Updated June 17, 2026
A reverse mortgage lets homeowners 62 and older convert home equity into cash without selling the home or making monthly mortgage payments. The loan balance grows over time, fees are substantial, and the loan comes due if you move out, fail to pay property taxes, or let homeowner's insurance lapse. It does not suit every borrower.
What Is a Reverse Mortgage?
The most common type is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). Program details are available on the HUD HECM program page.
Unlike a traditional mortgage, you receive payments or a line of credit rather than making them. The loan is repaid when the last borrower sells the home, moves out permanently, or passes away.
Pros of a Reverse Mortgage
Supplemental Retirement Income
A reverse mortgage can provide tax-free proceeds (loan advances, not taxable income) that supplement Social Security or a pension. For retirees who have equity but limited monthly cash, the difference can be meaningful.
No Monthly Mortgage Payment Required
Borrowers are not required to make monthly principal or interest payments, which frees up budget for living expenses, healthcare, or other needs. You do remain responsible for property taxes, insurance, and maintenance. That obligation does not disappear.
Non-Recourse Protection
HECM loans are non-recourse. If the loan balance eventually exceeds the home's value, neither you nor your heirs owe the difference. The FHA insurance fund covers that shortfall, which is a consumer protection built into the federal program.
Flexible Payout Options
You can receive funds as a lump sum, monthly payments, a line of credit, or a combination. The line of credit grows over time at the same rate interest accrues, which can make it a useful planning tool for borrowers who do not need funds right away.
You Retain Home Ownership
You keep the title to your home as long as you meet the loan obligations. Your name stays on the deed for the life of the loan.
Cons of a Reverse Mortgage
High Upfront Costs
Origination fees, closing costs, and the required FHA mortgage insurance premium (MIP) add up quickly. Upfront MIP alone is typically 2% of the appraised home value. On a $400,000 home, that is $8,000 before any other fees. Use our home equity calculator to estimate net proceeds after costs.
Loan Balance Grows Over Time
Interest and ongoing MIP accrue monthly on the outstanding balance. Because no payment is made, the balance compounds. Over 10 to 20 years, that compounding can consume a large share of your home equity, leaving less for heirs or for future needs.
Risk of Default and Foreclosure
Failing to meet the non-payment obligations of the loan is a real risk. Borrowers who do not keep up with property taxes, homeowner's insurance, or required home maintenance can face foreclosure. The Consumer Financial Protection Bureau explains these risks on its reverse mortgage consumer tools page.
Impact on Heirs
When the last borrower leaves the home, heirs typically have about 30 days to arrange repayment (extensions are usually available). They can sell the home, pay off the loan, or refinance. If they want to keep the property but the balance is large, it can create a financial strain.
Affects Means-Tested Benefits
Reverse mortgage proceeds do not count as income. If those proceeds sit in a bank account, however, they can affect eligibility for Medicaid or Supplemental Security Income (SSI). A benefits counselor can clarify the specifics before you draw funds.
Required Counseling Adds a Step
Federal law requires every HECM applicant to complete a session with a HUD-approved housing counselor before applying. It is a genuine consumer protection, and the counselor is independent of the lender, but it does add time to the process.
Who May Benefit from a Reverse Mortgage?
- Homeowners 62 or older with substantial equity and no plan to move
- Retirees who need to supplement income and have limited other liquid assets
- Borrowers who understand and can reliably meet ongoing obligations (taxes, insurance, maintenance)
- Those who do not need to preserve home equity for heirs
Who Should Be Cautious?
- Borrowers with health issues that may require a move to assisted living within a few years
- Homeowners who want to leave a substantial inheritance
- Those receiving Medicaid or SSI who could jeopardize their benefits
- Anyone who cannot reliably pay ongoing property taxes and insurance
The Bottom Line
A reverse mortgage is a complex financial product. The benefits can be real for the right borrower, and so are the costs and risks. Speak with a HUD-approved counselor and an independent financial advisor before deciding. Visit HUD.gov to find an approved counselor near you.