Reviewed by the Editorial Team · Updated October 18, 2026 · 9 min read
A reverse mortgage lets homeowners 62 and older borrow against their home without a required monthly payment, most often through an FHA-insured Home Equity Conversion Mortgage (HECM). Interest and insurance premiums are added to the balance each month, so the debt grows and the equity shrinks until the home is sold or the last borrower leaves.
Key takeaways
A reverse mortgage, usually an FHA-insured HECM, lets homeowners 62 and older borrow against their home with no required monthly payment.
FHA insurance costs 2% of the home value upfront, $8,000 on a $400,000 home, plus 0.5% a year on the balance.
In the illustrative example, a $150,000 draw starts at $158,000 and grows to $339,729 after 10 years with no payments, leaving $60,271 of equity on a flat $400,000 value.
The loan comes due when the last borrower sells, leaves or dies, or if taxes, insurance or upkeep lapse, and non-recourse terms cap what you or your heirs owe at the home's value.
Minimum age
62, for every borrower
Monthly payment
None required; the balance grows
FHA insurance
2% upfront + 0.5% a year
Balance after 10 years
$339,729 from a $150,000 draw
Balance after 10 years$339,729From a $150,000 draw on a $400,000 home, no payments. Year by year ↓
Upfront MIP on a $400,000 home$8,000FHA charges 2% of the home value at closing, plus 0.5% a year on the balance.
How a reverse mortgage works
A reverse mortgage pays you from the equity in a home you own, with no required monthly payment. The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM). The loan, plus everything it accrues, is repaid when the last borrower sells, moves out for good or dies.
Who: every borrower at least 62, living there as a primary residence
Payout: lump sum, credit line, monthly payments or a mix
Repayment: none required while you live there and meet the loan's rules
Insurance: FHA premiums of 2% upfront and 0.5% a year
Before you can apply, an independent, HUD-approved counselor must explain the loan, its costs and your alternatives. Lenders require proof that you completed the session.
How much you can borrow
Your borrowing limit is a share of the home's value, set by the youngest borrower's age and the expected interest rate. Older borrowers and lower rates generally unlock a larger share, and any mortgage you still owe comes out of that amount first.
The home value counted is capped at the HECM limit, $1,249,125 for 2026, the same figure as the top of the FHA loan limits. Above it, private proprietary reverse mortgages exist, with their own rules and costs.
How the HECM limit caps the value that counts
How much you can borrow
Appraised value
Value the HECM counts
Upfront premium at 2%
$400,000
$400,000
$8,000
$1,000,000
$1,000,000
$20,000
$1,500,000
$1,249,125
About $25,000
The reverse mortgage calculator estimates proceeds for your own age and home value; a lender's written quote sets the real figure.
How you receive the money
The payout choice changes how fast the balance grows, because interest accrues only on money you have drawn. A lump sum, as in the example below, compounds on the full amount from day one.
Lump sum: the full amount at closing, usual with fixed-rate loans
Credit line: draw when you need it, offered on variable-rate loans
Monthly payments: a set amount for a fixed term or for life
Combination: a smaller lump sum plus a standby line or payments
What a reverse mortgage really costs over time
Take a $150,000 HECM lump sum on a $400,000 home, with no payments. The $8,000 upfront premium lifts the starting balance to $158,000, which accrues at 7.68%: the note rate plus the 0.5% annual premium. The 7.18% note rate is illustrative, set equal to Freddie Mac's 30-year average; each lender sets its own.
Worked exampleA $150,000 HECM draw on a $400,000 home: what you owe over time
What a reverse mortgage really costs over time
Years after closing
Loan balancegrowing at 7.68%
Equity leftif the value stays $400,000
At closing
$158,000 $150,000 + $8,000 upfront MIP
$242,000
5 years
$231,683
$168,317
10 years
$339,729
$60,271
15 years
$498,161
$0 non-recourse protects you
20 years
$730,479
$0 non-recourse protects you
Balance after 10 years$339,729with no payments made — interest and the 0.5% annual MIP compound on the balance
Balance passes a flat $400,000 valueYear 13after that, non-recourse rules mean you and your heirs never owe more than the home brings
Illustrative note rate equal to Freddie Mac's 30-year fixed average (7.18%, Nov 5, 2026) — HECM rates are set by the lender — plus FHA's 0.5% annual MIP. Upfront MIP is 2% of the home's value. Other closing and servicing costs are excluded, and home values usually change. Estimate your own HECM
With nothing repaid, the balance reaches $231,683 after 5 years and $339,729 after 10, from a $158,000 start. On a flat $400,000 value, equity shrinks to $60,271 by year 10, because each month's interest is charged on interest already added.
On a flat value, the balance passes the home's value in year 13. After that, the loan's non-recourse terms cap what you and your heirs owe at the home's value, and FHA insurance covers the lender's shortfall. A rising price would delay that year; a falling one would pull it earlier.
The trade you are making
No required payment is not the same as no cost. You can pay any amount at any time, and paying what accrues each month would stop the balance from growing.
Costs the table leaves out
The table counts only the upfront premium and interest. Four other costs sit outside it, and any you finance compound with the rest of the balance:
Origination fee: set by the lender within HUD's limits, often financed
Third-party closing costs: appraisal, title, recording and similar charges
Servicing fee: a monthly charge some lenders add to the balance
Property costs: taxes, insurance, HOA dues and repairs stay your bill
When a reverse mortgage goes wrong
Most reverse mortgage problems come from the rules that keep the loan in place, not from the rate. These four are worth reading twice, ideally with a counselor and your family:
Unpaid property charges: missed taxes, insurance or HOA dues can make the loan due
Neglected upkeep: a home left in disrepair can put the loan in default
Spouse not on the loan: may need to leave unless they qualify as eligible
Leaving the home: moving out for good makes the loan due
The CFPB says you must keep paying property taxes and homeowners insurance, live in the home as your principal residence and keep it in good condition. The FTC adds HOA fees and repairs, and notes that a care-facility stay beyond 12 consecutive months can bring repayment due.
