Key Takeaways
- A reverse mortgage may be a good idea if you’re 55 or older, plan to stay in your home long-term, and want to access funds to support retirement or cover expenses.
- It may help improve cash flow, pay higher interest debt, or fund home updates that make aging in place more comfortable—but it’s not the right fit for everyone.
- Before deciding, review the costs, responsibilities, and long-term effects. Consider speaking with a financial advisor or using a reverse mortgage calculator to explore your options.
For many people, their home is their greatest asset. But the idea of using that equity through a reverse mortgage often comes with some hesitation. You may have heard stories that make you uneasy, or maybe you wonder whether a reverse mortgage is really the right fit.
Here’s the truth: a reverse mortgage is not a one-size-fits-all solution. It’s a financial tool designed to help eligible homeowners access the wealth tied up in their homes without selling or taking on additional monthly payments. When used thoughtfully, it can make aging in place easier, improve financial flexibility, and create new options for retirement. The borrower must live in the home, keep it maintained, and stay current on property taxes, insurance, and other housing costs. Otherwise, the loan will need to be repaid.
This guide will help you understand when a reverse mortgage might be a good idea, who is potentially eligible, and how it might (or might not) fit into your long-term goals.
What are the eligibility requirements for a reverse mortgage?
Before deciding whether a reverse mortgage is a good idea, it’s important to know if it’s even an option. To be eligible for a reverse mortgage, at a minimum you must own a home and have substantial equity. It’s also important to note that eligibility requirements vary based on location, and whether you choose a Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA), or a proprietary reverse mortgage that is not government-insured.
Other key reverse mortgage eligibility requirements include:
- Meet the age requirement: For a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, the minimum age is 62. Proprietary reverse mortgages may have different age requirements based on lender guidelines.
- Have significant equity in your home: You’ll generally need at least 50% equity, though the exact amount can vary depending on your home’s value, loan type, and lender criteria.
- Live in the home as your primary residence: You cannot use a reverse mortgage on a property you do not live in or only live in part-time.
- Be current on any federal debt: Borrowers cannot be delinquent on federal obligations, such as student loans or tax liens.
- Have the financial means to meet ongoing obligations: You must be able to meet all loan obligations, including living in the property, continuing to pay property taxes, fees, homeowners’ insurance, and maintaining the home, otherwise the loan will need to be repaid.
- Attend a counseling session with a HUD-approved counselor as required: HECM and some proprietary reverse mortgage loans also require a counseling session with a HUD-approved counselor prior to application.
→ Learn more about reverse mortgage eligibility requirements in our complete guide.
Understanding reverse mortgages: How do they work?
Before deciding if a reverse mortgage is a good idea, it helps to understand how the loan actually works. A reverse mortgage allows eligible homeowners to convert a portion of their home equity into cash without selling their home or taking on additional monthly mortgage payments.
While no monthly mortgage payments are required, borrowers must continue to pay property taxes, homeowners’ insurance, and home maintenance costs, and comply with all loan terms. Failure to meet these obligations can result in the loan becoming due and payable.
Unlike a traditional mortgage, where you make payments to the lender, a reverse mortgage is a loan that grows over time as interest and fees are added. The loan becomes due when the homeowner moves out, sells the home, fails to meet loan terms, or passes away. At that point, the proceeds from the sale of the home are used to repay the loan balance, and any remaining equity belongs to the homeowner or their heirs.
Reverse mortgage loan options
The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). This federal backing adds key consumer protections, including mandatory reverse mortgage counseling, limits on borrowing amounts, and safeguards for eligible non borrowing spouses.
Some private lenders also offer other types of reverse mortgages, which may allow for higher loan amounts on high-value homes but are not FHA-insured.
Home Equity Conversion Mortgages (HECM) are FHA-insured and regulated by HUD. Proprietary products such as HomeSafe are not government-insured and may have different age and equity requirements. HomeSafe products are only available in certain states.
How you can receive funds from your reverse mortgage
Loan disbursement methods vary based on the type of reverse mortgage you have. For a HECM reverse mortgage, borrowers can choose how to receive their loan proceeds:
- Lump sum: A one-time payout or disbursement at closing.
- Monthly: Fixed payout or disbursement for a set period or for as long as you live in the home.
- Line of credit: Funds you can access as needed, which can grow over time.
- Combination: A mix of the above options, depending on your financial needs.
Each payout or disbursement option affects your loan balance differently. For instance, taking a lump sum increases the balance immediately, while a line of credit only accrues interest on the amount you use.
