Reverse Mortgage Michigan

What is a reverse mortgage in Michigan?

Michigan homeowners who are retired or nearing retirement often discover they need additional cash for various reasons. You may have significant equity in your home, but that equity doesn’t help much with day-to-day expenses or unexpected costs.

That’s where a reverse mortgage may come in handy.

Homeowners age 62 and older may be able to tap into their home equity with a reverse mortgage. These mortgages may provide the needed funds without requiring them to sell their properties, make monthly loan repayments, or pay taxes on the money.

The most common type of these loans is the Home Equity Conversion Mortgage (HECM), which is backed by the Federal Housing Administration (FHA).

And it’s important to note that homes with reverse mortgages can still be passed down to heirs. The heirs can keep the property once the loan balance is paid off or sell the property and keep the proceeds minus the balance of the loan.

From the shores of the Great Lakes to the streets of Detroit, Michigan homeowners can tap into their home equity to make retirement more manageable, whether that means staying on top of rising healthcare costs, giving an older home some much-needed attention, or paying off existing debt.

A reverse mortgage is a home loan designed specifically for homeowners age 62 and older to provide them with the funds they need. They’re the “reverse” of traditional home loans, such as a Conventional loan or an FHA loan, where you make monthly payments to a lender.

Instead, a reverse mortgage pays you.

This loan type lets you convert part of your home equity into cash without selling your property or taking on a monthly mortgage payment.

To be eligible for the loan, you must have at least 50% equity in your home if you don’t own it outright.

Michigan-specific protections for reverse mortgages

Michigan provides important consumer protections for reverse mortgage borrowers through the federal HECM program and state oversight.  

Key protections for Michigan reverse mortgage borrowers include:

• Mandatory counseling and standardized disclosures: Before a federally insured HECM reverse mortgage can move forward in Michigan, borrowers must complete independent counseling with a HUD‑approved housing counselor. The counselor explains how the loan works, its costs, and possible alternatives in plain language, while lenders must provide standardized federal disclosures so borrowers can review interest rates, fees, and repayment terms before they sign.
• Non-recourse protection: Michigan reverse mortgages are non-recourse loans. That means you (or your estate) will never owe more than the home’s value when the loan becomes due. Even if the loan balance grows to exceed your home’s value, the lender cannot pursue your other assets and your heirs will not need to pay the difference.
• Three‑business‑day right to cancel: Under federal Truth in Lending rules, Michigan reverse mortgage borrowers have the right to cancel the transaction for any reason within at least three business days after closing. If you exercise this right in writing and on time, the lender must unwind the loan and return any fees you paid, so you are not locked into a reverse mortgage if you change your mind after seeing the final documents.

How does a reverse mortgage work in Michigan?

A reverse mortgage in Michigan works similarly to other states and closely follows federal rules.

The process of securing a reverse mortgage starts with mandatory U.S. Department of Housing and Urban Development (HUD) counseling. An approved counselor will explain how reverse mortgages work, the costs and risks involved, and alternatives to the loans.

After counseling, you will submit your application with basic information about yourself and your home.

Your lender will then conduct a financial assessment to verify you can afford ongoing property taxes, insurance, and maintenance. Then the lender will order a home appraisal to determine your home’s value and ensure it meets FHA standards.

Finally, you will be able to close on your loan after receiving comprehensive loan disclosures at least three days before closing as this is federal law.

How much money you can borrow depends on your age (older borrowers can access more), your home’s value (up to the FHA limit of $1,249,125 for 2026), current mortgage interest rates, and the specific loan program.

If approved, homeowners can receive this money in several different ways. This includes a lump sum, where they receive all the funds at closing with a fixed-rate reverse loan, and a line of credit, where they can draw as much cash as they need when they need it.

They may also choose to receive monthly term payments, where they receive equal-sized payouts over a set period of time, monthly tenure payments, which are equal-sized payments for the life of the loan, or a combination of these.

Adjustable-rate HECMs offer all options, while fixed-rate HECMs only offer a lump sum.

