The essentials
What is a reverse mortgage?
The most common reverse mortgage is the federally insured Home Equity Conversion Mortgage. Instead of making ordinary monthly principal-and-interest payments, the borrower receives funds or access to a line while interest and charges increase the balance.
The borrower must continue living in the home as required, pay property charges and maintain the property. Non-borrowing spouses and heirs need careful planning. Counseling is a core safeguard, not a sales formality.
How it works
- 01
Complete required counseling and evaluate alternatives.
- 02
Choose permitted payout structure.
- 03
Meet occupancy, tax, insurance and maintenance obligations.
- 04
Repay when a maturity event occurs, often through sale or other estate arrangements.
When it can—and cannot—make sense
Potentially useful when
- The borrower plans to remain in the home.
- Property charges remain affordable.
- Heirs understand the consequences.
- Alternatives such as assistance, downsizing or other credit have been compared.
Pause when
- A move is likely soon.
- Taxes and insurance are already unaffordable.
- A salesperson pressures the borrower to buy another product.
- A non-borrowing household member’s future occupancy is unresolved.
Costs and risks to count
- Interest added to balance
- Mortgage insurance premium for HECM
- Origination, appraisal and closing costs
- Servicing and property charges where applicable
HUD governs HECM eligibility, counseling and insurance. Federal mortgage, servicing, fair-lending and advertising rules also apply.
Questions to ask before signing
Who is a borrower and who is not?
What events make the loan due?
How fast can the balance grow?
What must heirs do?
What alternatives did the counselor review?
Location matters
Check the rules in your state
State foreclosure, probate, spousal, homestead and property-tax law can affect outcomes. State and local tax deferral or assistance may be an alternative.