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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteA reverse mortgage is a loan secured by your home—not free money, a government grant, or a way to avoid repayment. You generally keep title to the home and can receive money as a lump sum, monthly payments, a line of credit, or a combination. Instead of making monthly principal-and-interest payments, the loan balance typically grows as you receive advances and interest, mortgage-insurance premiums, and certain fees are added.
For most U.S. homeowners age 62 and older, the main product is the FHA-insured Home Equity Conversion Mortgage (HECM). A reverse mortgage may be useful if you expect to remain in your home for years, need retirement liquidity, and can continue paying property taxes, insurance, repairs, HOA charges, and other required expenses. It is usually a poor fit if you may move soon, cannot reliably pay property charges, or want to preserve as much home equity as possible for heirs.
This guide explains the three types of reverse mortgages, the 2026 HECM limit, costs, eligibility, payment options, spouse and heir protections, tax and benefit issues, risks, alternatives, and the questions to ask before signing.
How a reverse mortgage works
With a conventional mortgage, you borrow money and make scheduled payments that gradually reduce the balance. With a reverse mortgage, the lender advances money to you based on your home equity. You generally do not make required monthly principal-and-interest payments while the loan remains in good standing, but the balance increases over time.
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The balance can grow because of:
- Money you receive from the loan;
- Interest charged on the outstanding balance;
- FHA mortgage-insurance premiums on a HECM; and
- Financed origination fees, closing costs, servicing fees, or other permitted charges.
Repayment is deferred, not forgiven. The loan generally becomes due and payable when the last borrower dies, sells or transfers the home, permanently moves out, fails to occupy it as a principal residence, or defaults on an important loan obligation. The exact rules are in the loan documents and, for HECMs, 24 CFR Part 206.
Two common misconceptions
“The bank owns my home.” Usually, no. You normally retain title, while the lender records a mortgage lien. You remain responsible for the home and must comply with the loan’s occupancy, maintenance, insurance, tax, and other requirements. The lender can enforce its lien if you default.
“I never have to pay anything.” That is also false. Even when there is no required monthly principal-and-interest payment, you must generally pay property taxes, homeowners insurance, flood insurance when required, HOA or condominium charges, ground rent, special assessments, repairs, and maintenance. Failing to meet those obligations can result in default and potentially foreclosure. See the CFPB’s reverse-mortgage key terms and its guidance on borrower protections.
The three types of reverse mortgages
| Feature | HECM | Proprietary | Single-purpose |
|---|---|---|---|
| Insured by FHA | Yes | No | No |
| Typical purpose | Broad use, subject to program and underwriting requirements | Broad use, with terms set by the lender | Restricted purpose, such as repairs or property taxes |
| Age | Youngest borrower generally must be 62 or older | Set by the lender and product | Set by the program |
| Maximum loan | Based on the applicable HECM maximum claim amount, home value, age, and expected rate | Set by the lender | Set by the program |
| Counseling | HUD-approved HECM counseling is required | Varies; independent counseling is still advisable | Set by the program |
| Nonrecourse protection | HECM-specific federal protection | Read the contract; do not assume HECM protections | Read the program terms |
| Availability | Broadest | Limited to participating lenders | Local or state-specific |
| Potential fit | A homeowner seeking flexible access to equity | A high-value home or a situation that does not fit the HECM limit | A specific repair, tax, or accessibility need |
1. HECM
The Home Equity Conversion Mortgage is insured by the Federal Housing Administration and governed by HUD rules. A private FHA-approved lender originates the loan; FHA does not generally hand the borrower a reverse mortgage directly. FHA insurance protects the HECM program and lender against qualifying losses and supports the HECM’s federal nonrecourse structure.
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2. Proprietary reverse mortgages
A proprietary reverse mortgage is a private product that is not insured by the federal government. These loans may be designed for homes worth more than the HECM maximum claim amount, but the lender determines the age requirement, property rules, advance limits, interest rate, fees, appraisal standards, nonrecourse terms, and spouse protections.
Do not assume that every proprietary product:
- Allows a borrower younger than 62;
- Provides more cash than a HECM;
- Offers a growing line of credit;
- Has the HECM’s 95%-of-appraised-value sale protection; or
- Provides the same protections to a non-borrowing spouse or heirs.
