A reverse mortgage is a loan secured by your home that lets eligible homeowners access some of their home equity without making monthly mortgage payments. The balance generally grows as interest and fees accrue, and the loan usually must be repaid when the borrower sells or no longer occupies the home as a principal residence. Borrowers must still pay property taxes and homeowners insurance, maintain the home, and meet occupancy requirements.
In the United States, the most common type is the FHA-insured Home Equity Conversion Mortgage (HECM). Before applying, compare costs and terms from several lenders, understand the requirements and ongoing obligations, and consider alternatives with a HUD-approved counselor.
How a Reverse Mortgage Works
A reverse mortgage turns some of a homeowner’s equity into loan proceeds. The homeowner retains title to the property, while the lender holds a lien. Unlike a traditional mortgage, the borrower does not make monthly mortgage payments; interest and fees are added to the amount owed. That balance reduces the equity left in the home over time.
The amount available depends on factors including the youngest borrower’s age, the home’s eligible value, interest rates, and program rules. Existing mortgages or liens generally need to be paid off at closing, often using reverse-mortgage proceeds. The loan usually becomes due when the borrower sells the home or no longer lives there as a principal residence; failing to meet loan obligations can also lead to default and foreclosure.
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Types of Reverse Mortgages
The three broad types differ in who offers or insures them, how proceeds may be used, and the protections and terms that apply.
| Type | Who offers or insures it | Typical use and considerations |
|---|---|---|
| HECM | FHA-insured; offered by FHA-approved lenders | The most common type. It requires HUD-approved counseling and has federal program rules and a yearly claim-amount limit. |
| Proprietary | Private lenders; not federally insured | May suit owners of higher-value homes. Terms, eligibility, and protections vary by lender and product. |
| Single-purpose | Some state or local governments and nonprofits; not federally insured | Proceeds are restricted to a stated purpose, such as home repairs or property taxes. Availability may depend on location and income. |
HUD lists the 2026 HECM maximum claim amount as $1,249,125 (U.S. Department of Housing and Urban Development, 2026). This is a program ceiling used in loan calculations, not a promise of how much a borrower can receive. Actual proceeds depend on the borrower’s circumstances and loan terms.
HECM Requirements
HECM rules are more standardized than the terms of private reverse mortgages. A HECM applicant generally must be at least 62, occupy the home as a principal residence, have sufficient equity, meet property standards, and complete counseling through a HUD-approved reverse-mortgage counseling agency. The lender assesses whether the borrower can keep up with property charges; depending on that assessment, some funds may need to be set aside.
After closing, borrowers must continue to occupy the home as their principal residence, pay property taxes and homeowners insurance and other applicable property charges on time, and maintain the property. Failure to meet these obligations can put the loan in default and risk foreclosure. Proprietary and single-purpose loans can have different requirements, so review the specific loan documents.
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Depending on the HECM product and rate rules, proceeds may be available as a line of credit, monthly payments, a lump sum, or a combination. The payout method affects when funds are borrowed and how much interest and fees may accrue. Do not assume unused credit will grow: check the contract and ask the lender to explain how the available amount changes.
| Payout method | What to consider |
|---|---|
| Lump sum | Provides funds upfront. Interest and fees may accrue on more of the borrowed amount sooner; availability depends on product and rate rules. |
| Line of credit | Lets you request funds as needed. Ask how interest, fees, and any unused credit are treated under the contract. |
| Monthly payments | Provides payments on a schedule set by the loan arrangement. Confirm the amount, duration, and conditions for continuing payments. |
| Combination | May divide proceeds among available methods. Confirm what can be changed later and how each portion is charged. |
Reverse Mortgage Costs
HECM costs can include counseling, origination fees, third-party closing expenses such as appraisal and title work, and an initial mortgage-insurance premium. Ongoing costs can include interest, an annual mortgage-insurance premium, servicing fees, property taxes, and homeowners insurance. Some costs may be financed into the loan, reducing the proceeds available and increasing the balance owed.
The Consumer Financial Protection Bureau (CFPB) lists HECM origination fees of up to $6,000 and an annual mortgage-insurance premium of 0.5% of the outstanding balance (CFPB, cost page last reviewed 2024). These are source figures, not a personalized quote; ask lenders for current written estimates and review their disclosures. Counseling fees vary and may be waived if unaffordable.
Interest and fees added to the balance accumulate while the loan remains outstanding. In general, borrowing more and keeping the loan longer means more interest and charges can accrue. Compare the total costs and proceeds offered, not only whether a monthly mortgage payment is required.
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As the loan balance grows, the equity remaining in the home may decline. At repayment, the balance is generally paid from the home’s sale or other funds. Heirs may be able to keep the home by paying off the loan, or sell it and use the sale proceeds to repay the debt. HECMs are non-recourse loans: the borrower or heirs generally do not owe more than the home’s value when the loan is repaid. Any equity remaining after repayment belongs to the homeowner or estate.
Reverse-mortgage advances are loans, not earnings, and generally are not taxable income when received. Tax treatment of interest and any effect on means-tested benefits depends on individual circumstances and applicable rules. Before relying on proceeds while receiving needs-based benefits, ask a qualified benefits adviser how retained funds could affect eligibility.
Alternatives to Consider
A reverse mortgage is one way to access home equity, but it is not the only option. A home-equity loan or line of credit generally requires scheduled payments; refinancing may replace an existing mortgage; downsizing or selling can release equity but involves moving and housing decisions; and reducing expenses may help address a cash-flow gap. Which option is appropriate depends on the household’s finances, plans, and current offers.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to Compare and Decide
- Clarify what you need the funds for and how long you expect to remain in the home.
- Compare the loan type, insurance status, eligibility rules, interest-rate structure, fees, proceeds, and payout choices from several lenders.
- Ask how an existing mortgage payoff, property charges, occupancy rules, and a move or sale would affect you and any spouse or heirs.
- Compare the offer with alternatives such as a home-equity loan or line of credit, refinancing, downsizing, selling, or reducing expenses.
- If considering a HECM, complete counseling with a HUD-approved reverse-mortgage counseling agency and review the written loan documents before committing.
Be cautious of advertising that suggests reverse mortgages are free money or a special VA benefit. The CFPB warns that some ads falsely promise veterans special deals or imply VA approval; a reverse mortgage is not a VA benefit. Verify lender and program claims independently.
FAQ
Do I still own my home with a reverse mortgage?
With a HECM, the title remains in the homeowner’s name and the lender has a lien. The borrower must still meet occupancy and property-related obligations.
Do I have to make monthly mortgage payments?
HECM borrowers do not make monthly mortgage payments, but they must pay property taxes, homeowners insurance, and other applicable property charges and maintain the home. Failure to meet obligations can put the loan in default.
When does a reverse mortgage have to be repaid?
It generally must be repaid when the borrower sells or no longer occupies the home as a principal residence. The loan may become due earlier if loan obligations are not met. Check the contract for the applicable terms.
Can my heirs keep the home?
Heirs may be able to keep the home by repaying the loan, or sell it and use the proceeds to repay the debt. The amount owed, available equity, and loan terms affect their options.
What should I ask a lender before applying?
Ask for written details on fees, interest rates, proceeds and payout timing, property and occupancy obligations, and what happens if you sell, move, or enter care. Compare several offers and, for a HECM, speak with a HUD-approved counselor.
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