Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
A reverse mortgage, most commonly an FHA-insured HECM, lets homeowners 62 and older convert equity into cash without a monthly mortgage payment. The balance grows over time instead of shrinking.
Key takeaways
A reverse mortgage, most commonly an FHA-insured HECM, lets homeowners 62 and older convert home equity into cash with no monthly mortgage payment.
The loan balance grows over time instead of shrinking, and it's non-recourse, meaning borrowers never owe more than the home is worth.
Borrowers still must keep paying property taxes, insurance, and upkeep, and failing to do so can trigger foreclosure.
It fits older owners planning to stay in the home for life, since the growing balance reduces what heirs eventually inherit.
Min. age
62 (youngest borrower or spouse)
Monthly payment
None required; balance grows instead
Insurance
FHA-insured (HECM), upfront + annual premium
Best for
Older owners who plan to stay put
How a reverse mortgage works
A Home Equity Conversion Mortgage (HECM) is the FHA-insured reverse mortgage used by most borrowers. It converts home equity into cash while you keep living in the home.
A lump sum paid out at closing
A line of credit you draw on your own schedule
Fixed monthly payments to you for a set period or for life
Any combination of the three
No monthly mortgage payment is required. Interest and insurance premiums instead accrue onto the balance, which grows for as long as the loan is open.
The balance that grows, not shrinks
The trade-off for no monthly payment is compounding: interest and mortgage insurance premiums add to the balance every month, so the amount owed rises over time and the equity left for heirs shrinks.
Counseling is required
HUD-approved, independent counseling is mandatory before you can apply — use it to understand the compounding balance, upfront and annual insurance premiums, and your alternatives.
You must keep paying property taxes and homeowners insurance and keep the home maintained. Falling behind on any of those can trigger default.
Who a reverse mortgage fits
A reverse mortgage suits homeowners who plan to stay long-term and need the equity working for them now.
Age 62 or older with substantial home equity
Plans to remain in the home for years, not months
A need for supplemental income or a standby credit line
Ability to reliably cover taxes, insurance, and upkeep
Consider skipping it if you expect to move soon, want to leave the home free of debt, or receive means-tested benefits that a lump-sum payout could affect — a HELOC or home equity loan may fit better.
Reverse Mortgage: pros and cons
Pros
No monthly mortgage payment required
Non-recourse — never owe more than the home's value
Loan proceeds are tax-free
Can stay in the home for life
Cons
Upfront costs and mortgage insurance premium
Loan balance grows, equity shrinks over time
Must keep paying taxes, insurance, upkeep
Reduces inheritance left to heirs
Who qualifies for a reverse mortgage
HECM borrowers must be at least 62, own the home outright or hold significant equity, use it as a primary residence, and complete a mandatory session with a HUD-approved counselor before applying. Lenders also review your history of paying property taxes and insurance, since missing those payments is the leading cause of reverse mortgage default.
Requirements at a glance
Youngest borrower or eligible spouse at least 62
Home is your primary residence
Completion of HUD-approved reverse mortgage counseling
Sufficient home equity to support the loan
Ability to keep paying property taxes, insurance, and HOA dues
Do I have to make monthly payments on a reverse mortgage?
No — that's the defining feature. Interest and mortgage insurance premiums accrue onto the loan balance instead, which grows over time. You're still required to pay property taxes, homeowners insurance, and upkeep, or the loan can become due.
What happens to a reverse mortgage when the borrower dies?
The loan becomes due. Heirs can repay the balance to keep the home, sell it and keep any equity above the payoff, or let the lender sell it — they are never personally liable beyond the home's value.
Can I lose my home with a reverse mortgage?
Yes, if you fail to pay property taxes or insurance, don't maintain the home, or stop living there as your primary residence. Those obligations continue even though there's no monthly mortgage payment.
What is a reverse mortgage and why is it bad?
A reverse mortgage isn't inherently bad, but it carries real trade-offs: high upfront costs (origination fee, mortgage insurance premium), a growing loan balance that erodes equity over time, and the requirement to keep paying property taxes, insurance, and upkeep or risk default. It fits some retirees well and is a poor fit for others.
What is the 95% rule on a reverse mortgage?
It's the FHA rule letting heirs settle a HECM reverse mortgage for 95% of the home's current appraised value, or the full loan balance, whichever is less — even if the balance has grown larger than the home is worth. It's part of the loan's non-recourse protection, backed by FHA mortgage insurance.
How much can a 70 year old borrow on a reverse mortgage?
There's no fixed dollar figure — the amount depends on the home's value (up to the FHA lending limit), current interest rates, and the borrower's age, with older borrowers generally able to access a larger share of their equity than younger ones under HECM's age-based formula.
What are the 3 types of reverse mortgages?
A HECM, the FHA-insured version used by nearly all reverse mortgage borrowers; a proprietary or "jumbo" reverse mortgage for higher-value homes that exceed FHA's lending limit; and a single-purpose reverse mortgage, typically offered by state or local agencies for one specific expense like taxes or repairs.
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.
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