Reverse Mortgage Basics
A reverse mortgage converts part of your home equity into loan proceeds. Instead of making a required monthly principal and interest payment, you receive money from the lender and repay the loan later, usually after selling the home, moving out or the last borrower dies.
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA). A HECM is available to eligible homeowners age 62 or older, but it is still a mortgage. The balance grows as you borrow money and interest and fees accumulate.
| Feature |
How It Works |
| Basic purpose |
Borrow against home equity and receive the proceeds as a line of credit, monthly payouts, a lump sum or an allowed combination. |
| Most common type |
Home Equity Conversion Mortgage, or HECM, insured by the FHA. |
| Minimum age for a HECM |
Each borrower must be at least 62. The youngest borrower or eligible non-borrowing spouse affects the amount available. |
| Monthly mortgage payment |
No required monthly principal and interest payment, although voluntary payments are allowed. |
| Who owns the home |
You keep title. The lender holds a lien securing the debt. |
| Ongoing obligations |
Use the home as your principal residence, pay property taxes and required insurance, and maintain the property. |
| When repayment is triggered |
Usually when the home is sold, the last borrower no longer occupies it as a principal residence, the last borrower dies or the loan enters default. |
| 2026 HECM maximum claim amount |
$1,249,125 nationwide. This is not an automatic borrowing amount. It caps the property value used in the HECM calculation. |
What Is a Reverse Mortgage?
A reverse mortgage is a loan secured by your principal residence. You receive proceeds based partly on your age, interest rates and home value. Unlike a traditional mortgage, the loan does not normally require monthly principal and interest payments while you meet the loan terms.
The tradeoff is that the balance usually grows instead of shrinking. Each advance increases the amount owed. Interest, mortgage insurance and other financed charges are then added to the balance. As the balance rises, the equity remaining in the home generally falls.
The Consumer Financial Protection Bureau (CFPB) describes a reverse mortgage as a loan rather than free money. The amount borrowed, plus interest and fees, must eventually be repaid.
How Does a Reverse Mortgage Work?
1. You Confirm Eligibility and Complete Counseling
For a HECM, each borrower must be at least 62, occupy the home as a principal residence and have enough equity to pay off existing liens at closing. You must also complete counseling with a HUD-approved HECM counselor before the loan can close.
2. The Lender Reviews the Home and Your Finances
The lender orders an appraisal and completes a financial assessment. The review considers whether you have the resources to pay future property taxes, homeowners insurance, applicable flood insurance and home maintenance costs. The lender may require part of the available proceeds to be set aside for property charges.
3. Existing Mortgages and Liens Are Paid Off
Any existing mortgage or other required lien must be satisfied at closing. Reverse mortgage proceeds can be used for that payoff, but a high existing balance can leave little or no money available after closing costs.
4. You Choose How to Receive the Proceeds
HECM borrowers can generally choose a line of credit, monthly payouts or a lump sum. Some adjustable-rate HECMs allow a combination of a line of credit and monthly payouts. The option you choose affects how quickly the balance grows.
5. The Balance Grows Over Time
You do not make a required monthly principal and interest payment, but interest and eligible fees continue to accrue. You can make voluntary payments at any time to slow the balance growth or repay the loan.
6. You Continue Paying Property Charges
A reverse mortgage does not eliminate the costs of owning a home. You remain responsible for property taxes, homeowners insurance, applicable association charges, repairs and maintenance. Failure to meet these obligations can place the loan in default.
7. The Loan Is Repaid
The loan is commonly repaid with proceeds from selling the home. You or your heirs can also use other funds or a new mortgage to pay the balance. If the home sells for more than the amount owed, the remaining equity belongs to you or your estate.
What Are the 3 Types of Reverse Mortgages?