Unlike traditional mortgages, with a reverse loan you don’t make monthly payments. Instead, interest and mortgage insurance premiums are added to your loan balance each month, causing your balance of what you owe to grow over time.

For example, if you borrow $100,000 with a 6% interest rate, approximately $500 is added the first month, then $502.50 the next month on the new balance of $100,500, and so on.

However, non-recourse protection means you or your heirs never owe more than the home’s value when the loan becomes due.

Your reverse mortgage becomes due when you sell the home, permanently move out for more than 12 consecutive months (such as to a nursing home), pass away, or fail to meet loan obligations. This last one can be if you stop paying property taxes and maintaining insurance on the property.

At that point, you or your heirs have options. You can pay off the balance and keep the home. You can sell the home and use the proceeds to repay the loan and keep the rest. Or you can let the lender sell the home. You or your heirs may also be able to refinance a reverse mortgage into a traditional mortgage if you meet the qualifications.

You or your heirs are never responsible for any shortfall between the sale price and loan balance. If the home is worth less than the loan when it comes time to pay the loan, your heirs can pay whichever one is least between the loan balance and 95% of the appraised value at the time of sale.

Reverse mortgage pros and cons

Like all loans, reverse mortgages have pros and cons that you should carefully consider.

Reverse mortgage pros

The pros of a reverse mortgage include that you won’t need to make any monthly repayments, you can remain in your home as you age, and you’re able to access your home equity.

• No monthly mortgage payments required: The biggest advantage of a reverse mortgage is you’re not required to make monthly principal and interest payments.

• Remain in your home: You retain ownership of your home and can continue living there provided you meet the loan obligations.

• Non-recourse protection: You can never owe more than your home’s value when the loan becomes due.

• Access home equity without selling your property: If you need cash, but don’t want to sell your home, a reverse mortgage may allow you to access your equity while staying put.

• Tax-free proceeds: The money you receive from a reverse mortgage is generally not considered taxable income. This is because you’re receiving loan proceeds, not income. However, you should always consult a tax professional about your specific situation.

• Flexible payment choices: Select how you’d like to get your money—one-time payout, credit line, monthly installments, or a mix of options.

• Line of credit growth feature: If you choose the line of credit option, your unused credit line grows over time at the same rate as the loan’s interest rate.

• No income or credit requirements (for HECMs): Unlike traditional mortgages, you don’t need to prove income from employment.

• FHA insurance protection (for HECMs): Federal insurance provides important protections. This includes the guarantee that homeowners will receive their loan proceeds even if the lender goes out of business.

• Michigan protections: The state follows federal HECM rules, including clear upfront disclosures, and non-recourse protections.

Reverse mortgage cons

The cons of a reverse mortgage may include high upfront costs to take out the loan, reducing the inheritance you may be passing on. And unlike traditional loans, the loan balance grows over time.

• High upfront costs: The biggest drawback of a reverse mortgage is the upfront costs. These costs typically include an origination fee, which is capped at $6,000 for HECMs. This is the fee you pay to the lender for making the loan. There is also an upfront mortgage insurance premium, which is a one-time payment covering the costs of loan insurance, and third-party closing costs such as appraisal fees, title insurance, and recording fees.

• Loan balance grows over time: Since interest and mortgage insurance premiums accrue monthly, your loan balance grows rather than decreases. This compounding can significantly reduce the equity you have in your home over time. This has the potential to diminish what you’re able to leave to your heirs.

• Reduces inheritance: When you or the last borrowing spouse passes away, your heirs typically have 30 days to either repay the loan and keep the home, or sell the property. Typically, they may have up to 90 days if they seek an extension on the deadline.

• Must keep up the property and cover ongoing expenses: Homeowners must remain responsible for paying for property taxes and homeowners insurance as well as maintaining the home for the duration of the loan. Failure to meet these obligations can result in default and potential foreclosure.

• Moving triggers repayment: If you move out of the home for more than 12 consecutive months, the loan becomes due. This can be problematic if you need extended care in a nursing home or assisted living facility.

• Higher interest rates than traditional mortgages: Reverse mortgage interest rates are typically higher than rates on traditional mortgages or home equity loans.

