For many Colorado homeowners nearing or enjoying retirement, the home is more than just a place to live. It is a financial foundation built over years of steady payments and appreciation. In recent years, rising home values across Colorado Springs, Monument, and nearby areas have left many retirees sitting on significant home equity. According to national data, the average homeowner now has over $300,000 in equity, and many senior homeowners have even more after decades of ownership.

With that much value locked into their homes, more retirees are turning to reverse mortgages as a smart way to supplement income, reduce financial stress, and maintain independence while staying in the home they love. However, not every homeowner will automatically qualify for a reverse mortgage. One of the main requirements is how much equity you have in your home.

So how much equity do you actually need to qualify, and what can you do if you are not quite there yet? Let’s take a closer look.

How Much Equity Is Required for a Reverse Mortgage?

To qualify for a Home Equity Conversion Mortgage (HECM), which is the most common reverse mortgage program insured by the Federal Housing Administration (FHA), most lenders prefer that you have at least 50 to 60 percent equity in your home.

That means your remaining mortgage balance should be no more than about 40 to 50 percent of your home’s appraised value.

For example, if your home in Colorado Springs is worth $400,000, you would typically need to owe $160,000 or less on your current mortgage to qualify. If your balance is higher, you may be able to pay it down at closing to meet the equity requirement.

While the FHA does not list an exact percentage, lenders look for enough equity to ensure you can comfortably manage ongoing responsibilities like property taxes, homeowners insurance, and maintenance.

Factors That Affect How Much You Can Borrow

Meeting the minimum equity requirement does not mean you can automatically borrow that amount. Several factors determine your reverse mortgage loan proceeds, including:

Your age: Older borrowers typically qualify for a higher percentage of their home’s value since lenders base calculations on life expectancy. For example, a 75-year-old may access more equity than a 62-year-old.

Current interest rates: When rates are lower, loan proceeds are higher. When rates rise, the available borrowing amount decreases.

FHA lending limits: The maximum claim amount for HECMs in 2025 is $1,209,750. Even if your home is worth more, this limit may cap how much you can borrow.

What If You Do Not Have Enough Equity?

If you are not quite at that 50 to 60 percent equity mark, there are still several ways to move closer to qualifying:

1. Pay down your existing mortgage.
If you have savings or retirement funds available, using some to reduce your current mortgage balance can help you meet the equity threshold sooner.

2. Wait and build equity naturally.
If you are not in a rush, continuing to make regular mortgage payments while your property value appreciates can help you qualify later.

3. Consider downsizing with a HECM for Purchase.
If your current mortgage balance is high, you could sell your home and use a portion of the proceeds to buy a smaller property using a reverse mortgage purchase loan, allowing you to move and eliminate monthly payments in one transaction.

4. Explore other financing options.
If a reverse mortgage is not the best fit right now, a home equity loan or HELOC may help, though those options require monthly payments and standard income qualification.

The Bottom Line

A reverse mortgage can be a powerful tool for homeowners looking to stay in their homes while tapping into their equity for added financial security. In most cases, you will need to have around half of your home’s value in equity to qualify.

If you are not quite there yet, taking steps to pay down your balance, allowing equity to grow, or exploring downsizing may bring you closer to your goal.

For personalized guidance, reach out to Kevin Guttman, your Certified Reverse Mortgage Professional (CRMP) in Colorado Springs. Kevin specializes in helping retirees understand their options, protect their home equity, and make confident financial decisions.

Have questions about qualifying for a reverse mortgage?

Contact Kevin Guttman today through ReverseMortgageRevolution.com for personalized guidance and a no-pressure consultation.

Final Thought

A reverse mortgage can be a safe, flexible, and empowering solution — when it’s the right fit. Whether you want to reduce financial stress, eliminate payments, or simply enjoy more comfort in retirement, understanding how a reverse mortgage works is the first step.

Have questions? Kevin Guttman is here to help. As a Certified Reverse Mortgage Professional licensed in 18 states HI, WA, OR, CA, ID, UT, AZ, CO, NM, KS, OK, TX, TN, AL, FL, MI, OH, and PA. Get in touch today for a free quote in minutes. Kevin offers clarity, transparency, and personalized advice you can count on.