Updated for 2026 by the EasyFinance.com editorial team • Consumer-focused reverse mortgage information • Eligibility, costs, available proceeds, and legal consequences vary

Reverse Mortgage Guide: 12 Things Seniors Should Know Before Borrowing

A reverse mortgage can allow an older homeowner to convert part of the equity in a primary residence into cash without making the monthly principal-and-interest payments required by a traditional mortgage. However, it is still a loan secured by the home. Interest and fees are added to the balance, available equity generally declines, and the borrower must continue meeting important property-related obligations.

Quick answer: Before taking out a reverse mortgage, confirm that you are eligible, complete independent housing counseling, compare several lenders, understand every upfront and ongoing cost, choose a payout method carefully, and plan for property taxes, homeowners insurance, maintenance, moving, long-term care, and the effect on heirs. A reverse mortgage is usually a long-term home-equity decision rather than a quick solution to a temporary cash shortage.

Most reverse mortgages in the United States are Home Equity Conversion Mortgages, commonly called HECMs. A HECM is insured by the Federal Housing Administration and is available only through an FHA-approved lender.

What Is a Reverse Mortgage?
How Does a HECM Reverse Mortgage Work?
1. Check HECM Eligibility Requirements
2. Complete Independent HUD-Approved Counseling
3. Understand the Financial Assessment
4. Learn How the Borrowing Amount Is Determined
5. Compare Reverse Mortgage Payout Options
6. Calculate Upfront and Ongoing Costs
7. Plan for Taxes, Insurance, and Maintenance
8. Know When the Loan Becomes Due
9. Protect a Spouse or Other Household Member
10. Discuss the Loan With Your Heirs
11. Review Taxes and Public-Benefit Rules
12. Compare Lenders and Watch for Scams
Alternatives to a Reverse Mortgage
Reverse Mortgage Decision Checklist
Related EasyFinance Borrowing Guides
Frequently Asked Questions

What Is a Reverse Mortgage?

A reverse mortgage is a loan secured by a homeowner’s primary residence. Unlike a traditional mortgage, the borrower generally does not make required monthly principal-and-interest payments while continuing to meet the loan obligations.

The borrower remains the owner of the home. However, the loan balance typically grows because interest, mortgage insurance, and eligible fees are added over time. As the balance grows, the amount of remaining home equity usually declines.

Traditional Mortgage	Reverse Mortgage
The borrower receives money to buy or refinance a home.	The borrower converts part of existing home equity into loan proceeds.
Regular principal-and-interest payments usually reduce the balance.	Required monthly principal-and-interest payments are generally not made, so the balance usually grows.
Equity may increase as the balance is repaid.	Equity may decline as advances, interest, and fees accumulate.
The loan is normally repaid over a defined term.	The loan typically becomes due after a triggering event, such as sale, permanent move, or the death of the final eligible borrower.

A reverse mortgage provider may offer additional product information, such as this overview of a reverse mortgage. Always compare provider materials with official HUD and Consumer Financial Protection Bureau guidance.

How Does a HECM Reverse Mortgage Work?

A Home Equity Conversion Mortgage is the FHA-insured reverse mortgage program. The general process includes:

Initial research: The homeowner compares a HECM with other home-equity and retirement-income options.
Independent counseling: The prospective borrower completes counseling through a HUD-participating agency before the lender processes the formal HECM application.
Application and financial assessment: The lender reviews identity, income, assets, obligations, credit history, and property-charge payment history.
Property appraisal: An FHA-approved appraisal evaluates the value and condition of the home.
Underwriting: The lender determines whether the borrower and property satisfy the program rules.
Closing: The borrower signs the mortgage documents and pays or finances eligible closing costs.
Loan advances: Available funds are provided according to the selected payment plan and applicable limits.
Ongoing obligations: The borrower maintains the home as a principal residence and keeps required property charges current.

The borrower may voluntarily repay part or all of a HECM balance. HUD guidance states that a HECM may be prepaid in full or in part without a prepayment penalty.

1. Check HECM Eligibility Requirements

For an FHA-insured HECM, all borrowers must generally be at least 62 years old. A younger spouse may sometimes be treated as a non-borrowing spouse, but that status has important consequences and should be reviewed carefully.

Common HECM requirements include:

At least one eligible borrower must occupy the property as a principal residence.
The borrower must own the home outright or have sufficient equity to pay off an existing mortgage at or before HECM closing.
The home must satisfy applicable FHA property standards.
The borrower must complete required HECM counseling.
The lender must complete a financial assessment.
The borrower must be able to meet ongoing property obligations directly or through an approved set-aside arrangement.

