A Guide on How to Get Out of a Reverse Mortgage

Wondering how to navigate your way out of a reverse mortgage? Discover simple, actionable steps to free yourself from this financial agreement. Read on.

Real Estate
January 10, 2024
A Guide on How to Get Out of a Reverse Mortgage

Reverse mortgages: an idea born out of a desire to keep seniors in their homes with an additional source of income. But as with many grand ideas, some resulting pitfalls can create the need to reverse the clock on your reverse mortgage. 

If you’re asking: “how can I get out of a reverse mortgage,” let’s explore five common strategies to do so, along with some additional options to fit your financial situation. 

How Does a Reverse Mortgage Work?

In its original form, a reverse mortgage was an upside-down loan that netted seniors a monthly payment from a lender for the remainder of their lives. 

In return, the borrower essentially signed the property over to the lender to be sold upon their death. It provided a guaranteed home and income source for the senior and a bit of a gamble for the lender, not knowing how long the property would remain occupied. 

Today’s reverse mortgages have more options and limitations. It’s still a way for homeowners to convert home equity into an income stream, but borrowers can choose to receive their funds through one or a combination of these methods: 

  • An immediate lump sum
  • Monthly payments for a limited time
  • Monthly payments for their remaining lifetime (the original recipe)
  • A credit line 

Factors that make reverse mortgages unique compared to alternative property-based financing (such as home equity loans) include: 

  • Less borrowing power: Limited to 50 to 66% of your equity (vs. 80 to 90%)1
  • The requirement to pay for ongoing mortgage insurance premiums
  • Significantly higher closing costs 
  • Higher rates of foreclosure 
  • The borrower(s) must be age 62 or older
  • Greater prevalence of predatory lenders and loan terms

While reverse mortgages can provide a solid financial plan for seniors, they’re not always the best deal, especially when a borrower’s health, housing needs, or financial situation shifts. 

What are the three types of reverse mortgages? Learn more about them in our guide.

When Does the Reverse Mortgage Need to Be Paid?

A few different circumstances prompt repayment of a reverse mortgage loan. Payment is due in full at one of two points: 

  1. Upon the death of the borrower (or the last surviving borrower if the loan had two)
  2. When the property changes ownership (whether by sale or within the family)

A reverse mortgage can also end by foreclosure if the borrower doesn’t comply with the loan terms. These include staying current with payments for: 

  • Property tax 
  • Homeowners and flood insurance 
  • Homeowner’s association (HOA) dues or condominium dues

You can also enter a state of default leading to foreclosure if you do not: 

  1. Provide the upkeep and repairs necessary to maintain the property value, or
  2. Occupy your home as a principal residence.

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Can You Get Out of a Reverse Mortgage?

Yes, you can get out of a reverse mortgage, but it may cost you. So long as you comply with the contract terms, your lender is locked into the arrangement until your death or the property’s transfer. 

Similar to any other type of conventional mortgage, you’ve agreed to borrow funds in return for a stake in your property, and you can reclaim that stake by paying off the mortgage principal and interest balance. 

Ways to Get Out of a Reverse Mortgage

The most common type of reverse mortgage is the home equity conversion mortgage (HECM) insured by the Federal Housing Administration (FHA).

When you apply for a HECM loan, you must meet with a financial services counselor to ensure you understand all the contract details—including how to get out of a reverse mortgage—before you enter the loan contract. This is particularly key for understanding this first option: 

#1 Right of Rescission

The least costly answer to “how do I get out of a reverse mortgage“ is to exercise your right of rescission. This exit clause gives you three days after closing to cancel the contract for any reason without paying any penalties. 

Once notified in writing, your lender has 20 days to refund the money you’ve already paid, and you can walk away free and clear.

#2 Sell Your Home and Repay the Loan Amount

Whether you decide to downsize, head to a warmer climate, or move into an assisted living environment, you can always sell your home and use the proceeds to pay off your reverse mortgage. 

At closing, before you receive any profits left, your sale proceeds will be applied to: 

  • Sale closing costs (typically 2 to 5% of the property sale price for sellers)2
  • Real estate agent commissions (standard is 6% of the property sale price)3
  • Current reverse mortgage balance including interest accrued to date

The mortgage insurance you’ve been paying and the FHA backing come in handy if you do sell. As a non-recourse loan, you’ll be able to sell for 95% of your home’s value or of the loan, whichever is less, without repaying more than you borrowed.4

#3 Refinance to a New Reverse Mortgage

As interest rates fluctuate and your property value appreciates, you may be able to refinance into a new reverse mortgage with a higher payment or credit line and/or better terms. 

