Complete Guide to Reverse Mortgages in California & Washington [2026]

What Is a Reverse Mortgage (HECM)?

A Home Equity Conversion Mortgage (HECM) is an FHA-insured loan that allows homeowners age 62 and older to access their home equity without selling their home or making monthly mortgage payments. Unlike a traditional mortgage where you make payments to the lender, a reverse mortgage pays you.

The HECM program, created by Congress in 1988 and insured by the Federal Housing Administration (FHA), remains the most popular reverse mortgage product. FHA insurance protects both borrowers and lenders, guaranteeing that you receive your loan proceeds and ensuring you never owe more than your home is worth.

How a Reverse Mortgage Works

With a reverse mortgage, the lender makes payments to you instead of you making payments to the lender. The loan balance grows over time as interest and fees accumulate, but you retain ownership of your home. The loan becomes due when:

• You sell the home - Proceeds first pay off the reverse mortgage
• You move out for 12+ months - Including moving to assisted living
• The last borrower passes away - Heirs can repay the loan or sell the home
• You fail to meet loan obligations - Property taxes, insurance, or maintenance requirements

Key HECM Statistics for 2026

• FHA lending limit: $1,149,825 (up from $1,089,300 in 2025)
• Average HECM borrower age: 73 years old
• Most popular payout option: Line of credit (67% of borrowers)
• Average home equity accessed: 52% of available equity

HECM Eligibility Requirements

Qualifying for a reverse mortgage involves meeting specific age, property, and financial requirements. The eligibility criteria protect seniors from taking on obligations they cannot sustain.

Age Requirement: 62 Years or Older

The most critical requirement is age: at least one borrower must be 62 years old or older. This is a non-negotiable federal requirement for all HECM loans. If you are married to a younger spouse:

• Your spouse can be listed as an Eligible Non-Borrowing Spouse (NBS)
• NBS designation protects your spouse's right to remain in the home if you pass away first
• Having a younger spouse reduces the amount you can borrow (based on the younger spouse's age)

Property Requirements

Your home must meet specific criteria to qualify for a HECM:

• Primary residence: You must live in the home as your principal residence
• Eligible property types: Single-family homes, 2-4 unit properties (if you occupy one unit), HUD-approved condominiums, manufactured homes meeting FHA standards
• Property condition: Home must meet FHA minimum property standards
• No existing liens: Any current mortgage must be paid off with reverse mortgage proceeds

Financial Assessment

Since 2015, HECM lenders conduct a financial assessment to verify you can maintain loan obligations:

• Credit history review: Not for credit score requirements, but to assess payment patterns
• Income verification: Social Security, pensions, retirement accounts, and other income sources
• Property charge analysis: Ability to pay property taxes, homeowners insurance, and HOA fees
• Life Expectancy Set-Aside (LESA): If you cannot demonstrate ability to pay property charges, funds may be set aside from loan proceeds to cover these costs

How Reverse Mortgage Payouts Work

HECM loans offer flexible payment options to match your financial needs. Understanding each option helps you maximize the value of your reverse mortgage.

Five HECM Payout Options

1. Lump Sum (Fixed Rate)

Receive all available funds at closing in a single payment. This option requires a fixed interest rate and limits you to 60% of principal limit in the first year (unless paying off an existing mortgage).

• Best for: Paying off a large existing mortgage or immediate large expense
• Consideration: Interest accrues on entire balance immediately

2. Tenure Payments

Receive equal monthly payments for as long as you live in the home as your primary residence. Payments continue even if you live past your life expectancy.

• Best for: Supplementing retirement income with predictable monthly cash flow
• Advantage: Guaranteed lifetime payments regardless of loan balance

3. Term Payments

Receive equal monthly payments for a fixed period you choose (e.g., 10 years, 15 years). Payments are larger than tenure payments but stop after the term ends.

• Best for: Bridging income gaps until Social Security starts or pension begins
• Consideration: Payments stop after term even if you still live in the home

4. Line of Credit

Access funds as needed up to your credit limit. The unused portion of your credit line grows over time at the same rate as your loan balance.

• Best for: Maximum flexibility and emergency reserves
• Key advantage: Credit line growth can outpace home appreciation in some markets
• Most popular: 67% of HECM borrowers choose this option

5. Combination Plans

Combine any of the above options (except lump sum) to create a customized payout structure. For example, receive monthly tenure payments plus maintain a line of credit for emergencies.

