Reverse mortgage on a condo: What you need to know

For some homeowners, a reverse mortgage can be a useful financial tool that helps them create financial flexibility and live the retirement they’ve always dreamed of. But, there are also a lot of restrictions on the types of eligible properties–and that can feel a bit overwhelming.

While most reverse mortgages are for single-family homes, they aren’t the only property type that qualifies. For example, some manufactured homes and, yes, some condos may be eligible.

Here’s what you need to know if you own a condo and are considering a reverse mortgage.

Can I get a reverse mortgage on my condo? 

Yes, you may be eligible for a reverse mortgage on a condo, provided you meet the eligibility requirements and the property meets the requirements outlined by the U.S. Department of Housing and Urban Development (HUD) or your lender.

There’s one important distinction to be aware of: If you apply for a Home Equity Conversion Mortgage (HECM), you must meet the requirements outlined by HUD. That’s because HECMs are insured and regulated by the Federal Housing Administration (FHA).

However, if you apply for a non-HECM reverse mortgage, often called a proprietary reverse mortgage, you’ll need to meet the requirements outlined by your lender. These often follow the same HUD rules, but they might vary. 

So, the first step in determining whether your unit qualifies is to know what type of reverse mortgage you’re planning to apply for. Then, make sure your condo is FHA-approved and ensure you meet all the other requirements, which include, but are not limited to, being 62 or older, living in the home as your primary residence, taking required counseling, and passing a financial assessment.

→Learn more: What are reverse mortgage eligibility requirements?

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Condo eligibility for a reverse mortgage

The best way to see if your condo is eligible for a reverse mortgage is to check the HUD website. You can search by the condo’s name, location, or approval status. If the project is FHA-approved, you can take the next step toward applying for a reverse mortgage.

Appraisal requirements for authorized condos

Even if your condo is FHA-approved, it will still need to meet certain reverse mortgage appraisal requirements. During the application process, an FHA-approved appraiser will visit your condo to confirm its value and check that it meets basic health and safety standards.

To meet FHA appraisal requirements, your condo must, at a minimum:

• Have working electricity, heating, and running water
• Include a functioning bathroom and proper roofing
• Be structurally sound and free of safety hazards

Getting condos FHA-approved

If your condo is not FHA-approved, you may still have options. Borrowers interested in a reverse mortgage can start the FHA approval process in one of 2 ways:

• Check with your homeowners association (HOA): Contact your HOA board or property manager and ask if they are willing to apply for FHA approval for the entire complex. The HOA will need to submit an application package to HUD, which includes financial statements, insurance coverage, and governing documents for the property.
• Request single-unit approval: If your HOA does not plan to pursue approval, you may still be able to apply for single-unit approval. In this case, your lender will usually submit the request to HUD on your behalf. The lender must provide specific documentation, including proof that the condo meets FHA requirements for safety, insurance, and financial stability.

Because the approval process can be detailed, most borrowers work closely with their lender to manage the paperwork and communication with HUD. Your lender can tell you what documentation is needed and help ensure the process moves forward smoothly.

Requirements for FHA approval of a condominium

If several condo owners are interested in reverse mortgages, your condo association may be more willing to apply for FHA approval. Keep in mind that there are costs associated with this process, and approval is not guaranteed.

For a condo project to potentially gain FHA approval, it must meet the following requirements:

• Include at least 2 dwelling units
• Be primarily residential in use
• Have at least 50% of units owner-occupied
• Limit ownership to no more than 10% of units by a single investor
• Allow leasing without requiring owners to live in the unit for a full year first
• Have no more than 15% of units 60 days or more past due on HOA fees
• Limit commercial space to no more than 35% of the total floor area
• Dedicate at least 10% of the HOA budget to a reserve fund (savings account)
• Allow no more than 50% of units in the project to be FHA-insured

Not sure where to start?

Our reverse mortgage specialists will be happy to help you.

Speak to a loan specialist

Not sure where to start?

Our reverse mortgage specialists will be happy to help you.

Speak to a loan specialist

Speak with a specialist today

Call us at (800) 820-1715 or fill out the form below to connect with a licensed reverse mortgage specialist. Receive a no-obligation estimate, and explore your options with someone who understands your specific situation.