Compare the actual contract rather than relying on a general description. The CFPB’s types-of-reverse-mortgage explanation and the Federal Reserve’s product guidance provide useful context.
3. Single-purpose reverse mortgages
State or local governments and nonprofit organizations may offer single-purpose reverse mortgages. The proceeds are generally restricted to a specified use, such as repairing the home, making accessibility improvements, or paying property taxes. Income, location, property, and other restrictions may apply, and programs can open, close, or change. Check with your state, county, city, or local housing agency.
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How much can a HECM borrower receive?
There is no reliable universal rule such as “you can borrow 40% of your home’s value.” A HECM calculation has several stages:
- Maximum claim amount (MCA): The lesser of the home’s appraised value, the purchase price in an HECM for Purchase transaction, or HUD’s applicable maximum.
- Principal limit: The initial amount made available under the HECM formula. It depends primarily on the MCA, the age of the youngest borrower or eligible non-borrowing spouse, and the expected average mortgage interest rate.
- Mandatory obligations and set-asides: Existing mortgages and liens, closing costs, mortgage insurance, required repairs, delinquent federal debt where applicable, and reserves for certain future charges reduce the amount available to you.
- Net proceeds: The principal limit minus those obligations and set-asides. This is the amount available for your chosen payment plan.
For FHA case numbers assigned from January 1 through December 31, 2026, HUD’s nationwide HECM maximum claim amount is $1,249,125. That is a ceiling used in the calculation—not a guaranteed loan amount or cash payment. You can verify the current figure in HUD’s 2026 FHA loan-limit announcement.
Examples of the calculation
- High-value home: A $1.5 million home is not automatically eligible for a HECM based on its full value. For a 2026 HECM, the MCA cannot exceed $1,249,125.
- Existing mortgage: If you owe $150,000 on the home, that balance generally must be paid at closing. It reduces the cash left for you, even if the home has substantial equity.
- Initial MIP: If the MCA is $500,000, the current 2% initial mortgage-insurance premium would be $10,000 before other closing costs, assuming the full MCA is used for the calculation.
- Principal limit versus cash: A principal limit is not necessarily available immediately. The initial-disbursement limit, mandatory obligations, repairs, and set-asides can restrict what you can draw.
For an individualized estimate, ask lenders to show the MCA, principal limit, mandatory obligations, set-asides, initial disbursement, future availability, expected rate, and projected balance separately. HUD’s governing formulas appear in 24 CFR Part 206.
How HECM proceeds can be paid
HECM payment plans include:
- Tenure: Equal monthly payments for as long as you meet the loan conditions and remain eligible.
- Term: Equal monthly payments for a selected period.
- Line of credit: You draw money as needed up to the available limit.
- Modified tenure: Monthly tenure payments plus a line of credit.
- Modified term: Term payments plus a line of credit.
- Fixed-rate lump sum: Current fixed-rate HECMs use the single-lump-sum option under HUD rules.
Adjustable-rate HECMs can generally use tenure, term, line-of-credit, modified, or other permitted flexible options. The distinction between fixed rate and fixed payment matters: a fixed-rate HECM provides rate certainty but is associated with a single lump-sum structure, while an adjustable-rate HECM may provide flexible draws but exposes the balance and available proceeds to changing rates.
The first-12-month restriction
For an adjustable-rate HECM, the amount received at closing and during the first 12-month disbursement period generally cannot exceed the greater of:
- 60% of the initial principal limit; or
- Mandatory obligations plus 10% of the initial principal limit.
This restriction means many borrowers cannot take the entire available amount immediately. The rule is described in HUD Mortgagee Letter 2013-27.
Under HUD’s principal-limit rules, unused availability under an adjustable-rate HECM may increase over time. This is not the same as an ordinary bank HELOC, and it does not operate the same way for a fixed-rate lump-sum HECM. Ask the lender to explain how the credit-line feature works, what can reduce it, and how interest accrues.
Reverse-mortgage costs
Evaluate costs in three categories: upfront costs, ongoing costs, and opportunity costs. Financing a fee does not make it free; it reduces the money available and causes interest to accrue on the financed amount.