Eligible Property Types

Property eligibility is determined under FHA rules. Depending on the property and current program requirements, eligible homes may include certain:

Single-family homes
Two- to four-unit properties occupied by the borrower
HUD-approved condominium units
Manufactured homes that satisfy FHA standards

Ask the counselor and lender to confirm property eligibility before paying for optional services or making financial commitments.

2. Complete Independent HUD-Approved Counseling

Prospective HECM borrowers must receive counseling before the lender can process the formal application. Counseling is intended to help the consumer understand:

How reverse mortgages work
Eligibility requirements
Payout methods
Interest and fees
Property-charge obligations
Events that can make the loan due
Consequences for spouses and heirs
Available alternatives

The counselor does not approve the loan and should not be pressured by the lender to recommend a particular product. The lender makes the final eligibility decision.

A HUD-approved agency may charge a reasonable counseling fee, but the CFPB states that it cannot deny counseling solely because a consumer cannot afford the fee. Charges should be explained before the session.

Questions to Ask the Counselor

How will this loan affect my equity over five, ten, or more years?
Which payout structure best matches my actual expenses?
What happens if I need to move into assisted living?
How is a non-borrowing spouse treated?
What happens if I cannot pay property taxes or insurance?
What lower-cost alternatives should I compare?
How might retained loan proceeds affect needs-based benefits?

3. Understand the HECM Financial Assessment

A reverse mortgage is not automatically approved because the homeowner is old enough and has equity. For a HECM, the lender completes a financial assessment to determine whether the borrower is likely to meet ongoing property obligations.

The lender may review:

Income from employment, pensions, Social Security, or other sources
Bank and investment assets
Monthly debts and household obligations
Credit history
Previous payment of property taxes and insurance
Residual income after expenses

If the lender determines that the borrower may have difficulty paying future property charges, part of the reverse mortgage proceeds may need to be reserved in a Life Expectancy Set-Aside, often called a LESA. A set-aside reduces the funds available for other uses.

A weak credit history does not necessarily create the same underwriting result as with a traditional mortgage, but the lender can request explanations and supporting documentation.

4. Learn How the Reverse Mortgage Amount Is Determined

The amount available through a reverse mortgage is not simply equal to the homeowner’s total equity. For a HECM, the available principal generally depends on factors including:

The age of the youngest eligible borrower or applicable non-borrowing spouse
The appraised value of the home, subject to current HECM limits
Current interest rates
The balance of existing mortgages or liens
Required repairs
Closing costs and mortgage insurance
Any required Life Expectancy Set-Aside
The selected payout plan

An existing mortgage generally must be paid off before or at closing, commonly using part of the HECM proceeds. This can substantially reduce the cash available to the homeowner.

Ask for Several Projections

Request illustrations showing:

The initial amount available
The estimated loan balance over time
Remaining projected equity under different home-value assumptions
Fixed- and adjustable-rate scenarios where available
The effect of taking a large lump sum compared with smaller draws
The effect of voluntary partial repayments

Projections are estimates rather than guarantees. Home values, interest rates, withdrawals, and the length of time the loan remains open can change the outcome.

5. Compare Reverse Mortgage Payout Options

HUD materials identify several ways HECM proceeds may be received. The options available depend on the interest-rate structure, lender, program limits, and loan terms.

Payout Option	How It Generally Works	Important Consideration
Line of credit	Funds are requested as needed from the available credit line.	Borrowing only when needed may preserve more equity than an immediate full draw.
Term payments	Equal monthly advances are provided for a selected period.	Payments end after the stated term even if the borrower remains in the home.
Tenure payments	Equal monthly advances continue while the borrower remains eligible and the loan requirements are met.	The amount may be lower than a shorter fixed-term payout.
Modified term or tenure	Monthly advances are combined with a line of credit.	The available amounts are divided between the two features.
Lump sum	Available funds are taken in one initial advance, subject to program limits.	Interest and fees begin accumulating on the amount drawn, which can reduce equity more quickly.

Do not select a lump sum merely because the maximum amount is available. Match withdrawals to a documented purpose and compare how quickly each option increases the loan balance.

6. Calculate Reverse Mortgage Costs

Reverse mortgages can have substantial upfront and ongoing expenses. Some closing costs can be financed from the loan proceeds, but financing them reduces the cash available and adds those amounts to the growing balance.

