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Reverse Mortgage on Rental Property

Can I take out a reverse mortgage on a rental property?

This is one of the most frequently asked questions regarding Home Equity Conversion Mortgages (HECMs), a.k.a reverse mortgages. It is also one of the most frequently misunderstood questions by both potential borrowers and even industry professionals. While you can find a great deal of information on reverse mortgages by searching through articles and blogs, you should know that not every website or publication will provide a detailed answer to this question – and when it comes to reverse mortgages, it’s all in the details.

One of the reasons so many seniors are wary of reverse mortgages is because they don’t fully understand the terms of the program. If you own a rental property and are considering taking out a reverse mortgage loan, here is what you need to know:

A reverse mortgage can only be used on a property that serves as the home owner’s primary residence that they live in for more than six months out of the year. In other words, a reverse mortgage cannot be used on a vacation home, part-time residence or property that is rented out to someone else.


Reverse mortgages DO allow the borrower to finance their rental property if the property consists of 2-4 units and at least one of the units is being used as the home owner’s primary residence.

For example, if you own a duplex (2 units) and you live full time in one of the units and rent out the other one, you can obtain a reverse mortgage for that property, given the other requirements of the loan are met.

By contrast, if you own an apartment building with 5 or more units, even if you live full time in one of them, this property would not qualify for a reverse mortgage loan because the FHA limits the number of units to 4.

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Here’s what the HUD has to say on the matter:

“To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.”

Source: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten

If you have additional questions about reverse mortgages, don’t hesitate to contact us at 800-596-3788 to speak with a reverse mortgage banker.

A Little More on Reverse Mortgages…

A reverse mortgage can be a beneficial option for senior homeowners who need to supplement their income or pay for a major expense. While it may not be the best choice for every homeowner, those age 62 or older with substantial equity in their homes (about 45% or more) may wish to consider the benefits of a reverse mortgagefor their financial needs.

Learn more about how people are using home equity conversion mortgages for purchasing homes:

Please keep in mind that the reverse mortgage industry is constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.