• More complex loans: Reverse mortgages are more complex than traditional mortgages. Many borrowers struggle to fully understand all the implications despite mandatory counseling.

• May affect eligibility for need-based programs: While reverse mortgage proceeds generally don’t affect Social Security or Medicare benefits, they could impact eligibility for Medicaid or Supplemental Security income. This may apply if you retain cash proceeds beyond the month you receive them.

Michigan reverse mortgage requirements

To qualify for a reverse mortgage in Michigan, you must meet comprehensive requirements established by federal law.

These include age, property, and financial requirements as well as the ability to continue paying certain housing costs through the life of the loan.

Michigan reverse mortgage age requirements

For standard HECMs, at least one borrower must be at least 62 years old by the time the loan closes.

For proprietary or Jumbo reverse mortgages, the age requirement may be more flexible. Some private lenders offer jumbo products to borrowers as young as 55 years old.

However, each state has its own age requirements. In Michigan, at least one borrower is required to be 62 years old or older to qualify.

Michigan reverse mortgage property requirements

Your home must meet several criteria to be eligible for a reverse mortgage in Michigan:

• Primary residence: The property must be your primary residence. A reverse mortgage can’t be used for a:

• • Second home
  • Vacation residence
  • Investment property

• Eligible property types:

• • Single-family homes
  • Two- to four-unit properties, provided you live in one of the units
  • FHA-approved condominiums
  • Manufactured homes may be eligible with HECM loans only

• Property condition: Your home must meet FHA property standards and be in good condition. Major structural issues, safety hazards, or needed repairs must be addressed either before closing or you will need to set aside a portion of your loan proceeds for repairs.

• Sufficient value: Your home must have enough value to justify the loan. Most lenders have minimum property value requirements. Generally, you need at least 35% to 50% equity in your home or own your property without a mortgage.

Michigan reverse mortgage financial obligations

• Existing mortgage: If you have an existing mortgage on your home, you must pay it off using the reverse mortgage proceeds at closing.

• Property charges: You must be able to continue paying housing costs like property taxes, homeowners insurance, and any homeowners association fees. If the lender questions your ability to meet these obligations, they may require a “set-aside.” This is when a portion of your loan proceeds is reserved to cover future property charges.

• Counseling requirement: You must complete counseling with a HUD-approved reverse mortgage counselor before applying for a HECM.

Financial assessment requirements

Lenders conduct a financial assessment to verify you can afford ongoing property charges. This assessment reviews your credit history (not your credit score per se), income sources, and monthly expenses.

The assessment doesn’t prevent you from qualifying if you have past credit issues, but it helps determine if you will be required to set aside a portion of the funds.

No specific income or employment requirements

Unlike traditional mortgages, you don’t need to prove income from employment or meet specific debt-to-income ratios. This makes reverse mortgages accessible to retirees regardless of their current income level.

What are the two types of reverse mortgages in Michigan?

There are two main types of reverse mortgage available in Michigan, each with different features, costs, and eligibility requirements. They are:

Home Equity Conversion Mortgages (HECMs)

HECMs are, by far, the most common type of reverse mortgage. They are insured by the FHA and represent approximately 90% of all reverse mortgages originated in the nation.

The key features of this loan type include a lending limit of a maximum property value of $1,249,125 as of 2026. They also require mandatory HUD counseling, flexible payout options, a minimum age requirement of at least 62 years old, and mortgage insurance.

Proprietary (jumbo) reverse mortgages

Homeowners with pricey homes in more expensive parts of the country may be eligible for “jumbo” reverse loans.

Proprietary reverse mortgages are private loans offered by individual lenders without FHA insurance. They’re commonly called “jumbo” reverse mortgages because they’re designed for high-value properties that exceed the HECM limit.

These loans feature higher lending limits, up to $4 million, depending on the lender. They also don’t require mortgage insurance because they aren’t backed by the FHA. And they may be more flexible with age requirements as well as offering the loans on condos that haven’t been approved by the FHA.

However, they often come with higher mortgage interest rates than smaller reverse mortgages.

Michigan reverse mortgage FAQs