Reverse Mortgages
Access Your Home Equity Without a Required Monthly Mortgage Payment
For homeowners age 62 and older, a reverse mortgage can provide a way to access a portion of the equity built in your home without selling it or taking on a required monthly principal and interest mortgage payment.
- Supplement your retirement income to preserve quality of life using home equity
- Pay off an existing mortage on a second property you own
- Use funds flexibly: Use home equity for renovations, debt consolidation, repairs, reserves, or major expenses.
You continue to own your home and retain title.
You must continue living in the property as your primary residence and remain responsible for property taxes, homeowners insurance, applicable HOA charges, and maintaining the home.
What Is a Reverse Mortgage?
A reverse mortgage is a home loan designed to allow older homeowners to convert a portion of their home equity into usable funds.
The most common reverse mortgage is the Home Equity Conversion Mortgage, or HECM, which is insured by the Federal Housing Administration.
Unlike a traditional mortgage, where you typically make monthly principal and interest payments to reduce the amount you owe, a reverse mortgage works in the opposite direction.
You borrow against your available home equity, and the loan balance generally increases over time as funds are advanced and interest and applicable fees are added to the balance.
For an FHA-insured HECM:
You generally must be at least 62 years old
The home must be your principal residence
You retain ownership and title to the home
No monthly principal and interest mortgage payment is required
Existing mortgage debt is generally paid off as part of the reverse mortgage
You remain responsible for property taxes and homeowners insurance
You must maintain the property
HUD-approved reverse mortgage counseling is required
The loan generally becomes due when the last applicable borrower permanently leaves the home, sells the property, or dies, subject to rules that may protect an eligible non-borrowing spouse.
How Does a Reverse Mortgage Work?
A reverse mortgage allows you to borrow against a portion of the equity in your home.
Exactly how much may be available depends on several factors, including:
- Your age
- The age of an eligible non-borrowing spouse, if applicable
- Your home’s appraised value
- Current interest rates
- Existing mortgage balances
- The specific reverse mortgage program
Older borrowers and homeowners with more equity may generally have access to a larger portion of their home’s value.
Step 1: Review Your Home Equity
We start by reviewing your estimated property value and any mortgages or liens currently secured by the home.
Step 2: Estimate Available Reverse Mortgage Proceeds
Your potential proceeds are calculated based on your age, home value, interest rates, existing debt, and program guidelines.
Step 3: Pay Off Existing Mortgage Debt
If you currently have a mortgage, eligible reverse mortgage proceeds are generally used to pay off that loan at closing.
This can eliminate the required monthly principal and interest payment associated with the existing mortgage.
Step 4: Choose How to Access Remaining Funds
Depending on the reverse mortgage program and structure, available funds may potentially be accessed through:
- A lump sum
- Monthly distributions
- A line of credit
- A combination of available options
Who Qualifies for a Reverse Mortgage?
Requirements depend on the specific reverse mortgage program.
For the FHA-insured Home Equity Conversion Mortgage (HECM), some of the major requirements include:
Your Age
At least one borrower must satisfy applicable HECM age requirements, with HECMs generally designed for homeowners 62 years of age or older.
Rules involving spouses and eligible non-borrowing spouses should be reviewed carefully before proceeding.
Property Occupancy
The property must generally be your principal residence.
A HECM is not designed to access equity from a vacation home or investment property that is not your primary residence.
Home Equity
You need sufficient home equity.
If you still have a mortgage, it generally must be paid off at closing using the reverse mortgage proceeds and/or other available funds.
You do not necessarily need to own your home free and clear.
HUD-Approved Counseling
Before completing an FHA-insured HECM, borrowers must participate in counseling with an approved reverse mortgage counselor.
The purpose is to help you understand how the loan works, its costs, your responsibilities, alternatives, and the potential impact on you and your family.
Reverse Mortgage vs. HELOC vs. Home Equity Loan
A reverse mortgage isn’t the only way to access home equity.
The right option depends on your age, income, existing mortgage, available equity, monthly budget, and goals.
Primarily designed for older homeowners
HECM borrowers are generally 62+
No required monthly principal and interest payment
Existing mortgage generally must be paid off at closing
Loan balance typically grows over time
Home remains in your name
Must remain your primary residence
Property taxes and insurance remain your responsibility
May provide lump sum, line-of-credit, or scheduled-payment options depending on structure
Home Equity Loan
Typically provides a lump sum
Usually creates a second monthly mortgage payment
Often has a fixed repayment schedule
Generally leaves your existing first mortgage in place
Income and debt qualification apply
Can work well for a defined one-time expense
Revolving line of credit
Borrow as needed during the draw period
Usually requires monthly payments
Often carries a variable interest rate
Typically remains separate from your first mortgage
Income and debt-to-income qualification generally apply
Can work well when you want flexible access to equity while keeping your existing mortgage
The important question isn’t: “Which home-equity product is best?” It’s: “Which structure fits my financial situation and long-term goals?”
How Much Can You Get From a Reverse Mortgage?
There isn’t one fixed percentage of your home value available to every homeowner.
The amount you may be able to access depends primarily on:
- Age
- Home value
- Interest rates
- Existing mortgage debt
- Program limits
- Reverse mortgage structure
A simple example:
Estimated Home Value: $800,000
Existing Mortgage: $150,000
Your home may have approximately:
$800,000 – $150,000 = $650,000 of gross home equity
However, a reverse mortgage does not generally allow you to withdraw all $650,000.
A personalized reverse mortgage analysis can help estimate:
- Your home’s qualifying value
- Existing mortgage payoff
- Estimated principal limit
- Potential available proceeds
- Closing costs
- Available payment options
- Estimated future loan balance
What Can You Use a Reverse Mortgage For?