Reverse mortgage costs to consider
Reverse mortgages come with upfront costs, similar to a traditional loan. These include:
- Origination fees charged by the lender
- Closing costs, such as title insurance
- Appraisal fees, which are paid out of pocket
- Mortgage insurance premiums for FHA-insured HECMs
- Out of pocket costs for required HUD counseling
Most of these costs could be financed into the loan, but doing so increases the initial loan balance.
→Learn more about reverse mortgage fees.
Is a reverse mortgage a good idea for seniors?
In the Federal Fiscal Year of 2025, more than 28,000 homeowners took out HECM reverse mortgage—showing it’s a valuable financial tool for some individuals. A reverse mortgage may be a good idea when it supports your long-term goals, especially if you plan to stay in your home and want more financial flexibility in retirement. Keep in mind that borrowers must meet all loan requirements, including living in the home, maintaining it, and paying property taxes, insurance, and other housing costs. Otherwise, the loan will need to be repaid.
Generally, a reverse mortgage makes sense if you:
- Want to use home equity to improve cash flow: A reverse mortgage allows eligible homeowners to access a portion of their home equity, which can be used to help pay for everyday living expenses, cover healthcare needs, pay off higher-interest debt, or supplement other retirement income sources. The funds can offer increased flexibility in retirement, but must be used responsibly.
- Can meet ongoing homeownership costs: You’ll still need to live in the home, pay property taxes, insurance, fees, HOA dues, and meet all the loan terms or the loan will need to be repaid. In some cases, loan proceeds may be set aside at closing (known as a Life Expectancy Set-Aside or LESA) to cover these property charges, based on a financial assessment. Failure to meet these obligations can result in the loan becoming due and payable.
- Plan to live in your home long-term: A reverse mortgage works best for homeowners who want to stay in their homes. If you expect to move soon, the upfront costs may outweigh the advantages.
A reverse mortgage loan is designed for homeowners who plan to remain in their home long-term. To retain ownership and avoid default, borrowers must continue to live in the home as their primary residence, pay all property taxes and homeowners insurance, and keep the home in good condition. Failure to meet these obligations can result in the loan becoming due and payable
When a reverse mortgage may make sense for you
Every homeowner’s situation is different, but in the right circumstances, a reverse mortgage could be a valuable part of a retirement strategy. For many, it’s less about “borrowing money” and more about unlocking the equity they’ve already earned—to manage expenses, handle unexpected costs, or simply enjoy retirement with less financial stress.
Below are several situations where a reverse mortgage might be a good idea.
1. Support retirement funds
If your savings or Social Security benefits aren’t quite enough, tapping into home equity could help you manage expenses.
“Some consumers may have believed that Social Security income would be enough to live off,” Michelle White, mortgage expert at The CE Shop, told CBS. “They did, however, keep their homes, hoping to pass them on to their children. The equity they built can supplement any other income they receive, making their senior years more affordable.”
→ See how much you might be eligible for with our reverse mortgage calculator.
2. Making renovations to age-in-place
Many people want to stay in the homes they love as long as possible. In fact, 94% of surveyed older adults say they want to age in place. If you can meet all loan obligations, including living in the home, paying homeowners’ insurance, fees, and taxes, a reverse mortgage can provide funds for accessibility like walk-in showers, ramps, or safer flooring, helping you live independently longer. If loan obligations are not met, the loan will need to be repaid.
3. Reducing higher-interest debt
If you’re managing credit card balances or other higher-interest debt, using proceeds from a reverse mortgage to reduce higher-interest debt may simplify your finances and support your retirement lifestyle. This strategy may improve financial flexibility without requiring you to sell your home or take on new payment obligations.
While there are no required monthly mortgage payments, borrowers must continue to pay property taxes, homeowners’ insurance, and home maintenance costs, and comply with all loan terms. Failure to meet these obligations will result in the loan becoming due and payable.
4. Make the most of your retirement
For some retirees, home equity helps support lifestyle goals. Whether it is travel, hobbies, or spending time with family, reverse mortgage proceeds could provide financial flexibility that allows you to focus on things that matter most to you.
5. Helping family now
Some homeowners choose to share their home’s value during their lifetime—using proceeds to help pay for college tuition, down payments, or other needs. This approach lets you help your kids and grandkids now, rather than leaving an inheritance you won’t get to see them benefit from.
