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Three ways a reverse mortgage can be structured
Most people think a reverse mortgage is one product. There are actually several structures, and the right one depends on your age, home value, and how you want taxes and insurance handled.
Standard HECM
- Minimum age
- Age 62+
- FHA-insured?
- Yes, FHA-insured
- Home value considered
- Up to the FHA lending limit
- Best for
- Most homeowners 62+
- How taxes & insurance are paid
- You pay taxes/insurance directly
- Non-recourse protection
- Yes — you or your heirs never owe more than the home's value
- Line of credit available?
- Yes, with a growing credit line feature
HECM with a LESA
- Minimum age
- Age 62+
- FHA-insured?
- Yes, FHA-insured
- Home value considered
- Up to the FHA lending limit
- Best for
- Homeowners who want taxes & insurance handled automatically, or whose financial assessment requires it
- How taxes & insurance are paid
- A Life Expectancy Set-Aside reserves part of your proceeds to pay property taxes and homeowners insurance for you
- Non-recourse protection
- Yes
- Line of credit available?
- Yes, reduced by the set-aside amount
Proprietary
- Minimum age
- As young as 55 (program/state dependent)
- FHA-insured?
- No — privately insured programs
- Home value considered
- Can exceed the FHA lending limit
- Best for
- Higher-value homes and borrowers aged 55–61
- How taxes & insurance are paid
- You pay taxes/insurance directly
- Non-recourse protection
- Varies by program
- Line of credit available?
- Varies by program
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the borrower does not meet these loan obligations, then the loan will need to be repaid.
What's a LESA — and why it might be the best feature nobody told you about
A Life Expectancy Set-Aside (LESA) works like an escrow account built from your reverse mortgage proceeds. A portion of your available funds is reserved and used to pay your property taxes and homeowners insurance automatically — for the rest of your expected time in the home. You receive less cash up front, but you never have to budget for tax bills or insurance premiums again, and you eliminate the most common reason reverse mortgage borrowers run into trouble. Sometimes a LESA is required based on the lender's financial assessment; many borrowers choose one voluntarily for peace of mind.