Reverse Mortgage
Convert Your Home Equity Into Tax-Free Cash
A reverse mortgage is a loan designed for homeowners aged 62 and older who want to access the equity they’ve built, without selling their home or taking on monthly payments. Because you’re borrowing against your own equity, the funds you receive are not considered taxable income. You stay in your home, you keep the title, and repayment happens only when you permanently leave.
The most common version is the Home Equity Conversion Mortgage (HECM), which the federal government insures through the FHA. So if you’ve been wondering whether a reverse mortgage is a real option or just a product pitched in late-night commercials, the answer depends on your situation. This page explains how it actually works.
3 Ways To Receive Your Funds
Lump Sum
Receive your available proceeds at closing with a fixed interest rate. This is the most common choice for homeowners looking to pay off an existing mortgage and eliminate monthly payments immediately.
Line of Credit
Draw funds only when you need them. The unused portion of your credit line actually grows over time, meaning you have access to more funds the longer you wait to use them.
Monthly Payments
Receive fixed disbursements every month (tenure or term). This functions as a steady income supplement to help cover recurring costs like healthcare, taxes, or daily expenses.
How a Reverse Mortgage Works
Instead of making payments to a lender, the lender makes payments to you, or gives you access to a line of credit you can draw from. The loan balance grows over time because interest and fees accrue monthly. Repayment is not required until you die, sell the home, or permanently move out. At that point, the home is typically sold, and the proceeds pay off the balance.
Because the HECM is a non-recourse loan, neither you nor your heirs will ever owe more than the home is worth at the time of sale. If the home’s value is less than the loan balance, the FHA insurance covers the difference.
Before a lender can process your application, you must complete a counseling session with a HUD-approved counseling agency. This ensures you understand your obligations and the costs involved.
HECM Loan Parameters
Reverse Mortgage Requirements
Qualifying for a reverse mortgage involves several layered criteria. Every borrower listed on the home’s title must meet the age requirement, and the property itself must meet HUD safety and security standards.
About the Financial Assessment
The financial assessment is not the same as a traditional credit approval. Lenders review your history of meeting ongoing housing obligations: property taxes, homeowner’s insurance, and HOA fees if applicable. Since you’re not making monthly payments on the loan itself, the lender needs confidence that you’ll maintain the ongoing costs that keep the home in good standing.
If the assessment raises concerns regarding your ability to cover these costs, a portion of your loan proceeds may be set aside in a “life expectancy set-aside” (LESA) account to cover those expenses automatically on your behalf.
Reverse Mortgage Pros and Honest Trade-Offs
A reverse mortgage solves a real problem for many older homeowners who are equity-rich but cash-limited. However, it isn’t a neutral financial tool. The trade-offs matter, and understanding them before you commit is the whole point of this page.
- No required monthly mortgage payments
- Proceeds are generally not considered taxable income
- You retain title and the right to stay in your home
- Non-recourse protection — heirs cannot owe more than the home’s value
- Line of credit grows over time if unused
- FHA insurance backs the HECM program
- Loan balance grows monthly as interest and fees accrue
- Home equity decreases over time, potentially to zero
- Heirs may need to sell the home to repay the loan
- Upfront costs (origination, insurance, closing) can be significant
- You can outlive your available proceeds with the monthly payment option
- Property taxes and insurance must still be paid — or foreclosure is possible
A Closer Look at Reverse Mortgage
Patricia: Using a Line of Credit for Stability
Patricia is 74 and owns her home outright. Her home is worth $520,000. She lives on Social Security and a small pension, but rising healthcare costs have strained her monthly budget.
A HECM line of credit makes sense for her situation. Because she doesn’t need a lump sum, the line of credit lets her draw only what she needs, when she needs it. Her home title stays in her name. No monthly mortgage payment is required. The unused portion of the credit line grows over time, giving her more flexibility as she ages.
Patricia still pays her property taxes and homeowner’s insurance every year. She understands that failing to do so could trigger a default. Her counseling session covered these obligations clearly. So she goes in knowing the full picture, not just the benefits.
Her daughter may inherit less equity than expected. Patricia has had that conversation with her family. For Patricia, staying in her home without financial stress matters more than maximizing the inheritance.
When Another Program Might Fit Better
A reverse mortgage isn’t the right answer for every homeowner who wants to access equity. Several situations call for a different approach.
