How it actually works, step by step
- 01
It replaces the payment, not the ownership
The loan pays off your existing mortgage and converts remaining equity to cash. There's no monthly payment from then on. Interest accrues on the balance, which settles on a sale, a permanent move-out, or death.
- 02
You choose the payout
A lump sum at closing, a line of credit, monthly draws, or a combination. A lump sum suits paying off the mortgage plus one large expense; a line suits a safety net; monthly draws suit supplementing retirement income.
- 03
Qualification
Age 62 or older, a primary residence, and an existing mortgage balance under roughly 50% of the home's value. There's no minimum request, and requests go up to $4 million, with equity setting what is actually available.
- 04
Counseling comes first
Federal rules require a session with an independent HUD-approved counselor — a third party, not lender staff. Family is encouraged to attend.
- 05
Two obligations remain
Property taxes and homeowners insurance stay current, and the home stays your primary residence.
- 06
How it ends
The loan settles when the last borrower leaves, usually through a sale. Heirs keep the remaining equity, or walk away owing nothing if the balance exceeds the value.
How much can you get?
Proceeds depend on your age, the home's value, and FHA's age-based factors — it isn't a simple loan-to-value percentage. The estimator on the reverse mortgage page takes three inputs (home value, age, and mortgage balance) and returns a conservative figure, net of program costs, without asking for contact details.
The honest pros and cons
The alternatives are a home equity agreement (no monthly payments, no age requirement) or a HELOC. All three are available here.
- No monthly mortgage payment for as long as you live in the home
- The loan balance grows over time as interest accrues
- Cash from equity without selling or moving
- Less equity left for heirs when the loan settles
- Works at any credit score; equity qualifies, not FICO
- Upfront costs are real; they're reviewed line by line before you commit
- You keep title; heirs are protected by the non-recourse rule
- Taxes, insurance, and residency obligations must stay current; falling behind puts the home at risk
- Mandatory independent counseling before anything closes
- It's the wrong tool for a short stay; if you're moving within a few years, other options usually beat it
Myths vs. facts
- "The bank owns my home." False. You stay on title; the lender holds a lien, like any mortgage.
- "My kids inherit the debt." False. It's non-recourse. Heirs either settle the balance and keep the home, or sell it and keep the remaining equity.
- "I can be thrown out." The loan comes due only if you leave, sell, or stop meeting the obligations: taxes, insurance, and residency.
- "It's free money." False. It's a loan; interest accrues and the balance grows. It trades future equity for present cash flow.
How to spot a reverse mortgage scam
- Pressures you for a quick signature — a legitimate HECM cannot skip the counseling period
- Discourages family involvement or counseling
- Arrives attached to something else: a contractor pushing it to fund repairs, or an "advisor" steering the proceeds into an investment or annuity they sell
- Charges upfront fees just for information
- Quotes proceeds without knowing your age, home value, and balance
Walk away from anyone who:
Seven questions to ask any reverse mortgage lender
- 01
Do I remain on title?
The only acceptable answer is yes.
- 02
What happens to my spouse if I pass first?
They should explain the spouse protections in detail.
- 03
What must I keep paying?
Taxes, insurance, and upkeep.
- 04
What do my heirs owe if the balance exceeds the value?
Nothing. It's non-recourse.
- 05
Can I see the estimate before giving contact information?
Yes.
- 06
Will you show me alternatives?
A HELOC and a home equity agreement should both be on the table.
- 07
Who does my counseling?
An independent HUD-approved counselor of your choosing.
Talk it over as a family
About half the people researching a reverse mortgage are the homeowner's adult children. A family call is available before anything is signed.
Good to know.
Who is it right for — and wrong for?+
Right for homeowners 62 and older who are staying put, owe less than roughly half the home's value, and can keep taxes and insurance current. Wrong for anyone moving within a few years, anyone who can't sustain taxes and insurance, and often those maximizing an inheritance.
What does it cost?+
There are real upfront costs plus accruing interest. They're quoted for your file and reviewed line by line before you commit.
Is counseling required?+
Yes, by federal rule: an independent HUD-approved counselor, before any HECM closes.
Can I qualify with bad credit?+
Yes, at any score. A financial assessment still reviews your ability to keep taxes and insurance current.
Reverse mortgage, HELOC, or home equity agreement?+
A HELOC is a credit line with monthly payments, 620+ credit, at any age. A home equity agreement has no monthly payments and accepts credit from the 500s, in exchange for a share of future value, with no age requirement. A reverse mortgage has no monthly payments at any credit score, for 62 and older on a primary residence with roughly half the value paid off.
How long does it take to close?+
A few weeks, covering counseling, the appraisal, and underwriting.