Upfront HECM costs
Initial mortgage-insurance premium
Current HUD policy sets the initial HECM mortgage-insurance premium at 2% of the maximum claim amount. The premium can generally be financed. On a $500,000 MCA, the example initial premium is $10,000.
Current HUD policy also sets the annual mortgage-insurance premium at 0.5% of the outstanding mortgage balance. The regulation authorizes different maximum amounts, so distinguish the current policy from the regulatory ceiling. See HUD Mortgagee Letter 2017-12 and 24 CFR § 206.105.
Origination fee
For a HECM, the origination-fee formula is:
- 2% of the first $200,000 of the MCA;
- 1% of the amount above $200,000;
- A minimum charge equal to the greater of $2,500 or the formula result; and
- A maximum charge of $6,000 under the current regulation.
| MCA | Formula result | Applicable origination fee |
|---|---|---|
| $150,000 | $3,000 | $3,000 |
| $300,000 | $4,000 + $1,000 = $5,000 | $5,000 |
| $500,000 | $4,000 + $3,000 = $7,000 | $6,000 cap |
For an MCA below $125,000, the $2,500 minimum can be important. The fee may be financed. The formula is in 24 CFR § 206.31.
Third-party closing costs
Potential charges include an appraisal, credit report, title examination, title insurance, recording fees and taxes, survey costs where required, flood certification, inspections, engineering or repair certifications, and other customary transaction charges. Costs vary by state, property, lender, and transaction.
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Counseling fee
HUD-approved counselors may charge a reasonable fee, but they must tell you about it in advance and cannot charge a borrower who cannot afford it. Counseling is independent of the lender and should happen before you commit to the loan. The CFPB’s reverse-mortgage cost guide discusses these expenses.
Ongoing costs
- Interest on the outstanding loan balance;
- The annual HECM mortgage-insurance premium;
- Servicing fees if permitted and charged under the loan;
- Property taxes;
- Homeowners insurance and flood insurance where required;
- HOA, condominium, planned-unit-development, ground-rent, and special-assessment charges; and
- Repairs and maintenance.
Because interest and certain charges can be added to the balance, the debt may compound over time. A line of credit can reduce interest accrual compared with taking an equivalent lump sum immediately, but only the amount actually drawn avoids interest; fees, insurance premiums, and other charges still matter.
Opportunity costs
The less visible costs can be just as important:
- Less home equity for a future move or your estate;
- Less inheritance for heirs;
- Reduced flexibility if you later need to sell or relocate;
- Possible effects on SSI and other means-tested benefits;
- Lost flexibility if proceeds are used to pay debt or consumption instead of preserving other assets; and
- Potential loss or restriction of available credit if the loan enters default.
Review the TALC disclosure
Ask for the Total Annual Loan Cost (TALC) disclosure and read it alongside the fee worksheet. TALC illustrations show how loan costs and home appreciation assumptions affect the effective cost over different periods. They are not a promise about your home’s future value or the amount you will ultimately owe. The applicable disclosure rules are in the CFPB’s Regulation Z provisions.
HECM eligibility checklist
Age
The youngest borrower generally must be at least 62 at closing. The youngest borrower’s age affects the principal limit; a younger eligible borrower generally produces a lower principal limit than an older borrower with the same home and rate assumptions. See 24 CFR § 206.33.
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Principal residence
The home must generally be the principal residence of each borrower at closing. A temporary healthcare-institution stay can generally preserve principal-residence status for up to 12 consecutive months under HECM rules, subject to the loan requirements. This is not permission to stop communicating with the servicer or abandon the property.
Equity or enough money to pay existing liens
You must either own the home outright or have enough HECM proceeds or other funds to pay existing mortgages, liens, and mandatory obligations at closing. A reverse mortgage does not make an existing mortgage disappear without using proceeds to pay it off.
Financial assessment
The lender must evaluate your ability to meet financial obligations. The assessment can include:
- Credit history;
- Cash flow;
- Residual income;
- Extenuating circumstances; and
- Compensating factors.
A reverse mortgage is not automatically easy credit simply because regular principal-and-interest payments are deferred. The lender may require a set-aside or determine that the loan is not feasible. HUD’s financial-assessment guidance is available through its HECM Financial Assessment and Property Charge Guide.
