Reverse Mortgages in Tennessee

What is a reverse mortgage?

A reverse mortgage is a loan that allows homeowners 62 or older to convert a portion of their home equity into cash without selling the home or making monthly mortgage payments. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by FHA.

Unlike a traditional mortgage where you make payments to the lender, a reverse mortgage works in reverse — the lender makes payments to you, or provides a line of credit, or gives you a lump sum. The loan balance grows over time as interest accrues. The loan becomes due when you sell the home, move out permanently, or pass away.

Eligibility requirements

• At least one borrower must be 62 years of age or older
• The property must be your primary residence
• You must own the home outright or have significant equity
• You must be current on property taxes, homeowner's insurance, and HOA fees
• The home must meet FHA property standards
• You must complete a HUD-approved reverse mortgage counseling session before applying

How much can you borrow?

The amount available depends on your age (older borrowers can access more), the appraised value of your home, current interest rates, and the HECM lending limit set annually by HUD. The older you are and the more equity you have, the more you can typically access. Verify the current HECM limit with Morgan Hardy or at HUD's website, as it is adjusted each year.

If you have an existing mortgage, it must be paid off with the reverse mortgage proceeds. Only the remaining equity is available to you.

Payment options

• Lump sum: Receive all available funds at closing (fixed rate only)
• Monthly payments: Receive equal monthly payments for a set term or for as long as you live in the home
• Line of credit: Draw funds as needed; unused credit grows over time
• Combination: Mix of monthly payments and a line of credit

Costs and fees

Reverse mortgages carry significant upfront costs including an origination fee, FHA mortgage insurance premium (2% upfront, 0.5% annually), appraisal, title, and other closing costs. These are typically financed into the loan rather than paid out of pocket.

The ongoing interest accrual means the loan balance grows over time, reducing the equity available to heirs. This is a fundamental tradeoff to understand before proceeding.

What happens to the home?

You retain title to your home throughout the life of the reverse mortgage. You are responsible for maintaining the property, paying property taxes, and keeping homeowner's insurance current. Failure to meet these obligations can trigger default.

When the loan becomes due — upon sale, permanent move-out, or death — the home is typically sold to repay the loan. If the home sells for more than the loan balance, the remaining equity goes to you or your heirs. If it sells for less, FHA insurance covers the difference — your heirs are not personally liable for any shortfall.