Reverse Mortgage – Client Call Reference

🏠 Reverse Mortgage — Client Call Reference

Henry | Own It Group | Live Call Guide🧮 Nova Calculator 🎙️ Noota

Questions to Ask Your Client

🎂 Age & Occupancy

How old are you? Is there a spouse or co-borrower also on title — and what is their age?
Is this your primary residence — the home you live in most of the year?
How long have you lived in the home?
Do you plan to stay in this home long-term, or might you move in the next few years?

🏠 Home & Equity

Do you own the home outright, or do you still have a mortgage?
If there's a mortgage — what's your approximate remaining balance?
What do you think the home is worth today?
Is there a HELOC or second mortgage on the property?
Has the home been well-maintained? Any major deferred repairs needed?

💰 Financial Goals & Needs

What are you hoping to use the funds for? (Supplement income, pay off debt, healthcare, home improvements, legacy?)
Are you struggling to make your current mortgage payment?
Do you want a lump sum, a monthly payment, a line of credit, or some combination?
Do you have other retirement income — Social Security, pension, 401k distributions?
Are you able to pay property taxes and insurance on your own going forward?

👨‍👩‍👧 Family & Estate

Do you have heirs who will inherit this home?
Have you discussed this with your family? Are they aware you're exploring this?
Is leaving the home to your heirs a priority, or is your financial security the priority?
Do you have a will or trust in place?

📋 Prior Knowledge

What do you already know about reverse mortgages? (Great for uncovering misconceptions)
Have you spoken to a financial advisor or attorney about this?
Have you completed HUD counseling yet, or will you need a referral?

Reverse Mortgage Benefits — How to Explain Them

These are the real, life-changing benefits for the right client. Lead with the ones most relevant to their situation.

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No Monthly Mortgage Payments RequiredThis is the headline benefit. The borrower never has to make a monthly principal or interest payment for as long as they live in the home. For seniors on fixed income, eliminating a $1,000–$2,000/month payment can be life-changing. They still pay taxes, insurance, and maintenance.

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Stay in Your HomeThe borrower keeps full ownership and can live in the home for the rest of their life, as long as they meet the obligations (taxes, insurance, maintenance). The bank does NOT own the home — a common misconception to address head-on.

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Tax-Free ProceedsMoney received from a reverse mortgage is NOT considered taxable income — it's loan proceeds, not earnings. This is a significant advantage for retirees who need to manage their tax bracket carefully. (Always recommend they confirm with their CPA.)

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Growing Line of CreditIf they choose the line of credit option, the unused portion actually grows over time at the same rate as the loan interest rate. This means the longer they wait to use it, the more they have access to. This is unique to reverse mortgage LOCs — no other product works this way.

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Non-Recourse Loan — Never Owe More Than the Home is WorthFHA insurance guarantees that neither the borrower nor their heirs will ever owe more than the home's value at time of sale. If the loan balance exceeds the home value, FHA covers the difference. Heirs are protected.

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Flexible Payout OptionsLump sum, monthly payments (tenure or term), line of credit, or any combination. The client chooses what works best for their lifestyle and financial plan. They can also change their payment option later (with some restrictions).

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Pay Off Existing MortgageIf the client still has a mortgage, the reverse mortgage can pay it off entirely — eliminating that monthly payment immediately. Many clients use reverse mortgages for exactly this reason: to free up cash flow in retirement.

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Heirs Can Still Inherit the HomeWhen the borrower passes, heirs have options: pay off the loan balance (or 95% of appraised value, whichever is less) and keep the home, sell the home and keep remaining equity, or walk away with no personal liability. They are NOT stuck with the debt.

Reverse Mortgage Terminology

Know these inside out — clients often come in with misconceptions, and confident terminology builds trust.

HECM — Home Equity Conversion Mortgage

The FHA-insured reverse mortgage — by far the most common type. Regulated by HUD, requires mandatory counseling, and carries FHA mortgage insurance that protects both borrower and lender. 95%+ of all reverse mortgages are HECMs.

Principal Limit

The maximum amount a borrower can receive from a reverse mortgage. Based on age of youngest borrower, home value (up to $1,149,825), and current interest rates. Calculated using a PLF (Principal Limit Factor) table.

