What Is Reverse Mortgage?

A reverse mortgage is a loan that allows homeowners aged 62 or older to convert a portion of their home equity into cash without making monthly mortgage payments. The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM). The loan balance grows over time and is repaid when you sell the home, move out, or pass away.

For example, a 70-year-old with a $500,000 home and no existing mortgage might access up to $275,000 through a HECM. You can receive funds as a lump sum, monthly payments, or a line of credit. Closing costs typically run $10,000–$15,000, and you pay an upfront mortgage insurance premium of 2% of the home’s appraised value ($10,000 in this case) plus annual MIP of 0.5%.

Key Facts

• Minimum age: 62 years old
• No monthly mortgage payment: You repay when you sell, move, or pass away
• Upfront MIP: 2% of the home’s appraised value
• Borrower obligations: You must maintain the home, pay property taxes, and keep homeowners insurance current

Frequently Asked Questions

Can you owe more than your home is worth with a reverse mortgage?

No. HECM reverse mortgages are non-recourse loans, meaning you or your heirs will never owe more than the home’s sale value. FHA insurance covers any shortfall if the loan balance exceeds the home’s market value at the time of repayment.

Do your heirs lose the home when you pass away?

Not necessarily. Your heirs can keep the home by paying off the reverse mortgage balance or 95% of the appraised value, whichever is less. They can also sell the home and keep any equity remaining after repaying the loan.