Principal Limit Factors

Your principal limit (maximum loan amount) depends on three factors:

1. Age of youngest borrower or eligible non-borrowing spouse: Older borrowers qualify for higher amounts
2. Current interest rates: Lower rates mean higher principal limits
3. Home value or FHA limit (whichever is less): Maximum home value considered is $1,149,825 in 2026

Common Uses for Reverse Mortgage Proceeds

California and Washington seniors use reverse mortgage funds for various purposes that improve their quality of life and financial security in retirement:

• Eliminate monthly mortgage payments: The most common use - pay off your existing mortgage and eliminate that monthly obligation, freeing up cash flow for other expenses
• Supplement retirement income: Use tenure payments to create a reliable monthly income stream to cover living expenses, healthcare costs, or other regular needs
• Pay for long-term care: Fund in-home care or assisted living expenses while remaining in your home as long as possible
• Cover healthcare expenses: Pay for medical procedures, medications, or treatments not covered by Medicare
• Home modifications: Install grab bars, wheelchair ramps, stairlifts, or other accessibility improvements to age in place safely
• Property taxes and insurance: Establish a LESA (Life Expectancy Set-Aside) to ensure ongoing property charges are covered
• Emergency reserve: Maintain a growing line of credit for unexpected expenses without monthly payment obligations
• Help family members: Provide financial assistance to children or grandchildren for education, home purchases, or other needs
• Travel and lifestyle: Enjoy retirement by funding travel, hobbies, or experiences you have been postponing
• Delay Social Security: Use reverse mortgage funds to cover expenses while delaying Social Security benefits to age 70, maximizing your lifetime benefit

HECM vs HELOC for Seniors

Seniors with home equity have multiple options for accessing their equity. Understanding the differences between a HECM reverse mortgage and a HELOC (Home Equity Line of Credit) helps you choose the right product for your situation.

When to Choose a HECM Over a HELOC

• You cannot qualify for HELOC payments - HECMs have no monthly payment requirement
• You want guaranteed access to funds - HECM credit lines cannot be frozen or reduced
• You plan to stay in your home long-term - HECM benefits compound over time
• You want protection against owing more than home value - Non-recourse guarantee

When a HELOC May Be Better

• You are under 62 - HECMs require age 62+
• You need short-term funds - Lower upfront costs for temporary borrowing
• You can comfortably make monthly payments - Lower total interest cost over time
• You want to preserve equity for heirs - Pay down principal monthly

Reverse Mortgage Costs and Fees

Understanding HECM costs helps you evaluate whether a reverse mortgage makes financial sense for your situation. While upfront costs are higher than traditional mortgages, most fees can be financed into the loan rather than paid out of pocket.

Initial Mortgage Insurance Premium (MIP)

FHA charges an initial mortgage insurance premium of 2% of the maximum claim amount (your home value or FHA limit, whichever is lower). For a $800,000 home, this equals $16,000. This premium protects both you and the lender:

• Guarantees you receive your loan proceeds even if the lender fails
• Ensures you never owe more than your home's value (non-recourse protection)
• Allows heirs to walk away without owing anything if the loan exceeds home value

Annual Mortgage Insurance Premium

In addition to the initial premium, FHA charges an annual MIP of 0.5% of the outstanding loan balance. This is added to your loan balance rather than paid monthly. The annual MIP continues for the life of the loan.

Origination Fee

Lenders charge an origination fee for processing your HECM. FHA limits this fee as follows:

• Homes valued under $125,000: Maximum $2,500
• Homes valued $125,000 - $200,000: 2% of home value
• Homes valued over $200,000: 2% of first $200,000 plus 1% of remaining value
• Maximum origination fee: $6,000 regardless of home value

For a $800,000 California home, the maximum origination fee would be $6,000.

Third-Party Closing Costs

Standard closing costs apply to reverse mortgages, typically ranging from $3,000 to $8,000:

• Appraisal fee: $450 - $800 depending on property complexity
• Title insurance: $1,500 - $3,500 based on loan amount
• Recording fees: $100 - $300
• Credit report: $30 - $50
• Flood certification: $20 - $30
• Pest inspection: $100 - $200 (if required)
• Attorney or escrow fees: $500 - $1,500

Cost Example: $800,000 California Home

Ongoing Costs and Obligations

While you have no monthly mortgage payments, you must continue paying:

• Property taxes: Annual property tax payments must remain current
• Homeowners insurance: Coverage must be maintained on the property
• Flood insurance: Required if property is in a flood zone
• HOA fees: If applicable to your property
• Maintenance: Home must be kept in reasonable condition

Failure to meet these obligations can result in loan default and potential foreclosure, even without missed mortgage payments.