With a reverse mortgage refinance, you’ll need to cover: 

  • An origination fee up to $6,0001
  • A fee from a HUD-approved reverse mortgage counseling agency
  • Mortgage insurance premium
  • Loan closing costs (typically 2 to 6% of the loan total) 
  • Current reverse mortgage balance including interest accrued to date

#4 Refinance to a Standard Mortgage

You can also opt to refinance to a standard rate-and-term or cash-out refinance, which means switching back to making monthly mortgage payments as opposed to receiving monthly income. 

With a standard refinance, you’ll need to cover: 

  • Loan closing costs (typically 2 to 6% of the loan total) 
  • Current reverse mortgage balance including interest accrued to date

Plus, when you apply for a standard or cash-out refinance (vs. a reverse mortgage), the loan approval and offered interest rate will depend on your: 

  • Credit score – At least 620 (680 or 700 for some lenders) or 740 for good rates5
  • Debt-to-income (DTI) ratio – 43% or less for most lenders
  • Payment history

#5 Surrender the Deed

Finally, you can opt to surrender the deed to your home to the lender. This puts the property in the lender’s hands to sell and recoup its costs and keep any profit from the sale. 

You’ll still lose your house, but the act of surrendering it vs. it being foreclosed does have a silver lining. Unlike a standard foreclosure, surrendering your deed won’t lead to bad credit or affect your future borrowing ability. 

Alternatives to Reverse Mortgages

If you’re still at the planning stage, or ready to get out of a current reverse mortgage, look into these alternatives before deciding which path best fits your goals and circumstances. 

Home Equity Borrowing

If we’re judging based on popularity, consider that only about 2% of equity borrowers decide on a reverse mortgage vs. other options.6 Instead, most opt for a: 

  • Home equity loan
  • Home equity line of credit
  • Cash-out refinance

With any of these options, you’ll need to make monthly repayments of principal plus interest (or, for a line of credit during the draw period, interest only). However, compared to a reverse mortgage loan, these alternatives can provide: 

  • More borrowing power: 80 to 90% of your equity (vs. 50 to 66%)1
  • No mortgage insurance cost
  • Lower rates of foreclosure 
  • No age requirement
  • Many more lenders to compare and choose from


Instead of borrowing against your equity, a sale-leaseback combines the sale of your home with a switch to renter status in it. Contrary to a reverse mortgage or other equity financing, a sale-leaseback is an option that: 

  • Allows you to avoid new debt (plus pay off your current mortgage)
  • Unlock your home equity without having to move
  • Doesn’t charge you interest to repay now or in the future

You’ll save on monthly housing costs by eliminating: 

  • Your current mortgage principal and interest payments
  • Property tax
  • Homeowners insurance
  • Major maintenance and repairs

You’ll be given the opportunity to rent your home as long as you’d like, as long as you comply with your lease.

Sell and Downsize

If you’re an older homeowner entering retirement years with a bigger home—and more belongings—than you need, consider downsizing to a smaller house or an apartment that will allow you to age in place comfortably. In addition to a home sale that converts 100% of your home equity to cash, financial benefits include: 

  • Lower utility bills with less square footage and/or a connected vs. standalone structure
  • Less (or no) lawn care and snow/ice removal cost and effort
  • Lower (or no) property tax
  • For a smaller house: lower homeowners insurance 
  • For a rental home: much cheaper renters insurance instead of homeowners

Sale-Leaseback from Truehold Can Help

Our sale-leaseback at Truehold allows you to convert your home equity to cash without the headache of a traditional sale.

Instead, you can continue living in your home as a renter, and have a clear understanding of the lease cost and your rent payment expectations in upcoming years. It’s normal to have questions when renting a house, and we’re here to help you along the way. 

With a sale-leaseback, you remain in the home you love, but no longer carry the cost and effort of homeownership or property-based debt yourself. 

Ready to learn more? Reach out to us at (314) 353-9757 and one of our advisors will connect with you. They’ll review our process and answer your questions to discover if a sale-leaseback with Truehold fits your goals and financial situation.


  1. Debt.org. The Reverse Mortgage: Pros and Cons. https://www.debt.org/real-estate/mortgages/reverse/
  2. Bankrate. How much are closing costs for home sellers? https://www.bankrate.com/real-estate/closing-costs-for-sellers/
  3. Nerdwallet. What Are the Closing Costs for a Home Seller? https://www.nerdwallet.com/article/mortgages/closing-costs-home-seller
  4. Investopedia. How to Get Out of a Reverse Mortgage. https://www.investopedia.com/get-out-of-reverse-mortgage-5223770
  5. Bankrate. Requirements for a home equity loan or HELOC in 2023. https://www.bankrate.com/home-equity/requirements-to-borrow-from-home-equity/
  6. Investopedia. Reverse Mortgages in America: The Statistics. https://www.investopedia.com/reverse-mortgages-america-statistics-5224801
Nicolas Cepeda headshot
Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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