How does a reverse mortgage work?

A reverse mortgage lets homeowners aged 62+ convert home equity into cash without selling. Instead of making monthly payments to a lender, the lender pays you — as a lump sum, monthly payments, or a line of credit. The loan is repaid when you sell, move out permanently, or pass away. You retain ownership and can stay in the home as long as you maintain it, pay taxes, and keep insurance current.

Do you lose your home with a reverse mortgage?

No — you retain full ownership of your home. However, the loan becomes due when the last borrower moves out permanently, sells, or passes away. At that point, heirs can repay the loan and keep the home, sell the home to repay the balance, or walk away (reverse mortgages are non-recourse, meaning heirs owe nothing beyond the home's value).

How much money can you get from a reverse mortgage?

The amount depends on your age, home value, current interest rates, and the HECM lending limit ($1,149,825 in 2024). Generally, older borrowers with more valuable homes and lower interest rates qualify for more. Most borrowers can access 40–60% of their home's appraised value. A HUD-approved counselor can give you a personalized estimate.

What are the alternatives to a reverse mortgage?

Alternatives include home equity loans or HELOCs (lower fees, but require monthly payments), downsizing to a smaller home (frees up equity as cash), selling and renting (eliminates maintenance costs), property tax deferral programs (available in many states for seniors), and government assistance programs for utilities, prescriptions, and food.

Reverse Mortgage Guide — What Seniors Need to Know

How a Reverse Mortgage Works

A reverse mortgage is a loan that lets homeowners aged 62 and older convert part of their home equity into cash — without selling the home or making monthly payments. Instead of you paying the lender, the lender pays you. The loan balance grows over time as interest accrues, and it is repaid when you sell, move out permanently, or pass away.

You retain full ownership of the home throughout the life of the loan. The most common type is the Home Equity Conversion Mortgage (HECM), which is federally insured by HUD.

Eligibility Requirements

Age: At least 62 years old (both spouses, if married)
Primary residence: The home must be your primary residence — not a vacation home or rental
Equity: Substantial home equity (generally 50%+ of the home's value)
Property type: Single-family homes, 2–4 unit properties (if you live in one unit), HUD-approved condos, and manufactured homes meeting FHA standards
Financial assessment: Ability to pay property taxes, homeowner's insurance, and maintain the property
Counseling: You must complete a session with a HUD-approved reverse mortgage counselor before applying

Types of Reverse Mortgages

HECM — Home Equity Conversion Mortgage

The most common type, insured by the Federal Housing Administration (FHA). HECMs have lending limits, regulated fees, and consumer protections including non-recourse provisions (you or your heirs can never owe more than the home is worth). Available through FHA-approved lenders.

Proprietary (Jumbo) Reverse Mortgages

Private loans for homes valued above the HECM lending limit. They can provide more cash for high-value properties but lack federal insurance protections. Fees and terms vary by lender — compare carefully.

Single-Purpose Reverse Mortgages

Offered by some state and local agencies and nonprofits. Lowest cost option, but the funds can only be used for a specific purpose — typically property taxes or home repairs. Not widely available but worth investigating.

How You Receive the Money

Lump sum: One large payment at closing (only available with fixed-rate HECMs)
Monthly payments: Steady income for a set term or for as long as you live in the home
Line of credit: Draw funds as needed — unused amounts grow over time, increasing your available balance
Combination: Mix monthly payments with a line of credit for flexibility

Pros and Cons

Advantages

No monthly mortgage payments required
Stay in your home while accessing equity
Tax-free proceeds (consult a tax advisor for your situation)
Non-recourse: you or heirs will never owe more than the home's value
Line of credit option grows over time
Can supplement Social Security, pensions, and retirement savings

Disadvantages

High upfront costs: origination fees, mortgage insurance premium, closing costs
Loan balance grows over time, reducing equity for heirs
Still responsible for property taxes, insurance, and maintenance
Moving out for 12+ months (such as to assisted living) triggers repayment
Reduces the inheritance available to heirs
Complex product — high pressure sales tactics exist in this market

Costs to Expect

Origination fee: Up to $6,000 for HECMs, based on home value
Mortgage insurance premium: 2% of the home value upfront, plus 0.5% annually
Closing costs: Appraisal, title search, recording fees — similar to a traditional mortgage
Servicing fees: Up to $35/month for the life of the loan
Interest: Accrues on the outstanding balance and compounds over time

Alternatives to Consider

Before committing to a reverse mortgage, explore these options with a financial advisor:

Home equity loan or HELOC: Lower fees than a reverse mortgage, but requires monthly payments
Downsizing: Sell your current home, buy or rent something smaller, and pocket the difference
Property tax deferral: Many states offer property tax postponement for seniors — check your state's program
Government assistance: Programs for utilities (LIHEAP), prescriptions, and food (SNAP) can reduce expenses
Renting out a room: A housemate can provide income and companionship

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More Senior Housing Resources

Downsizing for Seniors Senior Housing Options Home Equity Loan Guide VA Home Loan Guide Home Insurance Guide