Possible Upfront Costs

Origination fee
Appraisal
Title search and title-related charges
Recording and settlement charges
Credit review
Initial FHA mortgage insurance premium
Inspections, surveys, or required repair evaluations
Housing counseling fee where affordable and charged

Possible Ongoing Costs

Interest added to the outstanding balance
Annual FHA mortgage insurance premium
Permitted servicing fees
Property taxes
Homeowners insurance
Flood insurance where required
Homeowners association charges
Property maintenance and repairs

The CFPB notes that interest and ongoing fees are added to the balance each month. This can result in interest being charged on costs previously added to the balance.

Review the Total Annual Loan Cost Disclosure

Ask the lender and counselor to explain the Total Annual Loan Cost, or TALC, disclosure. It estimates the cost of a reverse mortgage under different assumptions about:

How long the loan remains outstanding
How much money is borrowed
Future home appreciation
Interest and mortgage insurance

Use the disclosure to compare offers, but remember that the actual cost depends on what happens over the life of the loan.

7. Plan for Property Taxes, Insurance, and Maintenance

A reverse mortgage removes the usual required monthly principal-and-interest payment, but it does not remove the ordinary costs of owning a home.

The borrower must generally:

Use the property as a principal residence
Pay property taxes on time
Maintain required homeowners insurance
Maintain flood insurance where applicable
Pay applicable homeowners association charges and assessments
Keep the home in an acceptable condition
Complete required repairs
Respond to occupancy and property-certification requests

Failure to meet these obligations can cause the reverse mortgage to become due and may eventually lead to foreclosure.

Create a Property-Charge Budget

Annual Home Expense	Estimated Amount	Monthly Amount to Reserve
Property taxes
Homeowners insurance
Flood insurance
Homeowners association charges
Routine maintenance
Major-repair reserve

Do not plan to cover recurring property obligations with payday loans, repeated cash advances, or other high-cost borrowing. If taxes, insurance, and maintenance are already unaffordable, a reverse mortgage may only postpone a housing problem rather than solve it.

8. Know When a Reverse Mortgage Becomes Due and Payable

A reverse mortgage typically becomes due after the last eligible borrower:

Sells the home
Permanently moves out
Dies

The loan may become due sooner if the borrower:

No longer uses the property as the principal residence
Fails to pay required property taxes
Allows required insurance to lapse
Fails to maintain the property
Violates another material loan obligation

A temporary absence does not always make the loan immediately due. The result can depend on the duration, whether the borrower is in a healthcare facility, and whether a co-borrower or eligible non-borrowing spouse remains in the home. Notify the servicer before an extended absence and request written guidance.

Plan for a Future Move

Before borrowing, consider whether the home will remain suitable if you experience:

Reduced mobility
A need for assisted living
Loss of driving ability
Higher maintenance costs
A desire to live closer to family
The death or relocation of a spouse or caregiver

A reverse mortgage can be expensive when the homeowner expects to move again within a relatively short period because upfront costs are spread over fewer years.

9. Protect a Spouse or Other Household Member

Every person living in the home should understand whether they are a borrower, co-borrower, eligible non-borrowing spouse, or another occupant. These categories can produce very different rights after the borrower dies or permanently leaves the home.

Ask the lender and counselor:

Is my spouse listed as a borrower?
If not, does my spouse qualify as an eligible non-borrowing spouse?
What documents must be maintained?
Can the spouse remain in the home after the borrower dies?
Will loan advances stop during a deferral period?
What obligations must the spouse continue meeting?
What happens after divorce or separation?

Do not remove a spouse from title or exclude a spouse from the loan solely to obtain more money without receiving independent legal and housing-counseling advice.

10. Discuss the Reverse Mortgage With Your Heirs

A reverse mortgage affects the equity that may remain for heirs. Discuss the arrangement before a crisis occurs and keep the loan documents, servicer contact information, and estate-planning documents organized.

When a HECM becomes due after the final borrower and any protected eligible non-borrowing spouse are no longer entitled to remain, heirs may need to:

Sell the home and repay the loan
Use other funds or obtain financing to keep the home
Transfer the property to the lender through an appropriate process

If the home is worth more than the loan balance, heirs can generally sell it, repay the debt, and retain the remaining equity.

HECMs are non-recourse loans. HUD counseling guidance states that heirs or the estate may generally satisfy the HECM for the lesser of the full debt or 95% of the current appraised value. CFPB guidance also explains that mortgage insurance covers an eligible shortfall when the balance exceeds the home value.

