns down applicants when a reverse mortgage isn't the right fit.