PLF — Principal Limit Factor

A HUD-published factor (0.0–1.0) that determines how much of the home's value a borrower can access. Higher age and lower rates = higher PLF = more money available. Multiply home value × PLF to estimate principal limit.

MIP — Mortgage Insurance Premium

Two components: (1) Upfront MIP: 2% of home value at closing. (2) Annual MIP: 0.5% of the outstanding loan balance per year. This insures the lender AND guarantees borrowers never owe more than the home is worth (non-recourse protection).

Non-Recourse Loan

The most important protection for borrowers and heirs. If the loan balance exceeds the home's sale price, FHA covers the shortfall. Neither the borrower nor their estate can be pursued for the difference. Critical concept to explain clearly.

Tenure Payment

Monthly payments that continue for as long as the borrower lives in the home as their primary residence — even if they outlive the original loan amount. The FHA insurance fund covers payments if the loan balance exceeds home value.

Term Payment

Fixed monthly payments for a specified number of months chosen by the borrower. Unlike tenure, payments stop after the term ends (but the borrower can remain in the home). Good for clients with a specific short-term need.

Line of Credit (LOC)

The most popular HECM option. Borrower draws funds as needed. Unused portion grows over time (credit line growth rate = interest rate + 0.5% MIP). This growth feature is unique to reverse mortgage LOCs — it's not investment growth, but it increases access to funds.

LOC Growth Rate

The rate at which the unused line of credit grows. Equals the loan's expected interest rate + 0.5%. If rate is 7%, the LOC grows at 7.5% annually on the unused portion — giving borrowers more access to funds the longer they wait.

Financial Assessment

HUD-required review of the borrower's income, credit history, and assets to ensure they can pay ongoing property charges (taxes, insurance). If they can't demonstrate this, lender may require a Life Expectancy Set-Aside (LESA).

LESA — Life Expectancy Set-Aside

An escrow account funded from the reverse mortgage proceeds to cover future property taxes and insurance, required when the financial assessment shows the borrower may struggle to pay them. Reduces funds available but protects the loan from default.

HUD Counseling

Mandatory third-party counseling session with a HUD-approved counselor (not affiliated with the lender) before a HECM application can proceed. Usually done by phone, costs ~$125. Counselor explains all aspects of the loan and alternatives. Cannot be waived.

Due and Payable Event

Circumstances that trigger loan repayment: borrower passes away, sells the home, moves out for 12+ consecutive months (including assisted living), fails to pay taxes/insurance, or allows property to deteriorate significantly.

Non-Borrowing Spouse

A spouse under 62 can be listed as a Non-Borrowing Spouse (NBS). If the borrowing spouse passes, the NBS can continue living in the home without repaying the loan, as long as they meet ongoing obligations. Critical to structure correctly — requires planning.

Proprietary Reverse Mortgage

Non-FHA reverse mortgages offered by private lenders for high-value homes (above FHA lending limits) or borrowers as young as 55 in some states. Not HECM — no FHA insurance, but can offer more funds on luxury homes. Also called "jumbo reverse."

HECM for Purchase (H4P)

Allows seniors to BUY a new primary residence using reverse mortgage proceeds — combining the purchase and reverse mortgage in one transaction. Client puts down a larger amount (no monthly payments), and the reverse mortgage covers the rest. Great for downsizing or relocating.

Reverse Mortgage Process — Step by Step

This takes longer than a traditional mortgage — set expectations upfront.

Initial Consultation & EducationThis is your call. Understand their goals, review eligibility, estimate their principal limit using the Nova Calculator. Explain all payout options and address common misconceptions. Do NOT rush this step — informed clients move forward more confidently.

HUD-Approved Counseling (REQUIRED)Borrower must complete an independent HECM counseling session with a HUD-approved counselor — cannot use the lender's counselor. Done by phone or in person. Takes 60–90 minutes. Client receives a Certificate of HECM Counseling. Application CANNOT proceed without this. Provide referrals to approved counselors.

