How long does it take to get a reverse mortgage?

Learn what this financing option is along with its pros and cons

By Jesse Oberoi, CFA

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13 September 2023

For many, especially seniors, home equity represents a substantial portion of their net worth, which can be a lifesaver in certain situations.

Enter the reverse mortgage—a financial product that allows homeowners to borrow against the equity in their home.

Over the next few minutes, you’ll learn exactly what a reverse mortgage is, its pros and cons, and how long it takes to secure this kind of loan.

And as important, read to the end to find out tactics you can employ to help tap into your home equity as soon as possible when time is of the essence.

What is a reverse mortgage?

A reverse mortgage offers eligible individuals a unique way to borrow against the equity in their home. Unique because instead of the borrower paying the lender, the lender pays the borrower.

While there are some restrictions on how the loan proceeds can be used, there are still many possible uses. For example:

Supplemental income: Many retirees in America subsist on a fixed income. Reverse mortgages can deliver additional monthly cash to help with day-to-day expenses.
Mortgage settlement: Some people use a reverse mortgage to clear existing conventional mortgage balances.
Healthcare costs: As people grow older, healthcare expenses can mount. Reverse mortgages can offer a lifeline for seniors needing quick cash for medical bills.
Home upgrades: Need to renovate your guest bathroom? A reverse mortgage can offer the required funding to complete major home improvements.
Postponing social security: Some seniors delay their benefits so their payments will be higher when they do begin to collect. In the mean they rely on a reverse mortgage for monthly income.
Estate strategy: A reverse mortgage can be a tool in a comprehensive estate planning approach.
Investment opportunities: Some people take out reverse mortgages to invest the proceeds. This is done when a borrower believes the rate of return they can earn on the investment exceeds the loan's servicing cost.
Travel and leisure: Many use the funds from a reverse mortgage to indulge in travel, like a cruise or other vacations.

How long does it take to get a reverse mortgage?

The length of time can vary substantially, but on average, the process to get a reverse mortgage takes between 30 and 45 days, though exceptions exist.

Generally, the reverse mortgage lending application process follows these steps:

Counseling session: Borrowers must meet with a HUD-approved counselor before applying for a reverse mortgage. The counselor not only assists with the administration of the application but also helps ensure you understand the product and any implications.
Application: Following counseling, you can formally apply for the loan. At this stage, the lender will request various personal and financial documentation.
Assessment: After applying, the lender will order an appraisal of your home. The review determines the value of your home, which is one factor that determines how much you can borrow.
Underwriting: Once the appraisal is complete, the lender will complete a thorough assessment of all documentation to verify your eligibility. This can be the longest stage of the process, often taking up to three weeks.
Closing: If approved, you and the lender will move to close the loan. Any necessary paperwork is signed and finalized at this stage.
Disbursement: After closing, borrowers are given a mandatory three-day window to cancel the loan should they change their mind. Otherwise, the funds will be delivered based on their payment choice.

How to ensure a reverse mortgage process goes as quickly as possible

While you can’t control everything, there are several ways you can help expedite—or at the very least avoid delaying—the application process.

Be prompt: Try to answer any questions or provide requested documentation as quickly as possible.
Remain informed: Stay informed throughout each stage of the process so you aren’t left with unanswered questions that might delay the process.
Work with a reputable lender: Choosing a reputable lender can help ensure your application process moves forward smoothly without error and delay.

Reverse mortgage pros and cons

Pros

Immediate access to cash: Homeowners can quickly obtain funds by borrowing against the equity in their house.
No recurring payments: Monthly payments are not required on the reverse mortgage. Instead, the outstanding balance is only repaid once the homeowner sells the home, moves out, or passes away.
Remain in your home: Borrowers can remain living in their home provided they adhere to the terms of the loan, like maintaining the property as their primary residence.
Non-recourse: Reverse mortgages are considered non-recourse loans. That means the lender cannot come after your other assets if the home’s value falls and drops below the loan amount.
Flexibility: Borrowers can choose to have the loan dispersed as a lump sum, monthly payments, or line of credit.
Potential tax benefits: Money from a reverse mortgage is usually considered loan proceeds, not taxable income.

Cons

Higher fees: Reverse mortgages often have higher fees and upfront costs than conventional mortgages.
Higher interest rates: Reverse mortgages typically possess higher rates than traditional ones.
May impact benefits: Funds from reverse mortgages might affect your eligibility for specific government benefit assistance programs, like Medicaid.
Complex: These loans are considered more complicated than conventional mortgages. In fact, the complexity is so great that potential borrowers must consult with a counselor approved by the U.S. Department of Housing and Urban Development (HUD).
Potential impact on heirs: Reverse mortgages must be repaid when the borrower passes. This can happen at an inopportune time in the housing market, reducing the inheritance left for heirs.
Maintenance: To maintain loan eligibility, specific requirements must be met. For example, borrowers must stay current on property taxes and homeowner’s insurance. If not, default could occur, possibly leading to foreclosure.
Inability to easily move or sell: The loan must be repaid if a borrower decides to sell their home or move to a different primary residence.
Industry littered with scams: Since the reverse mortgage industry focuses on senior citizens, unscrupulous individuals target the space for scams. More than ever, it’s critical to only work with reputable lenders.

Reverse mortgages offer a unique financial solution for homeowners in need of cash. While this product can be a game-changer for some borrowers, it comes with a cost.

Higher fees and potential impacts on government benefits are some of the factors you need to consider before pursuing a reverse mortgage.

As always, it’s imperative to understand the full scope of the financial product before making a final decision. If you are still unsure, consider consulting with a financial advisor.