Federal debt
Delinquent federal debt can affect eligibility, but it is not accurate to say that every federal debt automatically disqualifies an applicant. Depending on the circumstances, eligible proceeds may be used to satisfy certain federal debts at closing. Treat this as a lender and HUD underwriting issue and disclose the debt accurately.
Counseling
Before a HECM closes, the borrower, applicable non-borrowing spouse, and non-borrowing owner generally must receive counseling from a HUD-approved counselor and provide the certificate to the lender. Counseling should cover costs, alternatives, loan obligations, spouse and heir consequences, and estate-planning-service contracts. It is a decision checkpoint—not merely paperwork. Find a counselor through HUD or ask the lender for the independent counseling process; do not let the lender choose the advice you receive.
Eligible property
HUD counseling guidance identifies potentially eligible HECM properties including:
- One- to four-unit properties, if the borrower occupies one unit;
- Manufactured homes built after June 1976 and meeting HUD requirements;
- Eligible condominiums;
- Planned-unit-development properties;
- Townhouses; and
- Certain properties held in a living trust.
Cooperatives, boarding houses, bed-and-breakfast properties, unapproved condominium projects, and noncompliant manufactured homes may be ineligible. The lender—not a generic online checklist—makes the final property-eligibility determination. See the HUD Housing Counseling Handbook.
Spouses, non-borrowing owners, and other people in the home
Co-borrowing spouse
A co-borrower is on the loan and receives its benefits. If one co-borrower dies, the other generally remains protected as a borrower as long as the loan conditions continue to be met.
Non-borrowing spouse
A spouse who is not a co-borrower may have only limited protections. An eligible non-borrowing spouse can receive a deferral period after the borrower’s death if HUD requirements continue to be satisfied. Those requirements can include continued residence, the marital relationship, ownership or a legal right to remain in the home, and compliance with loan obligations.
An ineligible non-borrowing spouse does not receive the same deferral protection. Couples should verify how both spouses are identified in the loan documents and understand the consequences before removing a younger spouse from title or making that spouse a non-borrower. Review the CFPB’s explanation of non-borrowing spouses and the applicable HUD regulations.
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Children, relatives, caregivers, and roommates
People who live in the home but are not borrowers or qualifying non-borrowing spouses generally do not automatically have the right to stay after the last borrower dies or permanently moves. To remain, they may need another source of money to repay or otherwise satisfy the loan. Discuss the situation with the lender and an attorney before closing if someone depends on the home for housing.
When does a reverse mortgage become due and payable?
Common triggers include:
- Death of the last borrower, unless an eligible non-borrowing spouse receives a deferral;
- Sale or transfer of the home;
- A permanent move from the home;
- Failure to occupy the home as the principal residence;
- More than 12 consecutive months in a healthcare institution when no other borrower retains principal-residence status;
- Failure to pay property taxes, homeowners insurance, flood insurance, HOA or other required charges;
- Failure to maintain the property; or
- Failure to perform another material loan obligation.
For certain non-death defaults, the lender may need HUD approval before calling a HECM due and payable. Reinstatement or loss-mitigation options may exist, but they are not automatic. Contact the servicer immediately, request the issue and cure requirements in writing, and consider contacting a HUD-approved counselor or legal-aid organization. The governing due-and-payable rules are in 24 CFR § 206.27.
Life Expectancy Set-Aside
A lender may require or allow a Life Expectancy Set-Aside (LESA) to fund future property taxes and hazard or flood insurance. It may be fully funded or partially funded depending on the financial assessment.
A LESA reduces the cash available to you, but it can reduce the risk of missing required charges. It is not free money: property charges paid from the set-aside are added to the loan balance. If the set-aside is exhausted or insufficient, you may again be responsible for paying the charges. HOA dues, repairs, and many other obligations may remain your responsibility even when taxes and insurance are handled through a LESA. See 24 CFR § 206.205.
What happens to the home and heirs?
For a HECM, the loan generally becomes due after the last borrower dies unless an eligible non-borrowing spouse qualifies for a deferral. The estate or heirs typically have several options:
- Sell the home: Use the sale proceeds to repay the loan and keep any remaining equity, after selling costs and other obligations.
