What Is a Reverse Mortgage? How It Works and Who It's For

A reverse mortgage lets homeowners aged 62 and older borrow against their home equity without making monthly payments. Instead of you paying the lender, the lender pays you — and the loan balance grows over time until it's repaid when you sell, move out, or pass away. The most common type, the Home Equity Conversion Mortgage (HECM), is insured by the FHA.

How a Reverse Mortgage Works

You keep the title to your home. No monthly mortgage payments are required — though you still must pay property taxes, homeowners insurance, and maintenance. Interest accrues on whatever you've borrowed, so the loan balance grows each year instead of shrinking.

Who Qualifies

• Must be 62 or older (all borrowers on title)
• Home must be your primary residence
• Must have significant equity — typically 50%+
• Must pass a financial assessment showing you can cover taxes and insurance
• Mandatory HUD-approved counseling session before applying

How Much You Can Borrow

The amount depends on your age, your home's appraised value, and current interest rates. Older borrowers and more valuable homes qualify for larger amounts — the math favors people who borrow later in retirement rather than right at 62.

Ways to Receive the Money

• Lump sum (usually only for fixed-rate HECMs)
• Monthly payments for a set term or for life
• A line of credit that grows unused over time
• A combination of the above

Pros and Cons

• Pro: No monthly mortgage payment required
• Pro: You keep living in and owning your home
• Pro: Non-recourse loan — you (or your heirs) never owe more than the home is worth
• Pro: Proceeds are generally tax-free
• Con: Closing costs and fees run higher than a standard mortgage
• Con: Reduces the equity and inheritance left to your heirs
• Con: You can still lose the home to foreclosure if you fail to pay taxes, insurance, or maintenance