Reverse Mortgage On A Paid-Off Home
If your home is paid off, a HECM lets you use its equity while the home stays your principal residence. Every borrower must be 62 or older, and you keep paying property taxes, insurance and upkeep. If property charges go unpaid, the loan can become due and payable.
Quick answer
Saxton Mortgage does. At least one HECM program we offer is available on an owner-occupied primary residence you already own, and there is no seasoning requirement for ownership as long as a borrower is on title before the application date. HUD still requires a financial assessment of your credit, income, assets and property charges. The loan is non-recourse: you or your estate will never owe more than the loan balance or the value of the home, whichever is less.
Fixed rate or adjustable rate
With no mortgage to pay off, the rate type you pick shapes how the money comes out. Each item below is an FHA rule or a rule of our reverse mortgage program.
- Fixed rate: our program pays one lump sum at closing, and that payment plan cannot be changed later. An open-ended fixed rate HECM is not offered.
- Fixed rate: the lump sum is capped by a first-year limit. Money not paid at closing is not available later, except from a set-aside created at closing.
- Adjustable rate: choose a line of credit, tenure, term, modified tenure or modified term.
- Adjustable rate: the principal limit may increase each month, but there are limits on what can be paid out in the first 12 months.
- Adjustable rate: you can change payment plans later, as long as funds are available.
- Either rate: you can pay back part or all of the loan at any time without penalty.
A single lump sum
Nothing more to draw later
Five adjustable rate plans
A principal limit that grows
Switch plans if funds allow
Prepay without a penalty
What A Paid-Off Home Changes
A HECM Traditional is the FHA reverse mortgage for a borrower who holds title to the home they live in and wants to use its equity. It is a non-recourse loan.
The most you can receive is called the principal limit. It is based on the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate, and the maximum claim amount. On a home you already own, the maximum claim amount is the lower of the appraised value or the FHA HECM limit, which is $1,249,125 for 2026. If FHA requires a second appraisal, the lower of the two values is used.
Owning the home outright does not make the whole principal limit available at closing. Mandatory obligations, the fees and charges required to get the HECM, are paid at closing or during the first 12 months, and they include any property tax and insurance payments the lender requires at closing. The amount you can take in the first 12 months is limited. On an adjustable rate HECM, you tell the lender at closing how much beyond mandatory obligations you will draw in that first year, and you cannot raise or lower that choice after closing. Funds set aside for servicing fees, repairs after closing, or taxes and insurance also come out of the principal limit.
Every HECM also requires a financial assessment of your credit, income, assets and property charges, even when the home is free and clear. If your credit or property charge history is not acceptable after any extenuating circumstances are considered, a fully funded set-aside for taxes and insurance is required. To compare draw choices on an adjustable rate loan, see our reverse mortgage line of credit page.
Why owners of paid-off homes talk to Saxton
This page is for homeowners 62 and older whose home is paid off, and the family helping them decide.
Non-Recourse To Your Estate
The HECM is a non-recourse loan. You or your estate will never owe more than the loan balance or the home’s value, whichever is less, and no assets other than the home must be used to repay the debt. If heirs sell the home to repay the loan, the sale must be for at least the lesser of the balance or 95 percent of its current appraised value.
Fixed Means One Draw
With a fixed rate, the money comes as one lump sum at closing, within the first-year limit. There are no later draws, except from a set-aside created at closing.
Adjustable Keeps Options Open
An adjustable rate HECM can pay through a line of credit, equal payments each month, or a mix of both. You can change plans later if funds are available.
Taxes Can Be Set Aside
Even when a set-aside is not required, you can choose to have taxes and insurance paid from the loan. That choice cannot be canceled, and if the funds run short you pay the charges yourself.
Repairs Can Be Set Aside
Some repairs FHA requires can be finished after closing using a repair set-aside, if they are estimated to cost no more than 15 percent of the maximum claim amount and are completed within 12 months. Repairs that threaten health and safety or the soundness of the home must be finished before closing.
Heirs Have Options
When the loan comes due after a death, the estate or heirs can pay it off, sell the home for at least the lesser of the balance or 95 percent of its current appraised value, or give a deed in lieu of foreclosure.
Hear From Homeowners Like You
Frequently Asked Questions
Common questions from owners of a paid-off home.
Saxton Mortgage does. At least one HECM program we offer is available on an owner-occupied primary residence you already own, and there is no seasoning requirement for ownership as long as a borrower is on title before the application date. HUD still requires a financial assessment of your credit, income, assets and property charges. The loan is non-recourse: you or your estate will never owe more than the loan balance or the value of the home, whichever is less.
Yes. A HECM Traditional is for a borrower who holds title to their current principal residence and wants to use its equity. Every borrower must be at least 62 as of the closing date.
A fixed rate HECM in our program pays one lump sum at closing, with no later draws except from a set-aside created at closing. An adjustable rate HECM offers a line of credit, tenure, term, modified tenure or modified term, and you can change plans later if funds are available.
No. The most you can receive is the principal limit, and what you can take in the first 12 months is limited. On a fixed rate HECM, nothing more becomes available after the lump sum at closing, apart from a set-aside, even though the principal limit grows. On an adjustable rate HECM, the limits apply to the first 12 months, and the principal limit may increase each month.
Yes. Mandatory obligations, the fees and charges required to get the HECM, are paid at closing or during the first 12 months. They include any property tax and insurance payments the lender requires at closing. Ask us for an itemized estimate before you decide.
Yes. Every HECM requires a financial assessment that documents and verifies credit, income, assets and property charges. If your credit or property charge history is not acceptable after extenuating circumstances are considered, a fully funded set-aside for taxes and insurance is required.
The loan can be called due when no surviving borrower lives in the home as a principal residence and there is no deferral period for an eligible non-borrowing spouse. Your estate or heirs can then pay the balance, sell the home for at least the lesser of the balance or 95 percent of the current appraised value, or give a deed in lieu of foreclosure.
Yes. The lender must accept a prepayment of a HECM in whole or in part without penalty.
Find out what you qualify for
Tell us about your paid-off home and what you want the money to do, and we will walk you through how a HECM could fit.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.