Reverse Mortgages in Florida: State-Specific Rules and Costs
Key Takeaways
- Florida charges a Documentary Stamp Tax on all mortgages.
- Florida's Homestead Exemption provides massive protection against creditors.
- Condo approvals in Florida can be difficult for FHA HECMs.
Florida is one of the most popular states in the nation for retirees, which makes it one of the largest markets for reverse mortgages. While the federal rules governing the FHA Home Equity Conversion Mortgage (HECM) apply nationwide, there are several Florida-specific nuances you must understand before applying.
Florida Documentary Stamp Tax and Intangible Tax
When you take out any mortgage in Florida, the state levies specific taxes on the transaction. You cannot avoid these.
- Documentary Stamp Tax: Florida charges $0.35 per $100 of the loan amount.
- Intangible Tax: Florida charges $2.00 per $1,000 of the loan amount.
How this applies to a Reverse Mortgage: Unlike a traditional mortgage where the tax is based on what you borrow on day one, Florida calculates these taxes on a reverse mortgage based on the maximum principal limit of the loan, regardless of how much cash you actually draw at closing. These taxes are rolled into your closing costs and financed into the loan.
The Florida Homestead Exemption
Florida offers some of the strongest homeowner protections in the country through its Homestead Exemption.
Creditor Protection: In Florida, your primary residence is generally protected from forced sale by creditors. If you have medical debt or credit card debt, those creditors cannot force you to sell your home. A reverse mortgage does not void your Homestead creditor protection.
Property Tax Caps: The "Save Our Homes" amendment caps the annual increase of assessed value for property taxes at 3%. Because paying your property taxes is a strict requirement to keep a reverse mortgage from defaulting, this tax cap makes it significantly easier for Florida seniors on fixed incomes to maintain their reverse mortgages long-term compared to seniors in states with skyrocketing property taxes.
The Florida Condo Problem
Florida has a massive number of condominiums. If you live in a condo, getting a standard FHA reverse mortgage can be challenging.
The FHA requires the entire condominium project to be FHA-approved, not just your individual unit. Many Florida condo associations let their FHA approvals lapse, or they fail to meet strict FHA requirements regarding owner-occupancy ratios or financial reserves.
If your Florida condo is not FHA-approved, you have two options: 1. Try to get a "Single-Unit Approval" (SUA) through the FHA, which requires cooperation from your HOA board. 2. Apply for a private, proprietary "Jumbo" reverse mortgage, which does not require FHA condo approval, though these typically require much higher home values.