Questions for an Estate-Planning Discussion

Does anyone want to keep the home?
Could that person qualify for financing?
Where are the mortgage and title documents stored?
Who will communicate with the loan servicer?
How will property taxes, insurance, and maintenance be handled after death?
Should an attorney review the title, trust, will, or estate plan?

11. Understand Taxes and Means-Tested Benefits

The Internal Revenue Service states that reverse mortgage payments are generally not taxable income because they are loan proceeds.

This does not mean that every tax question is simple. Interest is generally not treated as paid merely because it is added to the loan balance, and deductibility can depend on repayment, the use of proceeds, and other tax rules. Consult a qualified tax professional for individual advice.

Social Security, Medicare, SSI, and Medicaid

HUD counseling guidance states that HECM advances generally do not affect Social Security retirement or Medicare benefits. However, money retained in a bank account may affect resource-limited programs such as Supplemental Security Income or Medicaid.

Program rules and state Medicaid requirements can be complex. Before selecting a lump-sum payout, speak with:

A HUD-approved HECM counselor
The Social Security Administration where SSI is involved
Your state Medicaid agency
A qualified elder-law attorney or benefits specialist

Do not replace a HECM with a high-cost personal loan merely to avoid a possible benefit issue without receiving program-specific advice.

12. Compare Lenders and Protect Yourself From Scams

HECMs are available only through FHA-approved lenders. Compare several lenders because interest-rate margins, origination charges, servicing practices, and available payout options can differ.

Ask Each Lender for the Same Information

Interest-rate structure and margin
Estimated loan proceeds
Origination fee
Mortgage insurance costs
Third-party closing costs
Servicing fees
TALC disclosure
Available payout plans
Required repairs or set-asides
Non-borrowing spouse treatment
Early repayment rules

Reverse Mortgage Scam Warning Signs

Be cautious when someone:

Pressures you to sign immediately
Claims the loan is free money
Says you can never lose the home
Discourages independent counseling
Requires you to purchase an investment, insurance policy, annuity, repair package, or financial product
Asks you to transfer loan proceeds to another person
Promises guaranteed investment returns
Suggests adding a stranger to the title
Does not clearly explain taxes, insurance, maintenance, and due-and-payable events
Uses high-pressure home-repair or foreclosure-rescue sales tactics

Do not sign blank documents or give another person control of your bank account or loan proceeds. Report suspected fraud to the lender, HUD, the CFPB, the Federal Trade Commission, or local law enforcement as appropriate.

Alternatives to a Reverse Mortgage

A reverse mortgage is only one way to address retirement expenses or access home equity. Compare it with options that may preserve more equity or cost less.

Alternative	Possible Advantage	Important Risk or Limitation
Downsizing	May reduce housing, tax, insurance, and maintenance expenses.	Moving costs, emotional impact, and local housing prices may limit savings.
Home equity loan	May provide a fixed lump sum and repayment schedule.	Requires monthly payments and places the home at risk after default.
HELOC	Allows borrowing as needed from an available credit line.	Usually has a variable rate, monthly payments, and possible line reductions.
Cash-out refinance	May replace the existing mortgage and provide cash.	Requires qualification, monthly payments, and closing costs.
Property-tax relief	Local senior exemptions or deferrals may reduce housing pressure.	Availability and future repayment rules vary.
Home-repair assistance	Government or nonprofit programs may help with essential repairs.	Eligibility, funding, and waiting periods vary.
Family arrangement	May allow the family to preserve the home or share costs.	Requires written terms, legal advice, and careful relationship planning.
Budget and benefit review	May identify unused assistance, insurance, or expense reductions.	May not provide enough cash for a major need.

Short-term payday loans and repeated no-credit-check borrowing are not close substitutes for a long-term reverse mortgage. They create separate repayment obligations and may worsen cash-flow pressure.

Reverse Mortgage Decision Checklist

Question	Your Answer
Do I expect to remain in this home for several years?
Is the home suitable for future mobility and care needs?
Can I afford taxes, insurance, HOA charges, and maintenance?
Have I completed independent HUD-approved counseling?
How much of my existing mortgage must be paid at closing?
What amount will remain available after all deductions?
Which payout option best matches my documented needs?
How will the estimated balance grow over time?
How much equity may remain under several scenarios?
Does a spouse or other household member understand their status?
Have I discussed the plan with my heirs?
Could the payout affect SSI, Medicaid, or another benefit?
Have I compared at least several lenders and alternatives?

