Lenders that will do a HELOC on Duplex with Reverse mortgage?

Question

Looking for recommendations- Client has a duplex  worth 2.2 million that has a

reserve mortgage at 1 million balance. Can any lender do a HELOC on that ?

James Driscoll · Answer

This is a tough one, and the short answer is that most conventional lenders won't touch a HELOC where a reverse mortgage holds first lien position. The reverse mortgage lender typically controls the property title in a way that makes subordinate financing nearly impossible to place.

The math here is actually pretty clean on paper. $2.2M value with a $1M reverse mortgage balance leaves roughly $1.2M in equity, so the LTV isn't the problem. The problem is lien position. A HELOC lender would have to accept second position behind a reverse mortgage, and reverse mortgage servicers almost never consent to subordination. That's the wall most people hit.

A few angles worth exploring. Some portfolio lenders and private/hard money lenders will do a second lien behind non-traditional first mortgages, but the rate and terms will reflect the risk. Another path is a cash-out refinance that pays off the reverse mortgage entirely and wraps everything into a new first lien, though that changes the client's situation significantly. There's also the question of whether this duplex qualifies for DSCR financing since it's an investment property. If the rental income supports it, a DSCR loan could potentially pay off the reverse mortgage and pull cash out in one transaction.

With 31 years in the mortgage business I've seen situations like this resolved through portfolio lenders willing to look at the whole picture, but it usually takes someone who specializes in non-QM or investor products. Standard bank HELOC desks will decline this on the first call.

The state matters too since Florida has its own homestead and lien rules, so whoever you work with needs to be licensed and active in that market.

Jim Driscoll

Tal P. · Answer

Looking for a second position note/Heloc and 8 unit stablized proprty in Worcester, MA.Ideally, LTV of 80% or close to it.Current value around $2.1MDebt $1.03MMonthly rent $20200

Andrew Freed · Answer

@Tal P. - why dont you refinance it? I know a ton of lenders in the Worcester area. Workers credit union, greenfield savings bank, webster first, JDCU are all good options. An investment HELOC on a commercial property is a challenging ask. Another option is to negotiate that with the first lien holder and possibly get more funds out via 2nd refinance or line of credit on the investment propety. I've done this before on commercial multifamily. Feel free to reach out if you have any other questions.

LaTarence Dunbar · Answer

Great property and fantastic equity position! With a 2.2 million dollar value and a 1 million dollar balance, there is 1.2 million dollars in remaining equity to work with, which gives your client plenty of leverage.

While standard second-position HELOC lenders typically cannot sit directly behind an active reverse mortgage (because reverse mortgage balances grow over time and FHA records a second lien to protect HUD), there are two very viable ways to get your client access to that capital:

• Refinance the Reverse Mortgage into a Cash-Out Loan:
If the client qualifies based on income, property cash flow, or alternative documentation (like DSCR or bank statements), refinancing the existing 1 million reverse mortgage into a new cash-out loan allows them to clear the reverse mortgage entirely and extract substantial liquidity in one transaction.
• Cross-Collateralize or Tap Equity on Another Property:
If the client holds equity in a primary home or another 1 to 4 unit investment property, placing a fast, digital second-lien HELOC on those other assets is often the cleanest route to access cash without touching the existing reverse mortgage on the duplex.

I would be happy to take a look at the property details with you and run a few quick scenarios to see which option yields the highest payout for your client. What type of exit strategy or cash requirement are they looking for?

Vijay Friedman · Answer

@Nick DiSanzaThat's definitely a unique scenario. The biggest challenge is usually how the existing reverse mortgage affects lien position and individual lender guidelines. If a HELOC isn't available, it may also be worth comparing other equity-access options depending on the borrower's long-term goals and the property's cash flow. Interested to see what lenders others have had success with.

Melvin List · Answer

I have a second lien position reverse mortgage but the first needs to me a traditional forward mortgage

Kate Nixon Taylor · Answer

I would suggest a cash out refinance in this case. Happy to help! Feel free to reach out anytime.

Cheers,

Kate Taylor, LO

The One Brokerage

Mike Grudzien · Answer

Tricky one...

AJ Exner · Answer

Hey Nick,

They are hard to come by, and the one's I've seen focused on HELOC's for investments still have a bit of a 'conventional' fell to them (DTI considerations, etc.)

Happy to connect and talk leverage and needs if it helps

Good luck!

Lenders that will do a HELOC on Duplex with Reverse mortgage?

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