The CFPB identifies three main types of reverse mortgages: HECMs, proprietary reverse mortgages and single-purpose reverse mortgages. They differ in insurance, availability, costs and permitted uses.
| Type |
Provider And Insurance |
Common Use |
Important Limits |
| Home Equity Conversion Mortgage (HECM) |
Offered by FHA-approved lenders and insured by the FHA. |
General expenses, paying off an existing mortgage, a line of credit, monthly proceeds or purchasing an eligible principal residence. |
Borrowers must meet HUD requirements and complete counseling. The 2026 maximum claim amount is $1,249,125. |
| Proprietary reverse mortgage |
Offered and insured, if applicable, by a private lender. It is not FHA-insured. |
Often designed for homeowners whose property values or borrowing needs exceed HECM program parameters. |
Age, property, payout and non-borrowing-spouse terms depend on the lender and contract. |
| Single-purpose reverse mortgage |
May be offered by a state or local government or nonprofit organization. It is not federally insured. |
A specific lender-approved purpose, such as property taxes or home repairs. |
Availability is limited. Income, location and permitted-use restrictions may apply. |
Home Equity Conversion Mortgages
HECMs are the most common reverse mortgages and the only type insured by the federal government. FHA insurance protects the borrower if the lender cannot make required advances and supports the loan’s nonrecourse protection when the balance exceeds the home’s value.
For 2026, HUD set the nationwide HECM maximum claim amount at $1,249,125. The maximum claim amount is the greatest property value FHA will use when calculating the HECM. It does not mean every borrower can receive that amount.
Proprietary Reverse Mortgages
A proprietary reverse mortgage is a private product. It may allow a lender to consider a home value above the HECM maximum claim amount, which can make it relevant for some owners of higher-value properties. The lender sets the eligibility rules, costs, disbursement options and protections within federal and state law.
Single-Purpose Reverse Mortgages
A single-purpose reverse mortgage restricts the proceeds to one approved use. These loans are not widely available and may be limited to homeowners who meet local income or program requirements.
How Much Can You Borrow With a Reverse Mortgage?
For a HECM, the amount available is called the principal limit. HUD says it is affected by the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate and the lesser of the home’s appraised value, the HECM maximum claim amount or the sales price for a purchase transaction.
Older borrowers, lower rates and higher eligible property values generally support a higher principal limit. The amount you can actually use is reduced by existing mortgage payoffs, mandatory obligations, closing costs and any funds set aside for property charges.
The HECM maximum claim amount should not be described as a loan limit in the same way as a forward mortgage limit. It is an input in the calculation, and borrowers receive only a percentage of the eligible value.
How Do You Receive Reverse Mortgage Money?
The CFPB lists three main HECM payment options. The available choice also affects whether the loan has a fixed or adjustable rate.
- Line of credit: You draw funds as needed. Interest and fees accrue only on amounts already advanced. An unused HECM credit line has a growth feature, although that growth does not represent interest earned in a bank account.
- Monthly payouts: You can receive term payments for a set period or tenure payments while the loan remains active and the program requirements are met. Monthly payouts generally use an adjustable interest rate.
- Lump sum: You receive the available funds at closing through a fixed-rate HECM. Interest begins accruing on the full amount advanced, and the available lump sum may be lower than the amount available through adjustable-rate options.
Who Owns the House in a Reverse Mortgage?
You own the house and keep title after taking out a reverse mortgage. The lender does not become the owner. As with another mortgage, the lender records a lien against the property as security for the debt.
Keeping title also means keeping the responsibilities of ownership. The CFPB confirms that HECM borrowers must pay property taxes and homeowners insurance and keep the home in good repair. A failure to meet those obligations can lead to default and foreclosure.
Your equity is the home value minus the reverse mortgage balance and any other liens. Because the reverse mortgage balance usually rises, the equity available to you or your heirs may decline over time.
When Does a Reverse Mortgage Have to Be Repaid?
A HECM usually becomes due and payable after one of the following events:
- The home is sold or its title is transferred.
- The last borrower no longer occupies the property as a principal residence.
- The last surviving borrower dies, subject to protections for an eligible non-borrowing spouse.
- The borrower fails to pay property taxes, required insurance or other property charges.
- The home is not maintained according to the loan requirements.