Pros and Cons of Reverse Mortgages

A reverse mortgage is a significant financial decision. Understanding both the advantages and potential drawbacks helps you make an informed choice.

Advantages of HECM Reverse Mortgages

• No monthly mortgage payments required: Eliminate your current mortgage payment and never make another one
• Tax-free proceeds: Funds received are loan proceeds, not taxable income
• Non-recourse loan: You or your heirs never owe more than the home's value
• Retain home ownership: Keep the title and live in your home indefinitely
• Flexible payout options: Customize how you receive funds based on your needs
• Growing line of credit: Unused funds grow over time, potentially outpacing home appreciation
• FHA insurance protection: Government backing ensures you receive promised funds
• Social Security and Medicare unaffected: HECM proceeds do not count as income for these programs

Potential Drawbacks to Consider

• Higher upfront costs: FHA mortgage insurance premium (2% initial + 0.5% annual) plus origination fees
• Reduced inheritance: Loan balance grows over time, leaving less equity for heirs
• Must maintain property: Required to pay taxes, insurance, and keep home in good condition
• Complexity: More complicated than traditional mortgages or HELOCs
• Moving triggers repayment: Living outside the home for 12+ months requires loan repayment
• Interest accrues: Loan balance grows even if you do not draw funds (except line of credit)
• FHA lending limits: Maximum home value considered is $1,149,825 (may need proprietary loan for higher values)

HUD Counseling Requirement

HUD counseling is mandatory for all HECM reverse mortgages. Before applying for a HECM, you must complete a counseling session with a HUD-approved reverse mortgage counselor. This requirement protects seniors from potential scams and ensures borrowers fully understand the loan.

What HUD Counseling Covers

• How reverse mortgages work: Complete explanation of HECM loan terms and features
• Costs and fees: Detailed review of upfront and ongoing costs
• Payout options: Explanation of all disbursement methods and their implications
• Obligations: Property tax, insurance, and maintenance requirements
• Alternatives: Discussion of other options that may meet your needs
• Impact on benefits: How HECM proceeds affect Medicaid, SSI, and other programs
• Estate planning considerations: Effect on inheritance and heirs
• Scam awareness: Warning signs of reverse mortgage fraud

How to Complete HUD Counseling

1. Find a HUD-approved counselor: Visit HUD.gov/findacounselor or call 1-800-569-4287
2. Schedule your session: Counseling can be done in person, by phone, or online
3. Complete the session: Sessions typically take 60-90 minutes
4. Receive your certificate: The counselor issues a certificate valid for 180 days
5. Provide certificate to lender: You cannot apply for a HECM without this certificate

Counseling Costs

HUD-approved counselors charge approximately $125 for reverse mortgage counseling. If you cannot afford the fee, counselors must provide services at reduced cost or free. The fee cannot be financed into your loan - it must be paid before or at counseling.

Proprietary (Jumbo) Reverse Mortgages

For California and Washington homeowners with properties valued above the FHA limit of $1,149,825, proprietary (jumbo) reverse mortgages provide access to additional equity not available through HECMs.

What Are Proprietary Reverse Mortgages?

Proprietary reverse mortgages are private loans offered by banks and mortgage companies. Unlike HECMs, they are not FHA-insured but can accommodate higher home values:

• Higher loan limits: Access equity on homes worth $2 million, $5 million, or more
• Age requirement: Typically 62+ (same as HECM), though some programs allow 60+
• No FHA mortgage insurance premium: Reduces upfront costs on large loans
• Faster processing: Often close faster than HECM loans
• Condo flexibility: May accept condos not HUD-approved

California Markets Ideal for Jumbo Reverse Mortgages

High-value California markets where proprietary reverse mortgages are common:

• Orange County: Newport Beach, Laguna Beach, Newport Coast, Corona del Mar
• Los Angeles: Beverly Hills, Bel Air, Pacific Palisades, Manhattan Beach
• San Francisco Bay Area: Atherton, Palo Alto, Los Altos, Menlo Park
• San Diego: La Jolla, Del Mar, Rancho Santa Fe

Washington Markets for Jumbo Reverse Mortgages

• Seattle: Medina, Mercer Island, Madison Park, Laurelhurst
• Eastside: Bellevue, Kirkland, Clyde Hill, Yarrow Point

HECM vs Proprietary Comparison

Estate Planning Considerations

A reverse mortgage affects your estate and should be part of a comprehensive financial plan. Working with an estate planning attorney helps ensure your reverse mortgage strategy aligns with your overall goals.

