What Is a Reverse Mortgage and How Does It Work?
A reverse mortgage is a loan against your home's equity that you don't have to repay as long as you live in the home. It's available to homeowners 62 and older, and the most common version — the HECM — is insured by the FHA.
How a Reverse Mortgage Works
A traditional mortgage works like this: you borrow money to buy a home, and every month you pay down the balance while your equity grows. A reverse mortgage is the opposite: the balance grows over time as interest accrues, while your equity decreases.
You don't make monthly principal or interest payments. The loan is repaid in full when the last borrower permanently leaves the home — through sale, moving to long-term care, or death.
You keep the title. A reverse mortgage doesn't transfer ownership. You remain the homeowner with all the rights and responsibilities — including property taxes, homeowners insurance, and maintenance.
Who Qualifies
- You must be 62 or older
- The home must be your primary residence
- You must own the home outright or have significant equity (typically at least 50%)
- The property must be a single-family home, a 2–4 unit property, or an FHA-approved condo
- You must complete HUD-approved housing counseling before applying
There is no income or credit score minimum for a HECM.
How You Receive the Money
| Disbursement Type | How It Works |
|---|---|
| Lump Sum | Receive all available proceeds at closing (fixed rate) |
| Monthly Payments (Tenure) | Equal monthly payments for as long as you live in the home |
| Line of Credit | Undrawn funds grow over time at the same rate as loan interest |
| Combination | Mix of monthly payments and a line of credit |
When the Loan Comes Due
- The last eligible borrower sells the home
- The last eligible borrower permanently vacates the home
- The last eligible borrower dies
- The borrower fails to pay property taxes or keep homeowners insurance
HECM is non-recourse. If the loan balance exceeds the home's value, neither you nor your heirs owe the difference.
FAQ
What is a reverse mortgage?
A reverse mortgage is a loan for homeowners 62+ that lets them borrow against their home equity without making monthly mortgage payments. The balance grows as interest accrues, and the loan comes due when the borrower permanently leaves the home.
Do you still own your home with a reverse mortgage?
Yes. You keep the title and remain the owner. You must continue paying property taxes, homeowners insurance, and maintaining the property.
When does a reverse mortgage have to be paid back?
When the last borrower permanently leaves the home — by selling, moving to long-term care for 12+ consecutive months, or dying.
What happens if I owe more than my home is worth?
Nothing. The HECM is non-recourse — neither you nor your heirs owe more than what the home sells for. The FHA insurance covers the difference.