Can you get a reverse mortgage on a condo or a home in an HOA?
By OurHOA · General information · Revised
How reverse mortgages work in condos and HOA communities, why the condo approval matters, and why unpaid HOA dues can put the loan in default.
The short answer
Often yes, but the path depends on what kind of HOA home you own. Most reverse mortgages in the US are Home Equity Conversion Mortgages, or HECMs, which are insured by FHA and available to homeowners 62 and older. A house in a planned community with an HOA generally qualifies like any other single-family home, because the association only owns the common areas and FHA does not review the community as a whole. Condos are different. Since you share ownership of the building with everyone else, the lender has to look at the health of the entire association, not just your unit, and that is where most of the friction shows up.
Why the condo approval matters
For a HECM, a condo generally needs to be in an FHA-approved project or qualify for what HUD calls single-unit approval, which lets an individual unit in a non-approved building be insured if the project meets a set of minimum standards. HUD reopened single-unit approval in its 2019 condo rule and applied it to reverse mortgages, with the lender using a questionnaire the association fills out. In practice, industry reporting at the time said the single-unit route was only slightly easier and that many deals still ended up needing a full project approval. Your lender can look your building up in HUD's condo approval database and tell you which path you are on before you spend money on an appraisal.
What the lender looks at in your association
Expect questions about the budget, reserves, master insurance, delinquencies, pending lawsuits, and how much of the building is commercial space or owned by investors. A community where a lot of owners are behind on dues, or where the board is suing the developer over construction defects, can stall a loan even if your own unit is spotless. The most frustrating holdup is paperwork: if the management company or board never returns the questionnaire, the lender cannot finish its review and the loan usually stops there. If you are a board member, keeping a current document packet ready helps every owner who refinances or sells, not just the occasional reverse mortgage borrower.
If your building is not approved
Some lenders offer proprietary reverse mortgages, sometimes called jumbo reverse mortgages, which are private products without FHA insurance. Because they are not bound by FHA's condo rules, they can approve buildings using their own standards, and lenders have marketed them specifically to condo owners who could not get through a HECM review. The tradeoffs are that terms, age minimums, and consumer protections vary by lender and by state, so read the fine print and compare it carefully against what a HECM would offer. Another option is for the board to pursue FHA project approval, which helps every owner who wants to sell to an FHA buyer, not just you.
HOA dues do not go away
This is the part people miss. A reverse mortgage removes the monthly mortgage payment, but you still have to pay property taxes, homeowners insurance, and HOA dues, and HUD treats all of them as property charges you agreed to keep current. Falling behind on any of them can put the loan in default and eventually lead to foreclosure, which is a hard place to land at 80. Some borrowers have a portion of their loan set aside to pay taxes and insurance, called a life expectancy set-aside, but those are designed around taxes and insurance, and lender materials list HOA dues and special assessments as charges you still pay yourself. Before closing, ask the lender in writing exactly which bills the set-aside covers.
Plan for special assessments
Say your condo has 60 units and the roof needs replacing in a few years with reserves only covering half of it. A $10,000 special assessment is a nuisance for a working owner, but for someone living on a fixed income and a reverse mortgage it can turn into a default. Before you sign, read the latest reserve study and board minutes for any big projects on the horizon, and think about keeping a line of credit or cash cushion for exactly this. HECMs require a session with a HUD-approved housing counselor before closing, so bring your HOA budget and assessment history to that meeting. This is general background rather than lending or legal advice, and the rules change, so confirm the current requirements with a lender and a counselor.
Sources
- CFPB: What is a reverse mortgage?
- HUD FHA INFO 19-49: Condominium project approval and single-unit approval
- HousingWire: How the new condo rule is playing out for reverse mortgage lenders
- The Mortgage Reports: A homeowner's guide to HECM property requirements
- HousingWire: Advantages for proprietary reverse mortgages on condos
- National Consumer Law Center: HECM property charge defaults
- HUD Mortgagee Letter 2015-11: Loss mitigation for HECMs in default due to unpaid property charges
- Mutual of Omaha Reverse Mortgage: HECM LESA vs. SecureEquity LESA job aid
These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.