Impact on Inheritance

The most significant estate planning consideration is the effect on what you leave to heirs:

• Loan balance grows over time: Interest and fees compound, reducing equity
• Line of credit option preserves more equity: Only borrow what you need
• Home appreciation may offset loan growth: Especially in California and Washington markets
• Non-recourse protection benefits heirs: Never inherit debt exceeding home value

Options for Heirs When Borrower Passes Away

1. Repay the loan and keep the home: Pay off the loan balance with other funds or refinance
2. Sell the home: Use sale proceeds to repay the loan, keep any remaining equity
3. Deed in lieu of foreclosure: Transfer property to lender with no further obligation
4. Walk away: If loan exceeds home value, heirs have no obligation (non-recourse)

Strategies to Preserve Equity

• Choose line of credit: Only draw funds when needed, minimizing interest accrual
• Make voluntary payments: You can make payments anytime to reduce the balance
• Delay taking a reverse mortgage: Wait until later in retirement when you truly need funds
• Consider other assets first: Use retirement accounts or investments before home equity
• Life insurance: Purchase a policy to replace the equity your heirs would have received

Trusts and Reverse Mortgages

If your home is in a living trust, you can still get a reverse mortgage. The trust must be reviewed and approved by the lender to ensure it meets HECM requirements. Key considerations:

• Revocable living trusts are generally acceptable
• Irrevocable trusts typically do not qualify
• Trust must allow you to encumber the property
• You must remain the beneficiary while living in the home

Frequently Asked Questions About Reverse Mortgages

What is the minimum age requirement for a reverse mortgage?

The minimum age requirement for a HECM reverse mortgage is 62 years old. At least one borrower on the loan must be 62 or older. If you have a younger spouse, they can be listed as an eligible non-borrowing spouse, which provides certain protections but reduces the amount you can borrow.

Is HUD counseling required for a reverse mortgage?

Yes, HUD counseling is mandatory for all HECM reverse mortgages. You must complete counseling with a HUD-approved counselor before applying. This requirement protects seniors by ensuring they fully understand the loan terms, costs, and alternatives before proceeding. The counseling certificate is valid for 180 days.

How do I receive money from a reverse mortgage?

HECM reverse mortgages offer five payout options: lump sum (fixed rate), monthly tenure payments for life, monthly term payments for a set period, a line of credit that grows over time, or a combination of these options. Most borrowers (67%) choose the line of credit for its flexibility and growth feature.

Do I still own my home with a reverse mortgage?

Yes, you retain full ownership of your home with a reverse mortgage. The lender places a lien on the property (like any mortgage), but you keep the title and can live in the home indefinitely as long as you maintain it, pay property taxes, and keep homeowners insurance current. You can also sell the home at any time.

What happens to a reverse mortgage when the borrower dies?

When the last borrower passes away, heirs have options: they can repay the loan and keep the home, sell the home and keep any remaining equity, or let the lender sell the property. HECM loans are non-recourse, meaning heirs never owe more than the home's value, even if the loan balance exceeds it. They have 30 days to notify the lender and 6 months (with extensions available) to resolve the loan.

What is the difference between HECM and proprietary reverse mortgages?

HECM loans are FHA-insured with lending limits (currently $1,149,825 in 2026), while proprietary (jumbo) reverse mortgages are private loans for high-value homes exceeding FHA limits. Proprietary loans can access more equity on homes worth $2 million or more but lack FHA insurance protections and typically have higher costs.

Can I qualify for a reverse mortgage with an existing mortgage?

Yes, you can get a reverse mortgage even with an existing mortgage. The reverse mortgage proceeds must first pay off your current mortgage, then any remaining funds are available to you. Many seniors use reverse mortgages specifically to eliminate monthly mortgage payments and improve cash flow.

Additional Reverse Mortgage Resources

For more information about reverse mortgages, consult these authoritative sources:

• HUD HECM Program Overview - Official FHA reverse mortgage information
• Consumer Financial Protection Bureau - Reverse mortgage consumer guide
• Find a HUD-Approved Counselor - Locate counseling services near you
• National Reverse Mortgage Lenders Association - Industry education and resources

Related Loan Programs for Orange County Homeowners

Explore other home equity and refinancing options that may complement or serve as alternatives to reverse mortgages:

• HELOC (Home Equity Line of Credit) - Flexible access to home equity with monthly payments
• HELOAN (Home Equity Loan) - Fixed-rate lump sum home equity loan
• Cash-Out Refinance - Replace your mortgage and access equity
• Orange County Refinancing Guide - Complete guide to refinancing options