- Keep the home: Refinance or use other funds to repay the reverse mortgage.
- Provide a deed in lieu or take another permitted action: The servicer can explain available procedures.
If the home is worth more than the debt, the estate generally keeps the surplus after repayment and selling costs. If the HECM balance exceeds the home’s value, the federal nonrecourse protection generally prevents heirs from being required to repay more than the applicable HECM payoff or sale amount.
When a qualifying HECM balance exceeds the property’s value, a sale by the estate may be limited to a HUD-determined amount not exceeding 95% of the appraised value. This is not a universal “heirs only owe 95%” rule: it applies only in the circumstances covered by the HECM rules, and it should not be assumed for proprietary loans. The regulation also addresses notice, appraisal, extensions, foreclosure, and sale procedures. Review 24 CFR § 206.125 and the CFPB’s guidance for heirs.
Heirs should not ignore a due-and-payable notice. They should contact the servicer promptly, obtain the payoff and appraisal information, determine whether an extension is available, and decide whether to sell, refinance, repay, or surrender the property. A simplified statement such as “heirs have 30 days and then automatically lose the home” leaves out notice timing, extensions, eligible spouses, appraisals, and foreclosure procedures. HUD rules generally provide a period after notice to pay, sell, provide a deed in lieu, or take another permitted action, but the estate should follow the actual notice and servicer instructions.
Taxes, SSI, Medicaid, and other benefits
Federal income tax
Reverse-mortgage proceeds generally are loan proceeds, not taxable income. That does not mean every tax consequence disappears. Interest generally is not deductible until it is actually paid, and home-equity interest deductions are subject to current IRS rules, including restrictions related to how the money is used. Consult a tax professional for your circumstances. See the IRS senior-taxpayer FAQs and IRS Publication 936.
SSI
For Supplemental Security Income, valid loan proceeds are not income. However, unspent borrowed money retained into the following month can count toward the SSI resource limit. For 2026, the federal SSI resource limits are $2,000 for an individual and $3,000 for a couple. A large lump sum or unused line-of-credit draw can therefore create an eligibility problem even though the proceeds themselves are a loan. See the Social Security Administration’s Spotlight on Loans and its SSI resource information.
Medicaid and other means-tested programs
Do not assume reverse-mortgage proceeds are harmless for Medicaid, food assistance, housing assistance, state supplements, or other needs-based programs. Rules vary by program and state, and retained cash can affect resource eligibility. Before taking a lump sum or drawing from a line of credit, contact the administering agency or a benefits specialist and ask how borrowed funds, retained funds, and home equity will be treated.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Reverse mortgage alternatives
HELOC
A home-equity line of credit generally allows you to draw as needed and may preserve more equity if you repay it, but the lender normally evaluates your income and payment ability. The interest rate may be variable, and required payments can rise. Both a HELOC and a reverse mortgage use the home as collateral, so failure to meet the loan obligations can put the home at risk. Compare the products using the CFPB’s HELOC guide.
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A home-equity loan provides a lump sum with scheduled repayment. It may be less expensive for a borrower with stable income and strong payment capacity, but the required monthly payment can be difficult for someone with limited retirement cash flow.
Cash-out refinance
A cash-out refinance replaces the existing mortgage with a larger loan and gives you the difference in cash. It may offer a lower rate than a reverse mortgage in some circumstances, but it creates a required monthly payment, closing costs, and potentially a longer repayment period.
Downsizing
Selling and moving can unlock equity without reverse-mortgage interest and may reduce taxes, insurance, maintenance, or utility costs. The trade-offs include moving expenses, real-estate commissions, possible tax consequences, and the loss of the current home and neighborhood.
Assistance programs and single-purpose loans
Before borrowing against the home, check property-tax deferral, home-repair grants, energy-efficiency programs, accessibility assistance, and local single-purpose loans. These may be cheaper or restricted to a particular need, but availability depends on location, income, property, and program funding.
Who may benefit—and who should be cautious?
A reverse mortgage may be more plausible if you:
- Plan to remain in the home for years;
- Have substantial equity but insufficient liquid retirement income;
- Can reliably pay taxes, insurance, repairs, and HOA charges;
- Need flexible liquidity rather than only a short-term loan;
- Understand that the balance will grow;
- Have discussed the loan with your spouse and heirs; and
- Have checked the effect on SSI, Medicaid, and other benefits.
