Reverse Mortgage
A reverse mortgage is a loan for homeowners age 62 or older that lets you convert home equity into cash without making monthly mortgage payments. Instead of you paying the lender, the lender pays you. The loan balance grows over time and is repaid when you sell the home, move out, or die.
The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM), insured by FHA. To qualify, you must be 62+, own your home outright or have significant equity, live in the home as your primary residence, and keep up with property taxes, insurance, and maintenance. You still own the home—the lender has a lien, not ownership.
You can receive funds as a lump sum, monthly payments, a line of credit, or a combination. The amount available depends on your age, home value, and current interest rates. In 2024, the HECM lending limit is $1,149,825. A 75-year-old with a $500,000 home might receive about $250,000–$300,000 in available equity.
Reverse mortgages have a reputation for complexity and can be expensive (upfront MIP is 2% of the home's value, up to $23,000, plus ongoing costs). Heirs who want to keep the home must pay off the loan balance. A non-borrowing spouse can remain in the home after the borrowing spouse dies under updated HECM rules. HUD requires all prospective HECM borrowers to complete independent counseling before applying—a valuable safeguard.
Key Takeaway
A reverse mortgage is a loan for homeowners age 62 or older that lets you convert home equity into cash without making monthly mortgage payments. Instead of you paying the lender, the lender pays you. The loan balance grows over time and is repaid when you sell the home, move out, or die.
Related Terms
Frequently Asked Questions
No monthly principal or interest payments are required. However, you must continue paying property taxes, homeowners insurance, HOA dues, and maintain the home. Failing to do so can trigger loan repayment.
Your heirs can pay off the loan balance (at the lesser of the balance or 95% of appraised value for HECM loans) and keep the home, or sell the home to pay off the loan. Any remaining equity goes to your estate.
It depends on your situation. It can be valuable for cash-poor, equity-rich retirees who want to age in place. However, it reduces the estate you leave to heirs and is expensive. Always complete HUD-required counseling and consult a financial advisor.
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