A temporary absence does not always trigger repayment. However, the CFPB explains that an absence of more than 12 consecutive months in a health care facility can cause a HECM to become due unless a co-borrower remains in the home or an eligible non-borrowing spouse qualifies for applicable protections.
Can You Walk Away From a Reverse Mortgage?
You can leave the home, but you should not simply abandon the property or ignore the servicer. Moving out generally makes the reverse mortgage due and payable. You remain responsible for property charges and maintenance until the loan is resolved or ownership is transferred.
Common exit options include selling the home, repaying or refinancing the loan, or working with the servicer on a deed-in-lieu of foreclosure. Allowing the loan to proceed through foreclosure is also possible, but it can affect your credit and creates less control over the timing.
HECMs are nonrecourse loans. If the balance exceeds the home value, FHA mortgage insurance covers the eligible shortfall after the home is sold under program rules. The CFPB explains that a borrower with a due-and-payable HECM may be able to sell for 95% of the appraised value when the balance is higher than the home value.
Can a Reverse Mortgage Be Refinanced?
Yes. A reverse mortgage can be replaced with a new reverse mortgage or refinanced into a traditional forward mortgage. The new loan pays off the existing reverse mortgage balance.
A HECM-to-HECM refinance may make sense when a higher home value, an older borrower age or different market conditions create materially better proceeds or terms. FHA treats HECM refinancing as a distinct transaction, and the borrower must meet current program and lender requirements.
Refinancing creates new closing costs and may require counseling, an appraisal and another financial assessment. Compare the additional funds or other benefit with the total cost of replacing the existing loan. A refinance that produces only a small benefit can reduce home equity without improving the borrower’s position.
What Disqualifies You From Getting a Reverse Mortgage?
The most common disqualifying issues for a HECM involve age, occupancy, equity, federal debt, property eligibility or the ability to keep up with property charges. The CFPB summarizes the core HECM eligibility rules, while HUD and lenders apply the full underwriting requirements.
- Age: A HECM borrower who has not reached age 62 is ineligible.
- Occupancy: A vacation home, second home or investment property cannot serve as the HECM principal residence.
- Insufficient equity: Existing liens and required closing costs must be paid at closing. If the available proceeds and borrower funds cannot cover them, the loan cannot close.
- Unresolved delinquent federal debt: Delinquent federal obligations can prevent approval unless they are paid or resolved through an acceptable repayment arrangement.
- Inability to cover property charges: The financial assessment may show that income, assets or credit and property-charge history are insufficient. A lender may require a life expectancy set-aside, and some borrowers may still be unable to qualify.
- Property problems: The home must meet applicable program and lender standards. Ineligible property types, title issues or repairs that cannot be completed can stop the loan.
- No HECM counseling certificate: Required counseling must be completed before a HECM closes.
The official consumer eligibility guidance does not establish one universal minimum credit score for a HECM. Lenders still review credit history, payment history and residual income as part of the financial assessment.
Are Reverse Mortgages a Good Idea?
A reverse mortgage can be reasonable for a homeowner who plans to remain in the home, needs access to equity and can reliably pay taxes, insurance and maintenance. It can be a poor fit when the owner expects to move soon, wants to preserve as much equity as possible for heirs or would struggle with ongoing property costs.
| A Reverse Mortgage May Fit When |
It May Be A Poor Fit When |
| You expect to stay in the home for several years. |
You expect to sell or move in the near term. |
| You need cash flow but want to avoid a required monthly principal and interest payment. |
You can meet the same goal with a lower-cost option and can afford its monthly payments. |
| You have substantial equity after paying existing liens. |
Your existing mortgage balance would consume most of the available proceeds. |
| You can keep paying taxes, insurance and maintenance. |
Those ongoing costs are already difficult to manage. |
| You understand that the balance will grow and reduce remaining equity. |
Leaving the home debt-free or preserving maximum equity for heirs is a primary goal. |
Before deciding, compare the reverse mortgage with a home equity line of credit, home equity loan, cash-out refinance, downsizing, selling the home or local property-tax assistance. A HECM counselor must review alternatives and the loan’s financial implications, but the final decision should reflect your budget, housing plans and estate goals.
