One of the most common questions I hear from homeowners 62 and older is: "I still have a mortgage. Can I even get a reverse mortgage?" The short answer is yes. Having a current loan on your home doesn't disqualify you. In fact, paying off that existing mortgage with reverse mortgage proceeds is one of the main reasons people get a HECM — so they can eliminate their monthly mortgage payment and stay in their home.
How It Works Step by Step
When you take out a reverse mortgage, the lender calculates how much you can access based on your age, your home's value, and current interest rates. That amount is called your principal limit. From that pool of available funds, the first thing that gets paid off at closing is any existing mortgage or lien on the property. The reverse mortgage must be in first position, so the existing loan is satisfied (paid in full) at closing. Whatever is left after paying off the old mortgage and paying closing costs is yours — as a line of credit, lump sum, monthly payments, or a combination.
So the flow is: principal limit → minus payoff of existing mortgage → minus closing costs (origination, FHA mortgage insurance, appraisal, title, etc.) → equals net proceeds available to you. If you'd like to see how this plays out with your numbers, our reverse mortgage calculator lets you enter your current mortgage balance and home value to estimate what might be left for you.
What If My Balance Is Too High?
Sometimes the existing mortgage balance plus closing costs is close to (or even more than) the principal limit. In that case, you might not have much — or any — proceeds left after paying off the old loan. That doesn't necessarily mean you're denied; it might mean the reverse mortgage would mainly accomplish paying off your current mortgage and eliminating your monthly payment, with little or no extra cash or line of credit left over. For some people, that's still a worthwhile outcome: no more monthly mortgage payments for the rest of their lives, as long as they meet the loan terms (property taxes, insurance, maintenance, primary residence).
If the balance is so high that paying it off would exceed your principal limit, you would need to bring funds to closing to cover the shortfall. In that situation, a reverse mortgage might not be the right fit. A quick way to see if you're in the "plenty of room" or "tight" zone is to run your numbers through our calculator. For more on how reverse mortgages work in general, see our guide for homeowners.
Example With Numbers
Suppose you're 72, your home is worth $450,000, and you owe $120,000 on your current mortgage. Your principal limit might be in the ballpark of $250,000 (this varies with rates and exact age). At closing, roughly $120,000 goes to pay off the existing loan, and perhaps $15,000 to $20,000 covers closing costs. That could leave you around $110,000 to $115,000 in net proceeds — as a line of credit, monthly payments, lump sum, or a mix. You'd have no monthly mortgage payment going forward, and you'd still have access to a substantial amount of equity. Every situation is different, so this is only an illustration — but it shows how an existing mortgage doesn't block you; it's just the first claim on your proceeds.
If you're curious how your own situation stacks up, try our calculator for an estimate, and when you're ready, reach out for a personalized conversation. I'm happy to walk through the numbers with you, no pressure.
Have questions about reverse mortgages or want to see how much you might access? Try our calculator or schedule a conversation with Jerry.