Be cautious if you:
- Expect to move soon or may need assisted living or long-term care soon;
- Have unreliable cash flow for property charges;
- Want to leave the home debt-free to heirs;
- Have a younger spouse who would become a non-borrowing spouse;
- Are considering a lump sum to buy an annuity or investment;
- Could meet the need with a less costly alternative; or
- Are considering the loan mainly because a contractor, salesperson, or financial promoter recommended it.
How to apply and shop safely
- Clarify the need and time horizon. Decide how much you need, whether the need is temporary or ongoing, how long you expect to stay, and how important preserving inheritance is.
- Gather documents. Collect mortgage and lien statements, property-tax and insurance records, HOA or condominium statements, income and asset records, federal-debt information, spouse and owner information, and trust or life-estate documents.
- Check alternatives. Compare a HELOC, home-equity loan, cash-out refinance, downsizing, tax deferral, repair grants, single-purpose programs, family financing, and other retirement-income strategies.
- Contact more than one lender. Compare the initial and expected rates, adjustable-rate margin, origination fee, closing costs, servicing fees, payment plan, initial-draw restrictions, set-asides, nonrecourse terms, heir protections, and whether the lender sells or services the loan.
- Complete independent HUD counseling. Ask the counselor to model alternatives, fees, spouse consequences, benefits, projected balances, and projected remaining equity. Counseling should occur before you commit.
- Review the disclosures. Pay particular attention to the TALC disclosure, principal-limit and payment-plan details, mandatory obligations, required repairs, property-charge set-asides, interest-rate adjustments, and due-and-payable events.
- Complete underwriting and appraisal. The lender reviews finances, title, property condition, value, repairs, and program eligibility.
- Review the closing documents. Confirm the borrower and spouse status, rate, payment plan, fees, set-asides, liens being paid, and ongoing obligations.
- Know the cancellation period. For most reverse mortgages secured by a principal dwelling, federal law provides a three-business-day rescission right. Cancellation must generally be made in writing; retain proof of delivery. Confirm the exact procedure in the closing documents and the CFPB’s reverse-mortgage information.
- Maintain the loan after closing. Keep the home as your principal residence, pay taxes and insurance, maintain the property, respond to occupancy and contact certifications, monitor statements and credit availability, and notify the servicer about death, extended absence, title changes, or major damage.
Questions to ask before signing
- What is the maximum claim amount, principal limit, and net amount available after every obligation and set-aside?
- What are the initial and expected interest rates, and what is the adjustable-rate margin?
- How much will the initial MIP, origination fee, appraisal, title, recording, counseling, and other closing costs be?
- Which costs will be financed, and how will financing them affect the balance?
- What payment plans are available, and how much can I draw during the first 12 months?
- Does the line of credit have principal-limit growth, and under what circumstances can availability change?
- What property charges must I pay directly, and is a LESA required or recommended?
- What happens if I enter assisted living, stay in a healthcare facility, or am away for an extended period?
- Is my spouse a co-borrower, an eligible non-borrowing spouse, or neither? What exactly happens if I die first?
- Can my children, caregiver, or other household member remain in the home after my death or move?
- What are the HECM rules for heirs who want to sell or keep the home?
- Is the loan federally insured or proprietary, and which protections are actually in the contract?
- Who services the loan, and whom should I contact about a tax, insurance, occupancy, or payoff problem?
- Is anyone requiring me to use the proceeds for an annuity, investment, contractor payment, or other product?
A simple decision worksheet
Write down these figures before comparing offers:
| Question | Your answer |
|---|---|
| How many years do I realistically expect to remain in the home? | |
| How much cash do I need now, and how much might I need later? | |
| What is the existing mortgage and lien balance? | |
| What are my annual property taxes, insurance, HOA dues, and expected maintenance costs? | |
| Can my income cover those charges for as long as I remain in the home? | |
| Will a spouse be a co-borrower or non-borrowing spouse? | |
| Does anyone else depend on the home for housing? | |
| Do I receive SSI, Medicaid, food assistance, housing assistance, or another means-tested benefit? | |
| How important is preserving home equity for heirs? | |
| What would a HELOC, home-equity loan, refinance, move, or assistance program cost? |
Common reverse-mortgage failure modes
Missing taxes or insurance
This can lead to default and foreclosure. Contact the servicer immediately, request a written account history and cure requirements, ask about repayment or loss-mitigation options, and contact a HUD-approved counselor. Keep tax receipts, insurance declarations, annual certifications, and written correspondence.