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Speak with a specialist today

Call us at (800) 820-1715 or fill out the form below to connect with a licensed reverse mortgage specialist. Receive a no-obligation estimate, and explore your options with someone who understands your specific situation.

All fields are required.

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Reverse mortgage product availability varies by state. Understanding where your home is located will help us provide an accurate calculation of the funds that may be available to you.

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Age of youngest borrower

Eligibility for a reverse mortgage generally requires the homeowner to be at least 62 years old. However, some of our proprietary products have minimum age requirements as low as 55. If you’re applying with a co-borrower, use the age of the youngest homeowner.

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Requirements for single-unit condo approval

Even if your HOA chooses not to pursue approval for the entire complex, you may have the option to apply for single-unit approval (formerly known as “spot approval”). To be eligible, the following requirements must be met:

• Construction on the condo must be complete
• The condominium must have at least 5 units
• In projects with more than 10 units, no more than 10% can already be FHA-insured
• In projects with fewer than 10 units, no more than 2 units can already be FHA-insured

What are the payout options for a reverse mortgage on a condo? 

If your condo qualifies for a reverse mortgage, you’ll generally have the same payout options as homeowners with other eligible property types. The right option depends on your financial goals and how you plan to use the funds. Here’s how they differ:

• Line of credit: A reverse mortgage line of credit lets you access funds as you need them instead of receiving all the money at once. This option is only available with adjustable-rate HECM reverse mortgages and some proprietary reverse mortgages. It is not available with fixed-rate HECMs.
• Lump sum: If you need a larger amount of money upfront, you may choose a lump sum payout. Fixed-rate HECM loans require borrowers to take their available proceeds as a lump sum at closing, while some proprietary reverse mortgages may also offer this option.
• Monthly payments: Some borrowers prefer to receive regular monthly payments instead of a lump sum. You may choose payments for as long as you live in the home (known as a tenure payment) or for a set period of time (known as a term payment).
• Combination of payout options: Depending on the type of reverse mortgage you choose, you may be able to combine these options. For example, you might take part of your available funds as a line of credit while also receiving monthly payments. Your lender could help you determine which payout option best fits your financial needs.

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Is getting a reverse mortgage on my condo a good idea?

Like any financial product, a reverse mortgage should be viewed as a tool that may be a good fit for some and not for others. In general, if you are 62 or older, have sufficient equity in your home, live in your condo as your primary residence, and pass the financial assessment, a reverse mortgage might be a good fit.

It’s worth noting that reverse mortgages have negative amortization. This means the loan balance grows over time as fees and interest are added, rather than going down like in a traditional mortgage.

If you’re still not sure, consider speaking with a financial advisor or meeting with a HUD-approved counselor. Meeting with a counselor is a requirement for most reverse mortgages, and they can help ensure you understand the loan, how it works, and your other options.

The bottom line for condo owners

Getting a reverse mortgage on a condo is possible, but it may come with a few extra steps. Your condo must be FHA-approved, either at a building level or through single-unit approval, and you’ll still need to meet the borrower eligibility requirements. While the process can seem complex, your lender can guide you through each step and help determine whether a reverse mortgage is the right fit for your situation.

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FAQs about reverse mortgage loans on a condo  

How do I know if my condo is eligible for a reverse mortgage?  

If you’re applying for a HECM, check whether your condo is FHA-approved using HUD’s condominium database. If it isn’t, you may still be eligible through FHA’s single-unit approval process. Proprietary reverse mortgages have lender-specific requirements.

Can you get a HECM reverse mortgage on a condo?  

Yes, condos may be eligible. You may be eligible if you meet all the requirements and your condo is FHA-approved or eligible for single-unit approval.

What are the requirements for FHA-approved condos?  

FHA-approved condo projects must meet HUD requirements for owner occupancy, insurance, reserve funds, HOA finances, and other property standards.

Do reverse mortgages have fixed or adjustable interest rates?

Both may be available. Fixed-rate HECMs only offer a lump sum, while adjustable-rate HECMs offer more flexible payout options, including a line of credit and monthly payments.

The information provided above is a general summary of FHA condominium approval requirements and does not include all eligibility criteria. For the complete and most current guidelines, please refer to the official FHA Single Family Housing Policy Handbook (HUD Handbook 4000.1)