Key Takeaways

A reverse mortgage is a loan secured by the home, not free income.
The homeowner retains title but must continue paying required property charges and maintaining the home.
HECM borrowers are generally at least 62 and must complete HUD-approved counseling.
The lender conducts a financial assessment and may require a property-charge set-aside.
Available proceeds depend on age, property value, rates, existing liens, costs, and the payout plan.
Interest and fees are added to the balance, so the amount owed generally grows over time.
The loan typically becomes due after sale, permanent move, or the death of the last protected borrower.
Spouse status and estate planning should be addressed before closing.
HECM mortgage insurance limits the amount heirs or the estate must use to resolve an underwater loan.
Reverse mortgage proceeds are generally not taxable income, but retained funds may affect means-tested benefits.
A reverse mortgage is usually a poor solution for a brief shortage when the homeowner may move soon.
Independent counseling and lender comparison are essential.

Official Reverse Mortgage Resources

Frequently Asked Questions About Reverse Mortgages

What is a reverse mortgage?

A reverse mortgage is a loan secured by a primary residence that allows an eligible older homeowner to convert part of the home equity into loan proceeds. The balance generally grows as money is borrowed and interest and fees are added.

How old do you have to be for a reverse mortgage?

For an FHA-insured HECM, all borrowers generally must be at least 62. A younger spouse may sometimes qualify as a non-borrowing spouse, but that status has different rights and restrictions.

Do I still own my home after getting a reverse mortgage?

Yes. The title remains with the homeowner, but the reverse mortgage creates liens on the property and the borrower must continue satisfying the loan obligations.

Do you make monthly payments on a reverse mortgage?

Required monthly principal-and-interest payments are generally not required while the loan remains in good standing. Borrowers remain responsible for taxes, insurance, maintenance, and other required property charges and may make voluntary loan payments.

How much money can I get from a reverse mortgage?

The amount depends on factors including age, appraised value, current interest rates, existing liens, closing costs, set-asides, and the selected payout method.

What are the payout options for a reverse mortgage?

HECM options may include a line of credit, monthly term or tenure advances, a combination of monthly advances and a credit line, or a single lump sum. Availability depends on the loan structure and program rules.

Is reverse mortgage money taxable?

The IRS states that reverse mortgage proceeds are generally not taxable income because they are loan proceeds. Individual tax consequences and interest deductions can be more complex.

Can a reverse mortgage affect SSI or Medicaid?

HECM proceeds generally do not affect Social Security retirement or Medicare, but retained funds may count toward resource limits for SSI or Medicaid. Seek program-specific advice before taking a large lump sum.

Can I lose my home with a reverse mortgage?

Yes. A borrower can face default and foreclosure after failing to meet obligations such as paying property taxes, maintaining insurance, occupying the home as required, or keeping it in acceptable condition.

When does a reverse mortgage have to be repaid?

It typically becomes due after the last eligible borrower sells the home, permanently moves out, or dies. It may become due earlier after a serious violation of the loan obligations.

What happens if I move into a nursing home?

The result depends on how long you are away, whether the move is considered permanent, and whether a co-borrower or eligible non-borrowing spouse remains. Contact the servicer and a HUD-approved counselor promptly.

Can my heirs keep the home?

They may keep it by resolving the reverse mortgage balance, often through their own funds or financing. For a HECM, non-recourse and appraisal-value rules may limit the amount required when the balance exceeds the home value.

What happens if the reverse mortgage balance exceeds the home value?

HECM mortgage insurance generally covers the eligible difference, so the borrower or heirs are not personally responsible for an amount beyond the applicable non-recourse resolution rules.

Can I repay a reverse mortgage early?

A HECM may generally be repaid in whole or in part at any time without a prepayment penalty. Confirm the payoff procedure with the servicer.

What are the main reverse mortgage costs?

Costs may include origination, appraisal, title and closing charges, FHA mortgage insurance, interest, servicing fees, taxes, insurance, and property maintenance.

Is a reverse mortgage a good idea for a short-term cash problem?

It may not be. Substantial upfront costs and the long-term effect on home equity can make a reverse mortgage poorly suited to a temporary shortage or a homeowner expecting to move soon.

What are alternatives to a reverse mortgage?

Alternatives may include downsizing, a home equity loan, HELOC, cash-out refinance, tax-relief programs, repair assistance, family arrangements, benefit reviews, or reducing the expense.

How do I find a legitimate reverse mortgage lender?

Use HUD resources to identify FHA-approved HECM lenders, complete independent counseling, compare several written proposals, and avoid high-pressure sales or required purchases of unrelated products.

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