A servicer records an absence or missed charge incorrectly
Respond in writing, preserve proof of delivery, request the relevant account and payment records, and escalate to HUD, the CFPB, legal aid, or an attorney where appropriate.
Heirs ignore a due-and-payable notice
The estate should contact the servicer immediately, request payoff and appraisal information, ask about extensions, and decide whether to sell, refinance, repay, or surrender the home.
Keeping a lump-sum draw in a bank account
Although loan proceeds are not SSI income, unspent funds can become countable resources the following month. Check benefit rules before drawing more than you need.
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Using proceeds for an investment or annuity promoted with the loan
Be especially cautious when a salesperson ties the reverse mortgage to an investment, annuity, contractor, power of attorney, or other product. A reverse mortgage should be evaluated on its own terms. Review the CFPB’s reverse-mortgage warnings and the FTC’s consumer guidance.
Bottom line: Is a reverse mortgage right for you?
A reverse mortgage can convert home equity into retirement liquidity while allowing you to remain in the home. Its price is a growing loan balance, reduced equity, substantial fees, ongoing property obligations, and possible consequences for a spouse, heirs, or means-tested benefits.
A HECM is worth investigating when you expect to stay put, need cash, can pay property charges, and accept the effect on future equity. Before signing, compare multiple offers with alternatives, complete independent HUD counseling, verify spouse protections, examine the TALC disclosure, and obtain individualized tax or benefits advice when necessary.
Frequently Asked Questions
Do I still own my home with a reverse mortgage?
Usually, yes. You generally retain title while the lender holds a mortgage lien. You must still occupy, maintain, insure, and pay required charges on the home. The lender can enforce its lien if you default.
Is reverse-mortgage money taxable?
Reverse-mortgage proceeds generally are loan proceeds rather than taxable income. Interest deductions are governed by current IRS rules and generally are not available until interest is actually paid. Retained proceeds can affect SSI and other means-tested benefits.
Can heirs keep the home?
Often, but they must satisfy the reverse mortgage. They may repay or refinance the balance and keep the property, or sell it and retain any remaining equity. HECM heirs generally have nonrecourse protection, but proprietary loans may have different terms.
Can a reverse mortgage cause foreclosure?
Yes. Failure to pay property taxes, insurance, HOA charges, or other required expenses, failure to maintain the property, permanent relocation, or another loan default can lead to foreclosure. Contact the servicer immediately if a problem arises.
Can I get a reverse mortgage if I already have a mortgage?
Possibly. Existing mortgages and liens generally must be paid at closing using reverse-mortgage proceeds or other funds. A large existing balance can substantially reduce the cash available to you.
What happens if I move to assisted living?
A temporary healthcare-institution stay can generally preserve HECM principal-residence status for up to 12 consecutive months, subject to the loan rules. A permanent move or a longer absence can make the loan due and payable. Notify the servicer promptly.
What if my home is worth more than the HECM limit?
The 2026 HECM maximum claim amount is $1,249,125, so a HECM calculation cannot use value above that ceiling. A proprietary reverse mortgage may consider a higher-value home, but its protections, costs, and terms are set by the lender.
Can I cancel a reverse mortgage after closing?
Most reverse mortgages secured by a principal dwelling have a three-business-day rescission period. Cancellation generally must be made in writing. Check the closing documents for the exact deadline and delivery instructions, and retain proof.
The Bottom Line
A reverse mortgage is a deferred-repayment home loan, not free income. It can be useful for a homeowner who plans to remain in the home, needs flexible cash, and can reliably cover taxes, insurance, maintenance, and other property charges. It is less suitable when moving soon, preserving inheritance, protecting a younger spouse, or maintaining means-tested benefits is the priority. Compare alternatives, use independent HUD counseling, and review the actual loan documents before committing.
Quick Recap
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