Reverse Mortgages

One-line summary: A loan available to homeowners age 62 and older that converts a portion of home equity into cash, with no monthly payments required, repaid when the home is sold, the borrower moves out permanently, or passes away.

Best for

Homeowners 62 and older who want to access their home equity without selling and without taking on a monthly mortgage payment. Often used to supplement retirement income, pay off existing mortgage balances, fund healthcare costs, or simply create cash flow flexibility in retirement.

Key terms (typical)

Attribute	Typical Range
Eligible borrowers	All borrowers on title must be 62 or older
Eligible properties	Primary residence; single-family, FHA-approved condo, manufactured (with conditions)
Loan type	Home Equity Conversion Mortgage (HECM), FHA-insured; proprietary jumbo options also exist
Loan amount	Based on age, home value, and interest rate; older borrowers can access more
Payments	No monthly mortgage payment required; borrower remains responsible for taxes, insurance, and maintenance
Disbursement	Lump sum, monthly draws, line of credit, or combination
Repayment	Due when last borrower leaves home permanently, sells, or passes away

Why borrowers choose this program

• No monthly mortgage payment. Frees up monthly cash flow in retirement.
• Tax-free proceeds. Loan proceeds are not income and are not taxed (consult a tax advisor for your specific situation).
• Multiple disbursement options. Take a lump sum, set up monthly draws, or maintain a growing line of credit that can be tapped as needed.
• Heirs still inherit any remaining equity. When the loan is repaid (via sale or refinance), any equity above the loan balance goes to the borrower’s estate or heirs.
• FHA-insured. HECM reverse mortgages are insured by FHA, meaning the borrower can never owe more than the home is worth at repayment, even if the loan balance grows above the property’s value.

Considerations

• Borrower remains responsible for property charges. Taxes, homeowner’s insurance, and basic maintenance must continue to be paid by the borrower. Failure can trigger loan default.
• Equity declines over time. Without payments, the loan balance grows. Less equity remains for heirs over time.
• Counseling required. All HECM borrowers must complete HUD-approved counseling before the loan can be originated, a protective requirement, not an obstacle.
• Not for short-term needs. Reverse mortgage closing costs are significant; they only make sense for borrowers planning to stay in the home long-term.