What Is a Reverse Mortgage and Who Qualifies? | Pike Creek Mortgages

What is a reverse mortgage, and how does it work?

A reverse mortgage is a home loan available to homeowners aged 62 or older that allows them to convert a portion of their home equity into tax-free cash — without selling the home or making monthly mortgage payments. Instead of the borrower paying the lender each month, the lender pays the borrower, and the loan balance grows over time.

The most common type is the Home Equity Conversion Mortgage (HECM), which is federally insured by the FHA. At Pike Creek Mortgages, serving Newark, DE and the surrounding Delaware communities, we help homeowners understand exactly how these products work before making any commitment.

Repayment is triggered when the last borrower permanently leaves the home — whether through sale, moving to a care facility, or death. At that point, the home is typically sold to repay the loan balance. Any remaining equity belongs to the homeowner or their heirs.

Who qualifies for a reverse mortgage in Delaware?

To qualify for a reverse mortgage in Delaware, you must be at least 62 years old, own your home outright or have a low remaining mortgage balance, and live in the home as your primary residence. The property itself must also meet FHA standards.

Additional eligibility requirements include:

• Completion of a HUD-approved counseling session before the loan closes
• Demonstrated ability to continue paying property taxes, homeowners insurance, and maintenance costs
• The home must be a single-family property, FHA-approved condo, or a multi-unit property (up to four units) where you occupy one unit

Your income and credit score are reviewed — not to determine approval outright, but to confirm you can sustain the ongoing costs of homeownership. This is a key difference from traditional mortgage underwriting.

How much money can you get from a reverse mortgage?

The amount you can borrow depends on three primary factors: your age (older borrowers qualify for a larger percentage of home value), current interest rates, and your home’s appraised value up to the FHA lending limit of $1,149,825 for 2024. The older you are and the more equity you hold, the more you may access.

Funds can be received in several ways — a lump sum, a monthly payment stream, a line of credit, or a combination of these. The line-of-credit option is particularly popular because the unused portion grows over time, giving borrowers increasing access to funds the longer they hold the loan.

Pike Creek Mortgages works with Newark, DE homeowners to model out these scenarios side by side so you can see exactly what each payout structure means for your long-term financial picture.

What are the costs and fees associated with a reverse mortgage?

Reverse mortgages carry several upfront and ongoing costs that every borrower should understand clearly before proceeding. Upfront costs typically include:

• Origination fee: Up to $6,000 for most HECM loans, depending on home value
• FHA mortgage insurance premium (MIP): 2% of the home value at closing, plus an ongoing annual MIP of 0.5% of the loan balance
• Third-party closing costs: Appraisal, title insurance, and recording fees — typically $1,500–$3,000 in Delaware
• HUD counseling fee: Usually $125–$200, though this can sometimes be waived for low-income borrowers

Most of these costs can be rolled into the loan rather than paid out of pocket, which is important for borrowers on fixed incomes. However, rolling costs into the loan increases the balance that accrues over time. See our related guide on comparing HECM loan structures for a deeper look at how interest compounds on a growing balance.

What are the risks and downsides of a reverse mortgage?

The primary risk of a reverse mortgage is that your home equity decreases over time as interest accrues and the loan balance grows. If you or your heirs plan to keep the home long-term, a reverse mortgage can significantly reduce the inheritance value of the property.

Other important downsides to consider:

• If you fail to pay property taxes, insurance, or maintain the home, the lender can call the loan due — a process called loan default due to non-payment of obligations
• Moving out of the home for more than 12 consecutive months (such as for a long-term care stay) triggers repayment
• Spouses under age 62 at the time of loan origination may face complications if the borrowing spouse passes away first — though HUD has rules to protect eligible non-borrowing spouses

These are not reasons to avoid a reverse mortgage — they are reasons to understand it fully. Pike Creek Mortgages, an NMLS Licensed Lender based in Newark, DE, ensures every client reviews all scenarios with a HUD-approved counselor as part of the mandatory pre-loan process.

Is a reverse mortgage a good idea for Delaware homeowners?

A reverse mortgage can be a strong financial tool for Delaware homeowners who are equity-rich but income-limited, want to stay in their home long-term, and do not rely on leaving the full home value to heirs. It is not the right fit for everyone, and the decision should be evaluated alongside alternatives like a home equity loan, HELOC, or downsizing.

Delaware’s lack of a state inheritance tax and relatively stable real estate values in the Newark area make the equity-conversion math more predictable here than in more volatile markets. Homeowners in communities throughout New Castle County often find that their long-held properties carry substantial equity — equity that a reverse mortgage can help put to work during retirement.

As covered in our guide to home equity options for retirees, a reverse mortgage is best evaluated as part of a broader retirement income strategy rather than in isolation.

How do you apply for a reverse mortgage with Pike Creek Mortgages?

The reverse mortgage process at Pike Creek Mortgages begins with a no-pressure consultation where we review your home value, outstanding mortgage balance, and retirement goals to show you what you may qualify for. From there, the required steps are:

• Step 1: Complete a HUD-approved counseling session (we can refer you to approved providers in Delaware)
• Step 2: Submit a formal application with Pike Creek Mortgages, your NMLS Licensed Lender in Newark, DE
• Step 3: Home appraisal ordered and reviewed by FHA
• Step 4: Underwriting and approval
• Step 5: Closing and fund disbursement — typically within 30–45 days of application

There is no obligation at the consultation stage. Our team’s role is to give you accurate information so you can make the decision that is right for your household — not to push a product.

This guide was prepared by Pike Creek Mortgages, NMLS Licensed Lender, serving Newark, DE and communities throughout New Castle County and the greater Delaware region.

Frequently Asked Questions

What age do you have to be to get a reverse mortgage?

You must be at least 62 years old to qualify for a federally insured HECM reverse mortgage. All borrowers on the title must meet this age requirement, though HUD has specific protections for eligible non-borrowing spouses who are younger.

Do you have to make monthly payments on a reverse mortgage?

No — reverse mortgage borrowers are not required to make monthly principal or interest payments. Instead, the loan balance grows over time and is repaid when the borrower sells the home, moves out permanently, or passes away. Borrowers must still pay property taxes, insurance, and maintenance.

Can you lose your home with a reverse mortgage?

Yes, but only if you fail to meet the loan’s ongoing obligations — primarily paying property taxes and homeowners insurance, and maintaining the property. As long as you live in the home and stay current on those costs, you cannot be forced out by the lender.

How much equity do you need to qualify for a reverse mortgage?

There is no fixed equity percentage required, but most lenders expect you to own the home outright or have a low enough remaining balance that the reverse mortgage proceeds can pay it off at closing. Generally, having at least 50% equity gives you the most flexibility with payout options.

Is a reverse mortgage taxable income in Delaware?

No — reverse mortgage proceeds are considered loan advances, not income, so they are not subject to federal or Delaware state income tax. However, you should consult a tax advisor to understand how a reverse mortgage may affect means-tested benefits like Medicaid or SSI.