Before you apply
Add up a year of property taxes, insurance and HOA dues, and confirm your income covers them with room for repairs. Ask the counselor whether a spouse who is not a borrower qualifies as an eligible non-borrowing spouse, and get the answer in writing before closing.
Reverse mortgage vs. HELOC vs. selling and downsizing
All three can turn home equity into spendable money. They differ in whether a payment is required, what happens to the balance and what is left for heirs.
Three ways to use the value in a home you own
Reverse mortgage vs. HELOC vs. selling and downsizing
HECM reverse mortgage
HELOC
Sell and downsize
Monthly payment
None, while you live there and meet the loan's rules
Yes: interest only at first, then principal and interest
Only the next home's rent or mortgage
Getting the money
Lump sum, credit line or monthly payments
Draw from a credit line as needed
Sale proceeds, minus selling costs and any payoff
The balance
Grows with interest and premiums
Rises with draws, falls as you repay
Existing debt is paid off at sale
Heirs
Sell, refinance or repay; they owe no more than the home brings
Repay the line from the estate or the sale
Inherit the sale proceeds or the next home
Fits best
Owners 62+ staying put, with income for property costs
Owners whose income can carry payments
Owners willing and able to move
A HELOC or home equity loan keeps you in the home, but only if your income can carry the payments. Local property-tax relief programs can also lower your costs without adding any debt.
Who a reverse mortgage fits
A reverse mortgage fits homeowners who expect to stay in the home for years and can pay its ongoing costs from income.
Age 62 or older, with a paid-off home or large equity
A plan to stay put for many years
Income that covers taxes, insurance and upkeep
A family comfortable leaving less equity behind
Skip it if you may move within a few years, since upfront costs weigh most on short loans, or if leaving the home debt-free matters most. Receiving means-tested benefits is another reason to ask a counselor first.
Reverse mortgage: pros and cons
Pros
No required monthly mortgage payment
Stay in your home while you meet the loan's rules
Non-recourse: you and heirs never owe more than the home brings
Proceeds are loan advances, generally not taxable income
Cons
Balance grows and equity shrinks every month
Upfront premium, origination fee and closing costs
Taxes, insurance and upkeep remain your responsibility
Less equity left for heirs and family
What HECM lenders look for
Beyond the age rule of 62, lenders confirm the home is your primary residence and that you have completed counseling. A financial assessment then reviews your income, credit and record of paying property charges, and may require money set aside for taxes and insurance.
The home must meet FHA property standards: a single-family house, a two- to four-unit property you live in, an FHA-approved condominium or a qualifying manufactured home. Any lien you still hold is paid off at closing, and you cannot owe delinquent federal debt.
Requirements at a glance
Every borrower at least 62 years old
Home is your primary residence, owned outright or with large equity
Counseling with an independent, HUD-approved counselor before applying
A financial assessment showing you can pay taxes, insurance and HOA dues
A home meeting FHA standards; value counts up to $1,249,125
No delinquent federal debt; existing liens paid off from the proceeds
The main benefit is access to home equity with no required monthly mortgage payment, so you can stay in your home and still raise cash.
A HECM is also non-recourse, proceeds are generally not taxable income, and you can take the money as a lump sum, a credit line or monthly payments.
Can I get out of a reverse mortgage?
Yes — you can repay a reverse mortgage in full at any time, from savings, a refinance or the sale of the home, and a HECM carries no prepayment penalty.
Most reverse mortgages also let you cancel within three business days after closing, so check your closing papers for the exact deadline.
How do you pay back a reverse mortgage?
Usually from the sale of the home, when the last borrower sells, moves out for good or dies; until then no payment is required.
Heirs can sell, refinance or repay, and a HECM lets them settle for the lesser of the balance or 95% of the appraised value.
What are the typical closing costs for a reverse mortgage?
The main charge is FHA's upfront premium: 2% of the home's value, or $8,000 on a $400,000 home.
Origination fees and standard closing costs, such as appraisal, title and recording charges, come on top, and they can usually be financed, which adds them to the balance. Ask each lender for a written estimate of every charge.
What is a better alternative to a reverse mortgage?
Downsizing is the simplest alternative, since it frees equity without adding debt. A HELOC or home equity loan can work if your income can carry the payments, and local property-tax relief programs can lower costs without borrowing. A HUD-approved counselor can compare the options before you apply.
What is the dark side of a reverse mortgage?
The dark side is a balance that grows while your equity shrinks. In an illustrative example, a $158,000 starting balance reaches $339,729 after 10 years with no payments, and the loan can come due if taxes, insurance or upkeep lapse. Heirs also inherit less, so HUD requires counseling before you apply.
What is the minimum age for a reverse mortgage?
The minimum age is 62, and every borrower named on a HECM must meet it. A younger spouse may be able to stay in the home as an eligible non-borrowing spouse but cannot borrow, and the youngest borrower's age is one factor in how much you can take. Private reverse mortgages may use different age limits.
Can you lose your home with a reverse mortgage?
Yes — if you fall behind on property taxes, homeowners insurance or HOA dues, let the home deteriorate, or stop living there, the lender can call the loan due and foreclose if it is not repaid.
A growing balance alone does not trigger that, so paying those costs and keeping up the home is what protects you.
What happens to a reverse mortgage when the borrower dies?
The loan becomes due when the last borrower dies. Heirs then have a limited time to sell the home, refinance, repay the balance, or hand the home to the lender.
A HECM is non-recourse, so heirs owe no more than the home brings, and they keep any equity above the payoff.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.