Reverse Mortgages for Seniors: Use Your Home Equity to Age in Place
Quick Summary
For homeowners age 62+, a reverse mortgage lets you convert home equity into cash without required monthly mortgage payments.
You keep ownership and must continue to pay property taxes, homeowners insurance, and maintain the home.
When you move, sell, or pass away, the loan is repaid—usually from the home’s sale. With FHA-insured HECM loans, you or your heirs never owe more than the home’s value.
What Is a Reverse Mortgage?
A reverse mortgage is a type of home loan for homeowners age 62 or older that allows you to access a portion of your home equity. Unlike a traditional mortgage, you are not required to make monthly mortgage payments. Interest and fees are added to the loan balance over time. You remain on title and continue to own your home.
Key protections:
Non-recourse (HECM): You or your heirs will not owe more than the home’s value when the loan becomes due, even if the housing market falls.
Stay in your home: You can live in your home as your primary residence as long as you meet ongoing obligations.
Is It Right for You? Quick Eligibility & Fit Checklist
You may be a good candidate if:
You are 62 or older (the loan amount is based on the age of the youngest borrower or eligible non-borrowing spouse).
The home is your primary residence (1–4 unit home, FHA‑approved condo, some manufactured homes).
You have sufficient equity.
You can continue paying property taxes, homeowners insurance, HOA dues (if any), and maintain the home.
You plan to stay in the home for several years.
Important: Since 2015, HECM reverse mortgages include a financial assessment to confirm you can meet ongoing property charges. Some borrowers may have a set-aside for taxes/insurance.
Common Ways Seniors Use Reverse Mortgages
Eliminate an existing monthly mortgage payment
Supplement retirement income with monthly payments
Open a line of credit for emergencies or future needs
Fund home repairs, accessibility upgrades, or medical expenses
Pay off high-interest debt
Right-size or purchase a new home using a HECM for Purchase
Payment Options
Lump sum: Receive funds at closing (often with a fixed interest rate).
Monthly payments: Tenure (for as long as you live in the home) or term (for a set number of months).
Line of credit: Withdraw when needed; unused funds grow in available credit over time with the HECM program.
Combination: Mix monthly payments with a line of credit.
Benefits at a Glance
No required monthly mortgage payments while you live in the home
Flexible payout choices to fit your needs
Non-recourse protection on FHA HECM loans
You remain on title and can sell or repay at any time without prepayment penalties (most programs)
Proceeds are generally not considered taxable income (consult a tax professional)
Important Considerations and Risks
Costs: Upfront fees can include origination, appraisal, third-party closing costs, and FHA mortgage insurance (for HECM).
Interest accrues: Your loan balance grows over time, which can reduce home equity.
Ongoing obligations: You must pay property taxes, homeowners insurance, HOA dues (if applicable), and maintain the property.
Benefits impact: Reverse mortgage advances generally do not affect Social Security or Medicare, but may affect means‑tested benefits such as Medicaid. Consult an elder law attorney.
Non-borrowing spouse: HECM provides protections for eligible non-borrowing spouses; confirm your status and protections before closing.
Program and lending limits: HECM loan amounts are capped by FHA limits; proprietary “Jumbo” programs may allow higher amounts for high‑value homes.
HECM vs. Jumbo (Proprietary) Reverse Mortgages
HECM (FHA-insured)
Most common reverse mortgage with non-recourse protection and standardized counseling requirements.
Jumbo/Proprietary
For higher‑value homes; features, fees, and protections vary by lender and program.
How Much Can You Get?
Your available reverse mortgage funds depend on:
Age of the youngest borrower (or eligible non‑borrowing spouse)
Home value (up to FHA lending limits for HECM)
Current interest rates and expected rate
Program type and upfront costs
Existing liens that must be paid off at closing
Tip: The older you are and the more equity you have, the more you may qualify for (up to program limits). Use our calculator for an estimate, then confirm with a specialist.
What Happens When the Loan Is Due?
The loan becomes due when:
You sell the home, move out permanently, or the last borrower passes away
You fail to meet loan obligations (taxes, insurance, upkeep)
Heirs’ options:
Repay the balance and keep the home (often by refinancing)
Sell the home and use the proceeds to repay the loan
With HECM, if the balance exceeds the home’s value, the FHA insurance covers the shortfall—heirs are not personally liable
The Required Counseling Step
Before applying for a HECM reverse mortgage, you must complete counseling with a HUD‑approved counselor. Counseling helps you compare options, understand costs and obligations, and receive a certificate required for your application. Counseling is typically done by phone and may include a modest fee.
Myths vs. Facts
“The lender will take my home.” Fact: You keep title. The lender has a lien, just like any mortgage.
“I can be forced out.” Fact: You can stay as long as you meet obligations and the home remains your primary residence.
“I might owe more than the home is worth.” Fact: HECM loans are non‑recourse. You or your heirs will not owe more than the home’s value.
“Anyone can qualify, no income or credit checks.” Fact: HECM includes a financial assessment to ensure you can pay property charges. Credit and income may be reviewed.
“Reverse mortgages are risk-free.” Fact: They can be helpful, but they have costs and reduce home equity over time. Review carefully with a counselor.
“I can’t use funds for an annuity.” Fact: Lenders cannot require you to buy financial products with loan proceeds. Buying annuities with proceeds may not be suitable; consult a trusted advisor.
Step-by-Step: How to Get a Reverse Mortgage
Check your eligibility and goals
Complete HUD‑approved counseling and receive your certificate
Apply with a lender; financial assessment and disclosures
Appraisal, underwriting, and loan approval
Closing: sign documents; any existing mortgage is paid off; fees may be financed
Receive your funds (lump sum, monthly, line of credit, or combination)
Stay on track: pay taxes/insurance, maintain the home, and complete any required occupancy certifications
Frequently Asked Questions
Will I still own my home?
Yes. You remain on title. The lender has a lien against the property.
Do I have to make monthly payments?
No monthly mortgage payments are required. You can make optional payments. You must still pay property taxes, homeowners insurance, and maintain the home.
Are reverse mortgage proceeds taxable?
Proceeds are generally considered loan advances and not taxable income. Consult a tax professional for your situation.
Will this affect Social Security, Medicare, or Medicaid?
Social Security and Medicare are typically not affected. Medicaid and other means‑tested benefits may be affected—speak with an elder law attorney.
Can my heirs keep the home?
Yes. They can repay the loan balance (often by refinancing). With HECM, if the loan balance is higher than the home’s value, they can pay the lesser of the balance or 95% of the current appraised value.
Can I pay off the loan early?
Yes. Most programs have no prepayment penalty.
What property types are eligible?
Single‑family homes, 2–4 unit homes (one unit must be owner‑occupied), FHA‑approved condos, and qualifying manufactured homes.
