Faith & Finance - Understanding Reverse Mortgages Today with Harlan Accola
Did you know there’s a way to tap into your home’s equity for tax-free cash—without having to make monthly payments? It’s true.
It’s called a Home Equity Conversion Mortgage, or HECM—what many of you know as a reverse mortgage. But today’s reverse mortgage isn’t what it used to be. Harlan Accola is here to help us unpack how they work and whether one might be right for you.
Harlan Accola is the National Reverse Mortgage Director at Movement Mortgage, an underwriter of Faith and Finance. He is also the author of Home Equity and Reverse Mortgages: The Cinderella of the Baby Boomer Retirement.
What’s Changed? A Safer, Regulated Option
When you hear the phrase reverse mortgage, you might think of outdated financial tools with a bad reputation. However, home equity conversion mortgages (HECMs) significantly differ from those in the past.
Reverse mortgages today are not the “Wild West” products of decades past. Since major reforms were enacted during President Reagan’s term in 1988, HECMs are now heavily regulated under the Federal Housing Administration (FHA).
No one can lose their house or have it taken away, provided they're working with a reputable lender and stay in the home while meeting basic obligations. Ownership doesn’t change, and homeowners are protected.
These changes addressed the risks that once made reverse mortgages controversial. Now, with strict oversight, they provide a reliable option for seniors wanting to tap into their home equity without selling.
Are Reverse Mortgage Interest Rates Too High?
It’s a common misconception that reverse mortgage interest rates are significantly higher than traditional mortgages. But that comparison isn’t apples to apples. Interest rates on HECMs are actually tied to the 10-year Treasury rate and are heavily regulated.
Right now, interest rates for reverse mortgages are about the same as traditional mortgages—around 6.5%. This means homeowners aren’t sacrificing much, if anything, in interest when compared to forward mortgages.
What About Costs and Obligations?
The closing costs for reverse mortgages are nearly identical to traditional mortgages, with one key difference: the addition of FHA mortgage insurance.
This insurance offers three essential guarantees:
- You can remain in your home as long as you want (up to age 150!).
- Thanks to non-recourse debt protections, you will never owe more than the home’s value.
- Your heirs won’t be left with a bill.
Yes, this insurance adds about 2% of the home’s value to the upfront costs, but it’s well worth it—just like ho