What Are the Pros and Cons of a Reverse Mortgage?
| Potential Advantages |
Potential Drawbacks |
| No required monthly principal and interest payment while the loan remains in good standing. |
The balance grows as interest and fees accrue, reducing equity. |
| You keep title and can remain in the home while meeting the loan requirements. |
Failure to pay taxes, insurance or maintenance costs can lead to foreclosure. |
| HECM proceeds can be received in several ways and generally can be used for any purpose. |
Reverse mortgages can have substantial upfront and ongoing costs. |
| HECM nonrecourse protection limits repayment to the home value under program rules. |
The loan usually must be repaid after moving, selling or the last borrower’s death. |
| The proceeds can pay off an existing mortgage and remove its required monthly payment. |
A spouse or other resident who is not a co-borrower may have limited rights to remain in the home. |
| Voluntary payments are allowed, so a borrower can limit balance growth when funds permit. |
Less equity may remain for the borrower’s future needs or for heirs. |
The CFPB notes that reverse mortgages are typically more expensive than other home loans. HECM costs can include an origination fee, appraisal and other closing charges, upfront mortgage insurance, ongoing interest, servicing charges and an annual mortgage insurance premium added to the balance.
What Happens to a Reverse Mortgage After the Borrower Dies?
After the last borrower and any protected eligible non-borrowing spouse die, the HECM becomes due and payable. Heirs can repay the balance and keep the home, sell the home and keep any remaining equity, or turn the property over to the lender.
If the balance exceeds the appraised value, the CFPB says heirs can generally satisfy a HECM by paying the lesser of the full balance or 95% of the appraised value. Heirs should contact the servicer promptly after receiving a due-and-payable notice because deadlines apply.
The Bottom Line
A reverse mortgage lets an eligible homeowner convert part of the home’s equity into loan proceeds without a required monthly principal and interest payment. The HECM is the most common option, but proprietary and single-purpose reverse mortgages serve different needs.
The loan balance grows, and the home remains collateral. You keep ownership, but you must continue living in the home as required, pay property charges and maintain the property. The decision works best when the expected time in the home, available equity, ongoing housing costs and effect on heirs have all been considered together.
Frequently Asked Questions
What Are the 3 Types of Reverse Mortgages?
The three main types are FHA-insured Home Equity Conversion Mortgages, privately offered proprietary reverse mortgages and single-purpose reverse mortgages offered by some government or nonprofit programs. HECMs are the most common.
Are Reverse Mortgages a Good Idea?
They can be appropriate for homeowners who plan to stay in the home, need access to equity and can afford taxes, insurance and upkeep. They are less suitable for short-term homeowners or people focused on preserving the maximum amount of equity for heirs.
What Disqualifies You From Getting a Reverse Mortgage?
HECM disqualifiers can include being younger than 62, not using the home as a principal residence, lacking enough equity to pay existing liens, unresolved federal debt, an inability to cover property charges, an ineligible property or failure to complete required counseling.
Can a Reverse Mortgage Be Refinanced?
Yes. It can be refinanced into another reverse mortgage or a traditional mortgage. The new loan must pay off the existing balance, and the borrower must qualify under the new loan’s requirements. New closing costs apply.
What Are the Pros and Cons of a Reverse Mortgage?
Potential advantages include no required monthly principal and interest payment, flexible HECM payout options and the ability to remain in the home. Drawbacks include rising debt, declining equity, closing costs and the risk of foreclosure if property obligations are not met.
Can You Walk Away From a Reverse Mortgage?
You can move or sell, but leaving makes the loan due and payable. Do not abandon the home without contacting the servicer. Selling, refinancing or arranging a deed-in-lieu generally provides a more orderly exit than allowing foreclosure to proceed.
Who Owns the House in a Reverse Mortgage?
The borrower keeps title and owns the home. The lender holds a lien. The borrower must continue paying property taxes and insurance and maintaining the property.
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