6. Covering healthcare or long-term care costs
Healthcare expenses can add up quickly in retirement. According to Fidelity, the average retired individual at age 65 can expect to spend around $172,000 on healthcare in retirement. Reverse mortgage proceeds may help cover out-of-pocket costs, home care, or medical bills not fully covered by insurance.
→Explore Six smart ways to use reverse mortgage proceeds for practical tips.
When doesn’t it make sense to get a reverse mortgage?
A reverse mortgage may be a smart option for some homeowners, but it isn’t right for everyone. In certain situations, the costs, risks, or timing may outweigh the potential advantages. Here are a few situations when a reverse mortgage may not be a good idea.
- You plan to move: If you expect to sell your home or relocate within a few years, a reverse mortgage probably doesn’t make sense. These loans have upfront costs that are better spread out over the long term. For homeowners planning to move, selling the home or using a reverse mortgage for purchase might be a better fit.
- You have limited financial flexibility to maintain the home: Borrowers must pay taxes, insurance, and maintain the home. If you’re unsure whether you can reliably cover these expenses, a financial assessment will help determine eligibility. Some borrowers may be required to have a Life Expectancy Set Aside (LESA) to assist with these charges, however it reduces the overall disbursement. For some, options like downsizing or public programs may be more suitable.
- Leaving your home to heirs is your top priority: Because a reverse mortgage draws from your home’s equity, it reduces the amount your heirs may inherit. While your family can keep the home by repaying the loan balance, those who want to preserve full equity for their heirs might prefer other solutions.
- You have serious health concerns: Reverse mortgages are designed for homeowners who plan to remain in their homes long-term. If you move into a care facility for 12 months or longer, the loan typically becomes due since the home is no longer your primary residence.
- You’re only seeking short-term funds: If your goal is to cover a short-term expense, such as a temporary medical bill or repair, the upfront costs of a reverse mortgage might outweigh the advantages. Other forms of financing—like a home equity loan or line of credit—may be more cost-effective.
- You haven’t explored all alternatives: Reverse mortgages can be valuable, but they’re not the only option. Selling your home, downsizing, or refinancing could align better with your goals. During the required counseling session with a HUD-approved advisor, you’ll review these alternatives.
To learn more, please visit the CFPB’s “Reverse Mortgage: A Discussion Guide.”
Is a reverse mortgage right for you?
A reverse mortgage can be a powerful tool for the right homeowner. It offers a way to turn home equity into usable funds, helping you age in place, improve cash flow, or cover major expenses without taking on monthly mortgage payments.
While no monthly mortgage payments are required, borrowers must continue to pay property taxes, homeowners’ insurance, and home maintenance costs, and comply with all loan terms.
Failure to meet these obligations can result in the loan becoming due and payable.
Keep in mind, reverse mortgage balances increase over time due to accumulated interest and fees, which can significantly reduce the homeowner’s equity. These loans also come with responsibilities and long-term implications, which is why it’s essential to evaluate your full financial picture before deciding if a reverse mortgage is right for you.
A reverse mortgage may be the right fit if you:
- Are 55 or older and plan to stay in your home long-term
- Have substantial home equity
- Want to continue living in your home without selling or relocating
- Can continue to pay property taxes, insurance, fees, and maintenance costs
For others, different strategies—like downsizing, refinancing, or other types of loans—might better support your goals. Talking with a trusted financial advisor can help you see the full picture and choose the path that works best for you.
To learn more, please visit the CFPB’s “Reverse Mortgage: A Discussion Guide”.
Disclaimer
This article is for informational purposes only and is not intended as financial, legal, tax, or investment advice. These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.
Reverse mortgage loans are subject to eligibility requirements and terms, including the requirement that the borrower live in the home as their primary residence, maintain the property, and stay current on property taxes, homeowners’ insurance, and any applicable fees. Failure to meet these obligations may result in the loan becoming due and payable.
Reverse mortgages are non-recourse loans, meaning the borrower or their heirs will not owe more than the home’s value when sold to repay the loan. Not all reverse mortgage products are FHA-insured. Home Equity Conversion Mortgages (HECMs) are insured by the Federal Housing Administration (FHA) and require counseling with a HUD-approved reverse mortgage counselor.
Proprietary reverse mortgage products (such as HomeSafe®) are not government-insured and may have different requirements and terms. HomeSafe® products are only available in certain states.
Interest accrues over time, and loan balances grow as fees and interest are added. This may reduce the amount of home equity available to you or your heirs. Before proceeding, consult a financial advisor and review all available options.
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