You’re under 62 or want to preserve equity for heirs: If leaving maximum equity behind matters to you, or if you haven’t yet reached 62, a cash-out refinance may give you access to equity while keeping the loan balance more predictable over time.
You want to move within a few years: Since a reverse mortgage is designed for long-term occupancy, the upfront costs rarely make sense if you plan to sell or relocate in the near term. A shorter-term equity strategy may serve you better.
You’re still under 62 and planning ahead: If you’re researching now for a decision several years out, reviewing our full loan program overview can help you compare options side by side.
You need purchase financing, not a refinance: HECM for Purchase is a real product, but it works differently from the standard reverse mortgage. If you’re buying a new home and want to use a reverse mortgage, ask us specifically about that program.
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Reverse Mortgage FAQs
Yes. You retain title to your home throughout the life of the loan. The lender does not take ownership. However, you must continue meeting your ongoing obligations: property taxes, homeowner’s insurance, and basic home maintenance. If those obligations go unmet, the lender can declare the loan due and payable, which could lead to foreclosure. So ownership comes with responsibility, same as any other mortgage product.
When you pass away, your heirs typically have several options. They can sell the home and use the proceeds to repay the loan balance. If they want to keep the home, they can pay off the reverse mortgage with their own funds or by refinancing into a new conventional loan. Because the HECM is non-recourse, they will never owe more than the home’s appraised value at the time, even if the loan balance has grown beyond that. The FHA insurance covers any shortfall.
Yes, in specific circumstances. A reverse mortgage can go into default if you stop paying property taxes, let the homeowner’s insurance lapse, or fail to maintain the property as your primary residence. For instance, if you move into a care facility for more than 12 consecutive months, the loan can become due. That’s why the required counseling session covers these scenarios directly. Understanding your ongoing obligations before signing is the point of that process, not just a formality.
The amount depends on several factors: your age, the current interest rate, and the appraised value of your home up to the 2026 HECM loan limit of $1,249,125. Generally, older borrowers with higher home values and lower interest rates can access a larger percentage of their equity. A lender will calculate the “principal limit” specific to your situation. You can also explore different scenarios using our mortgage calculator or by speaking with a loan officer who can run actual numbers for you. The CFPB also maintains useful background information at their homeownership resource center.
Yes, but with a condition. If you still carry a balance on your existing mortgage, that balance must be paid off at or before closing on the reverse mortgage. In many cases, the reverse mortgage proceeds cover that payoff. So if the remaining balance is small relative to your home’s value, this is usually straightforward. If the existing balance is large, there may not be enough proceeds remaining to make the reverse mortgage worthwhile. A loan officer can help you model whether the numbers work given your specific equity position. Also, our FHA loan page has additional context on FHA-insured products if you’re comparing approaches.
Reverse Mortgage Disclaimer
This page provides general educational information about reverse mortgage products, including the Home Equity Conversion Mortgage (HECM) program insured by the Federal Housing Administration. No specific interest rate, annual percentage rate, monthly payment amount, loan term, or down payment has been advertised on this page. Therefore, full Regulation Z trigger term disclosures are not required for this content.
HECM loans accrue interest over the life of the loan. Because no monthly mortgage payment is required, interest compounds onto the outstanding balance, which reduces available home equity over time. The unused portion of a HECM line of credit grows at the same rate as the loan’s interest and MIP accrual rate, which may increase available funds over time — but does not increase the home’s value or equity.
HECM loans require an upfront mortgage insurance premium (MIP) of 2% of the appraised value or applicable FHA loan limit, whichever is less, plus an annual MIP of 0.5% of the outstanding loan balance. These costs affect the total amount available to the borrower and are in addition to other closing costs.
HECM loans are non-recourse. Neither the borrower nor their heirs will owe more than the lesser of the outstanding loan balance or 95% of the home’s appraised value at the time of repayment, provided the home is sold to satisfy the debt.
Rates and program terms are subject to change without notice and may vary based on borrower qualifications, property type, loan amount, creditworthiness, and market conditions. Not all applicants will qualify. This page does not constitute a commitment to lend, a loan approval, or an offer of credit. Actual loan terms, interest rates, fees, and available proceeds will be determined at the time of application based on individual circumstances.
Borrowers must meet all program eligibility requirements, including age, residency, financial assessment, and completion of a HUD-approved counseling session. Property taxes, homeowner’s insurance, and HOA fees (if applicable) remain the borrower’s ongoing responsibility throughout the life of the loan. Failure to meet these obligations may result in loan default and potential foreclosure.