Reverse mortgage proceeds can provide financial flexibility for a variety of retirement goals.
Pay Off an Existing Mortgage
One of the most common reasons homeowners consider a reverse mortgage is to eliminate an existing required monthly mortgage payment.
Your existing mortgage is paid off using reverse mortgage proceeds, assuming sufficient proceeds are available.
You would still remain responsible for property taxes, insurance, HOA charges, maintenance, and other applicable property expenses.
Supplement Retirement Cash Flow
Some homeowners have substantial home equity but relatively limited monthly cash flow.
A reverse mortgage may allow part of that housing wealth to become available for retirement needs.
Establish a Financial Reserve
A reverse mortgage line of credit may provide an additional source of funds for future needs.
Home Improvements and Repairs
Proceeds may potentially be used for:
- Roof replacement
- HVAC systems
- Accessibility modifications
- Bathroom renovations
- Kitchen improvements
- Aging-in-place upgrades
- General repairs
Medical or Long-Term Financial Expenses
Some homeowners use home equity as an additional source of liquidity when facing significant expenses.
Help Fund Retirement Goals
Reverse mortgage proceeds may provide additional flexibility when coordinated thoughtfully with your broader retirement plan.
Before using home equity, consider discussing the decision with your financial, tax, or legal advisors where appropriate.
Benefits of a Reverse Mortgage
Potential advantages may include:
- Access a portion of accumulated home equity
- No required monthly principal and interest mortgage payment
- Remain in your home while meeting loan requirements
- Retain title and ownership
- Pay off an existing mortgage
- Potentially improve monthly cash flow
- Access funds in different ways depending on loan structure
- Establish additional financial reserves
- Use proceeds for a variety of financial goals
- FHA insurance protections with a HECM
- Ability to sell the property later
- Remaining equity can still pass to heirs
- For many homeowners, the primary benefit is turning an illiquid asset—the equity in the home—into usable financial flexibility without immediately selling the property.
Drawbacks of a Reverse Mortgage
Potential disadvantages include:
- The loan balance generally grows over time
- Interest and fees reduce remaining home equity
- Closing costs can be significant
- You remain responsible for property taxes and homeowners insurance
- The home must be properly maintained
- The property generally must remain your principal residence
- The loan eventually has to be repaid
- Less home equity may remain for heirs
- Moving relatively soon after obtaining the loan may reduce its usefulness
- A HELOC, home equity loan, sale, downsizing strategy, or other alternative may be better in some situations
Do You Still Own Your Home With a Reverse Mortgage?
This is one of the biggest misconceptions about reverse mortgages.
The lender does not take ownership of your home simply because you have a reverse mortgage.
Your name remains on title.
A reverse mortgage is a loan secured by your home, similar in that respect to a traditional mortgage.
You still have the ability to:
- Live in the home
- Sell the property
- Leave the property to your heirs
- Pay off the reverse mortgage
- Refinance the loan if eligible
However, because the home secures the loan, you must continue meeting the requirements of the reverse mortgage.
That includes keeping property taxes and homeowners insurance current, maintaining the home, and continuing to use the property as your principal residence.
Frequently Asked Questions
A reverse mortgage is a home loan that allows eligible older homeowners to borrow against a portion of their home equity.
The most common reverse mortgage is the FHA-insured Home Equity Conversion Mortgage, or HECM.
Unlike a traditional mortgage, a HECM generally does not require monthly principal and interest mortgage payments while the borrower continues to satisfy the loan requirements.
For an FHA-insured HECM, borrowers are generally required to be at least 62 years old.
Other proprietary reverse mortgage products may have different requirements.
A reverse mortgage has requirements that must continue to be met.
Borrowers must generally keep property taxes and homeowners insurance current, maintain the property, and continue using it as their principal residence.
Failure to satisfy applicable loan requirements can cause the loan to become due and can potentially lead to foreclosure.
When the last applicable borrower dies, the loan generally becomes due, subject to rules that may apply to an eligible non-borrowing spouse.
Heirs may generally sell the home and use the proceeds to repay the reverse mortgage or satisfy the applicable payoff and retain the property.
Any remaining equity after the loan and other applicable costs are paid belongs to the estate or heirs.
The interaction between reverse mortgage proceeds and government benefit programs can depend on the specific benefit and how proceeds are received or retained.
If you receive needs-based government benefits, discuss the potential impact with a qualified benefits or financial advisor before proceeding.
Tax treatment depends on your individual situation.
Because a reverse mortgage involves borrowing against your home rather than selling it, homeowners should consult a qualified tax professional about the specific tax treatment of proceeds and interest.
Neither is universally better.
A HELOC may make more sense if you qualify for the required monthly payments and want flexible access to equity while keeping your existing first mortgage.
A reverse mortgage may make more sense for an eligible older homeowner who wants to access equity without adding a required monthly principal and interest mortgage payment.
The right answer depends on your circumstances.
See If a Reverse Mortgage Fits Your Retirement Strategy
Your home may represent one of your largest financial assets.
A reverse mortgage can provide a way to access part of that equity without immediately selling your home—but that doesn’t mean it’s automatically the right solution.
We’ll help you understand:
- How much equity you may be able to access
- How the mortgage balance works
- Potential payment options
- Costs
- Your ongoing responsibilities
- What happens when you sell or move
- What happens to the home after your death
- Alternatives such as a HELOC, home equity loan, or refinance
Ready to see how much equity you may be able to access? Start with a personalized Reverse Mortgage review.