For many older adults, their home is their largest asset. A reverse mortgage is one way to turn part of that value into cash while continuing to live in the home. It can be a useful tool for some people, but it is complex and can have long-term consequences for you and your heirs.
How a reverse mortgage works
With a regular mortgage, you make monthly payments to the lender. With a reverse mortgage, the lender pays you, using your home's equity. You keep the title to your home. Interest and fees are added to the loan balance each month, so the amount you owe grows over time and your equity shrinks.
Most reverse mortgages are Home Equity Conversion Mortgages, or HECMs, insured by the Federal Housing Administration. To qualify, you generally must:
- Be 62 or older.
- Live in the home as your main residence.
- Own the home outright or have a low enough mortgage balance to pay off with the reverse mortgage.
- Be able to keep paying property taxes, homeowners insurance and any HOA fees, and keep the home in good repair.
- Meet with a HUD-approved housing counselor.
How you can receive the money
- A lump sum.
- Monthly payments for a set period or for as long as you live in the home.
- A line of credit you can draw on as needed. With a HECM, the unused credit line grows over time.
- A combination of these.
The amount you can borrow depends on your age, interest rates and your home's value, up to a federal limit of $1,249,125 for HECMs in 2026.
What it costs
Reverse mortgages have significant upfront and ongoing costs, including:
- An upfront FHA mortgage insurance premium and an annual premium.
- An origination fee, which is capped for HECMs.
- Closing costs, such as an appraisal and title insurance.
- Interest, which is added to the balance.
Most costs can be paid from the loan, but that reduces the money available to you.
When the loan must be repaid
The loan becomes due when the last borrower:
- Dies.
- Sells the home.
- Moves out permanently, including living in a care facility for more than 12 months in a row.
- Fails to pay property taxes or insurance, or keep the home in repair.
Usually the home is sold to repay the loan. HECMs are "non-recourse" loans: you or your heirs will never owe more than the home is worth when it is sold. Heirs who want to keep the home can pay off the loan, or 95% of the home's appraised value if that is less.
Spouses
If your spouse is not a borrower on the loan, for example because they are younger than 62, ask how they would be protected. For HECMs, an eligible non-borrowing spouse may be able to stay in the home after the borrower dies, if certain conditions are met. Make sure these protections are written into the loan.
Risks and red flags
- Less equity for you later, for moving, for long-term care or for your heirs.
- Pressure to buy other products, such as annuities or insurance, with the loan money. Be wary.
- Advertising that suggests a reverse mortgage is free money or a government benefit. It is a loan.
- Effects on benefits. Reverse mortgage payments are not income for Social Security or Medicare, but money you keep in the bank can affect needs-based benefits such as SSI and Medicaid.
Alternatives to consider
- Downsizing to a less expensive home. See downsizing your home.
- A home equity loan or line of credit, if you can afford monthly payments.
- Property tax deferral or relief programs. See property tax relief programs.
- Programs that help with energy bills and home repairs.
Start with counseling
HUD-approved counselors are independent and must explain the costs, risks and alternatives. You can find one through HUD's website or by calling 1-800-569-4287. Take your time, compare offers from more than one lender and consider having a trusted family member or attorney review the paperwork.