Formal ApplicationOnce counseling certificate is received, full application is submitted. Financial Assessment completed — review income, credit, and assets to confirm ability to pay taxes, insurance, HOA. If concerns, a LESA (set-aside) may be required.

FHA AppraisalA HUD-approved appraiser assesses value AND property condition (HUD MPRs). If repairs are needed, they may need to be completed before or after closing (depending on amount). Appraisal drives the principal limit calculation.

Underwriting & ProcessingFile reviewed against HUD guidelines. Title search confirms clear ownership. LESA calculated if needed. Lender reviews counseling certificate, appraisal, financial assessment. Takes 2–4 weeks typically.

ClosingLoan documents signed. 3-day Right of Rescission (cooling-off period) — borrower has 3 business days to cancel after signing, no penalty. Funds disburse on day 4. Existing mortgage (if any) is paid off first from proceeds.

Disbursement of FundsAfter the 3-day rescission period: lump sum paid immediately, line of credit available immediately, monthly payments begin the following month. Client receives annual statements and can track loan balance growth.

⏱ Typical Timeline

Counseling: Schedule within 1 week | Application to Close: 45–60 days | Right of Rescission: 3 business days after signing

Reverse mortgages take longer than forward mortgages — the counseling requirement, financial assessment, and FHA processing add time. Set the expectation early: plan for 6–8 weeks start to finish.

Call Scripts & Talking Points

Opening the Call

You say: "Hi [Name], thank you so much for reaching out. So you're looking into a reverse mortgage — and I want to make sure we have a really thorough conversation today, because this is a big decision and I want you to fully understand how it works before we go any further. Can I ask you a few questions about your situation first? Then I'll walk you through exactly how this works and whether it makes sense for you."

Explaining a Reverse Mortgage Simply

You say: "Here's the simple way to think about it: you've spent years building equity in your home — that equity is sitting there, tied up in the walls. A reverse mortgage lets you access that equity as cash, a line of credit, or monthly income, without selling the home and without making monthly mortgage payments. You stay in your home, you keep ownership, and the loan doesn't come due until you sell, move out permanently, or pass away. It's your money — you've already earned it."

Addressing 'The Bank Takes the Home' Myth

You say: "I want to address something right up front, because I hear this a lot: the bank does NOT own your home. You remain the owner — your name stays on the title, just like with any other mortgage. The lender has a lien, same as they would with a regular mortgage. You can sell the home anytime, leave it to your heirs, or pay off the loan whenever you want. The only difference is you're not required to make monthly payments."

Talking About Heirs / Estate

You say: "I know a common concern is what happens to your family. Here's how it works: when you pass away, your heirs have options. They can sell the home, pay off the loan balance, and keep whatever equity is left. Or if they want to keep the home, they can refinance the reverse mortgage into a regular mortgage and take over. And here's the important protection: FHA insurance guarantees they will never owe more than what the home sells for — even if the loan balance is higher. They are completely protected."

On the Counseling Requirement

You say: "Before we can move forward with an application, there's a mandatory step: you'll need to complete a counseling session with an independent HUD-approved counselor — not affiliated with me or the lender. It takes about an hour, usually done over the phone, and costs around $125. I can give you the referral right now. The reason HUD requires this is to make sure you go in with eyes open — and I actually think it's a great step because it gives you a second, completely neutral opinion."

Closing the Call

You say: "Based on what you've told me — your age, your home value, and what you're looking to accomplish — I can run some numbers and show you exactly what you'd qualify for. I want to also make sure this is the right fit, not just push you into something. Can I get some information and put together a no-obligation proposal for you? And I'll send you a referral for the counseling session at the same time — that way we can move forward if it makes sense."

Common Objections & How to Handle Them

"The bank will own my home."

That's one of the biggest misconceptions out there, and I'm glad you brought it up. You remain the owner — your name stays on the title the entire time. The lender has a lien, exactly like any other mortgage. You can sell the home, renovate it, leave it to your heirs. The only difference is you don't have to make monthly payments. Nothing changes about your ownership.

"What about my kids? I don't want to leave them with debt."

