The 5 new reverse mortgage rules

Upfront cash will be limited

As of Sept. 30, HUD also has limited the amount of cash that can be withdrawn in the 12 months following reverse mortgage approval.

A homeowner who qualifies for a $100,000 reverse mortgage will only be allowed to withdraw 60% of their available equity or $60,000 during the first year. The remaining equity can be accessed at the end of the 12-month period.

Previously, a homeowner could withdraw 100% of their available equity right away.

There are exceptions to the 60% rule.

Homeowners who have "mandatory obligations" like an existing mortgage and delinquent federal debts must use their equity to pay off those debts, says Gregg Smith, president and COO of San Diego-based One Reverse Mortgage. Credit card debt is not considered a mandatory obligation.

If those mandatory obligations exceed 60% of their equity, the homeowner may be allowed to take out additional upfront cash.

For example, a homeowner who qualifies for a $100,000 reverse mortgage and has an unpaid mortgage balance of $70,000 and $10,000 in student loans can access $80,000 to pay off debts and an additional 10% or $10,000 in cash during the first year.