If I Have a Reverse Mortgage on One Home, Can I Get a New Mortgage on Another One?

Qualifications

To qualify for a reverse mortgage, a homeowner must be at least 62 years old and have substantial equity in his home. His income, credit and other assets aren't considered in the application process. FHA reverse mortgages are only available for owner-occupied principal residences. You're able to refinance a reverse mortgage with another reverse mortgage should the property value or some other aspect of the property or loan make that attractive --- that is, allow you to get a better interest rate or take more money out. You're also permitted to fully repay your reverse mortgage, move and then take out a new reverse mortgage on another property.

Reverse mortgages aren't available for vacation homes or rental properties. Because you can only have one principal residence under IRS rules, you can also only have one reverse mortgage. You can't take out a reverse mortgage on your home, then move to another home and rent out the house with the reverse mortgage on it. To meet the requirement as a principal residence, you must live in the house at least six months out of the year. A reverse loan becomes due and payable if you move out for more than 12 months or if you make another home your principal residence.

As long as you maintain and continue to live in your reverse-mortgaged principal residence, you can buy one or more vacation properties or investment properties, financing or refinancing the purchase with a traditional mortgage. In fact, you could use reverse mortgage proceeds for the down payments on these additional properties. You can use reverse mortgage proceeds for any purpose you choose --- there are no restrictions.

If you already own a home, want to keep it for rental purposes and have a sizable --- 40 percent or more --- down payment for a home you'd like to spend your retirement in, the FHA offers a reverse-mortgage-for-purchase program. This allows you to combine your down payment with the reverse mortgage for a purchase loan to buy the house outright. You would live mortgage-free in this house and be able to keep your other property, whether it has a traditional mortgage or is mortgage-free. If the first property has no mortgage or only a small one, the advantage of this strategy is that it allows you to reduce your cost of living while still ensuring an inheritance for your heirs.