This is the non-recourse protection — and it's one of the most important features. Neither your heirs nor your estate can ever owe more than what the home sells for. If your loan balance is $300,000 but the home sells for $250,000, FHA covers the $50,000 difference. Your kids are completely protected. And if there's equity left after the loan is paid, that equity belongs to them. Many heirs actually benefit significantly.

"I don't want to use up all my equity."

You don't have to. You control how much you take and when. If you choose the line of credit, you only draw what you need and the unused portion actually grows over time. Many clients use a reverse mortgage as a safety net — they open the line of credit but barely touch it, knowing it's there for emergencies. The goal isn't to drain equity — it's to have options.

"I heard reverse mortgages are a scam."

I completely understand that concern — there have been bad actors in the past, and the media doesn't always cover this fairly. But today's HECM is a federally regulated, FHA-insured product with mandatory independent counseling, strict lender oversight, and non-recourse protections built in by law. HUD has made enormous improvements to this program. That's exactly why the independent counseling is required — so no one can pressure you into something that doesn't serve you.

"The fees seem high."

The upfront costs are higher than a traditional mortgage — there's a 2% FHA insurance premium and standard closing costs. But here's the perspective: if you're eliminating a $1,500/month mortgage payment, you recover that entire upfront cost in under 24 months. And if you're using a line of credit or monthly income to supplement retirement, the cost of the loan versus the financial security it provides usually makes it a clear win. Let me show you the break-even math for your specific situation.

"My spouse is under 62. Can we still do this?"

Yes — but we need to structure it carefully. Your younger spouse would be listed as a Non-Borrowing Spouse. The loan amount will be based on the younger spouse's age, which will reduce the principal limit somewhat. But the key protection is that if you pass away first, your spouse can continue living in the home without having to repay the loan, as long as they keep up taxes, insurance, and maintenance. This needs to be set up correctly from the start, so let's make sure we document it properly.

"What if I need to move to a nursing home or assisted living?"

If you're away from the home for more than 12 consecutive months — even for medical reasons — the loan can become due and payable. If it's temporary and you plan to return, 12 months gives you significant time. If you have a spouse or co-borrower still living there, they can remain and the loan stays in place. This is an important scenario to plan for, and it's one reason the counseling session is so valuable — they walk you through exactly these situations.

Reverse Mortgage Payout Options — Compared

Help your client choose the right disbursement structure based on their goals.

Option	How It Works	Best For	Key Consideration
Lump Sum	Receive all funds at closing. Fixed interest rate only option.	Paying off existing mortgage, large immediate need, debt payoff	Interest accrues on full balance immediately. Lowest long-term flexibility.
Line of Credit	Draw funds as needed. Unused portion grows over time.	Financial safety net, healthcare reserve, unpredictable expenses	Most popular option. Unused balance grows — more access over time.
Tenure Payments	Fixed monthly payments for LIFE (as long as you live in home).	Income supplement, fixed budgeting, long-term planning	Payments never stop while in home — even if loan balance exceeds value.
Term Payments	Fixed monthly payments for a set number of months you choose.	Bridging to Social Security, specific short-term income need	Payments stop after term — borrower still lives in home.
Modified Tenure	Monthly payments for life + a line of credit reserve.	Income + emergency backup fund	Combines steady income with flexibility. Very popular combination.
Modified Term	Monthly payments for set period + a line of credit reserve.	Short-term income + long-term access	Good for clients with specific near-term financial goals.

🧮 HECM for Purchase (H4P) — Buy with a Reverse Mortgage

Many seniors don't know they can USE a reverse mortgage to buy a new home. The HECM for Purchase lets a 62+ buyer put down approximately 40–60% of the purchase price (depending on age and rates), get a reverse mortgage for the rest, and make NO monthly mortgage payments on the new home. Perfect for downsizing, relocating closer to family, or moving to a one-story home.

💡 Proprietary / Jumbo Reverse Mortgages For homes above $1,149,825 OR borrowers as young as 55 (state-dependent), proprietary reverse mortgages from private lenders may offer more funds. Not FHA-insured, but regulated. Worth exploring for high-value home clients.

🏠 Reverse Mortgage — Client Call Reference

Reverse Mortgage Eligibility

Borrower Requirements

Property Requirements

How Much Can They Get? (Principal Limit)