4 Reverse Mortgage Questions Families Ask: Citizenship, Disasters & Spending

Whether your parents hold a green card, live somewhere wildfire season has become part of life, or simply wonder what they can actually do with the money, the facts are more reassuring than the rumors. Here are four reverse mortgage questions families ask me, answered with current, government-sourced facts.

Meet Rosa. Her father, Vincent, is a 76-year-old homeowner near Sacramento who is a lawful permanent resident, a green card holder, not a U.S. citizen. After a hard winter, Rosa started researching reverse mortgages and hit a wall of conflicting answers. Could her dad even qualify? What would happen if a wildfire damaged the house? And if they went through with it, what could the money actually be used for? If any of that sounds familiar, read on.

1. Can a Parent Who Is Not a U.S. Citizen Get a Reverse Mortgage?

Yes, and this is one of the least understood facts in the whole program. A lawful permanent resident, someone with a green card, can get a Home Equity Conversion Mortgage, or HECM, under the same requirements, terms, and conditions as a U.S. citizen. HUD has been explicit on this point: citizenship is not required for eligibility.

One rule change matters for families. Under HUD guidance issued in 2025, HECM eligibility is limited to U.S. citizens and lawful permanent residents. Parents who are in the United States on a temporary visa or other non-permanent immigration status are generally no longer eligible for an FHA-insured reverse mortgage. For green card holders like Rosa’s father, nothing changes, they simply provide documentation of their lawful permanent resident status when they apply.

Everything else works exactly the same. Vincent still must be at least 62, live in the home as his primary residence, have meaningful equity, and complete the HUD-approved counseling session that every HECM borrower goes through. The citizenship question turns out to be the least of Rosa’s worries, which is what I told her.

2. What Happens to the Reverse Mortgage if the Home Is Damaged or Destroyed?

With wildfire season stretching longer in California, Washington, and Colorado, and hurricanes in Florida and Texas, this question comes up more every year. Here is the fact that surprises most families: the federal mortgage insurance behind a HECM protects against the loan balance, it does not insure the physical house. The structure itself is covered by the same homeowners insurance, and flood insurance where required, that every homeowner carries.

That is why keeping hazard insurance in force is one of the few absolute obligations of a reverse mortgage. If the insurance lapses, the loan can be called due even when nothing has happened to the home. When a loss does occur, the insurance claim is typically made payable to both the borrower and the lender, and the money is expected to be used to repair the home back to its pre-loss condition, which is exactly what keeping it as a primary residence requires.

If the damage is total and the home cannot be restored or occupied, the loan becomes due and is repaid from the insurance proceeds, the sale of the lot, or other funds. Because a HECM is a non-recourse loan, neither your parents nor your family will ever owe more than the home is worth. But the lesson stands: the coverage that protects the house itself is your family’s responsibility to keep in place, and a quick annual check that premiums are being paid can prevent a disaster from becoming a loan problem.

3. Is There Any Limit on What the Money Can Be Used For?

Generally, no. Parents can use the funds for almost anything: paying off credit card balances and medical bills, home modifications like grab bars and ramps, in-home care, everyday expenses, even a well-earned trip. The HECM program does not police how the money is spent, which is one of the reasons it feels so different from a conventional loan.

There are guardrails, and families should know them. An existing mortgage or other lien on the home must be paid off first with the proceeds. The lender may also set aside part of the proceeds to cover future property taxes, homeowners insurance, and homeowner association fees, money that is dedicated to those bills rather than free cash. Understanding the set-aside before closing is the difference between a plan that runs smoothly and one that surprises everyone later.

For Rosa, the guardrails were actually the reassuring part. Knowing the property taxes and insurance would be handled automatically meant fewer moving parts for her to monitor, which was the whole point of the exercise.

4. How Much Can Parents Take Out Right Away?

Even though the total is based on the home’s value, the parent’s age, and current interest rates, HUD limits how much can be drawn in the first year. Under current rules, a borrower can generally access the greater of 60 percent of the principal limit or the mandatory obligations, plus an extra 10 percent, unless all of the proceeds are going to pay off an existing mortgage.

The money can arrive as a lump sum, a line of credit, fixed monthly payments, or a combination, and whatever is not drawn stays available for later. That structure is deliberate: it keeps families from spending the largest amount of equity at the very beginning, when a parent may be most vulnerable to pressure or scams, while still allowing the full plan to unfold over time.

A practical example. If your parents want to pay off the remaining mortgage, make a needed repair, and then rely on a line of credit, the payoff happens first, the repair is scheduled, and the line of credit becomes the safety net they draw on only when they need it. That is a common pattern, and it works because the rules are designed around exactly that kind of planning.

The Takeaway for Families

Here is what I hope Rosa, and you, take away from all this. Citizenship is not a barrier for green card holders, and the immigration rules changed in 2025 only tightened the door for temporary visa holders. The house itself is protected by your family’s own hazard insurance, so keep it current. The money can be spent on nearly anything, with a few sensible guardrails. And the first-year draw limit is a feature, not a flaw, it protects parents from spending everything at once.

A reverse mortgage is a federal program with real protections built in, and it works best for families who understand the responsibilities that come with it. That is my job: helping families see the full picture before they decide, and reassuring them that their parents’ home equity can be a source of security, not worry.

If you have questions like Rosa’s about your own parents’ situation, you are not alone, and there is no cost to asking them. That is what I am here for.