Reverse mortgage pros and cons

Quick Answer: A reverse mortgage provides access to home equity with no required monthly mortgage payments, as long as loan terms are met. Potential drawbacks include upfront costs, interest that increases the loan balance over time, and reduced equity available to heirs.

For generations, Social Security has served as a foundation of income for citizens 65+. But as the program evolves and long-term funding pressures mount, Americans are increasingly looking beyond Social Security to support their retirement plans.

For homeowners, that often means considering how home equity fits into the picture—and whether a reverse mortgage makes sense.

Reverse mortgages, particularly federally insured home equity conversion mortgages (HECMs), operate under established guidelines and include certain borrower safeguards and protections, subject to program guidelines and applicable state requirements. Still, they aren’t right for everyone. Understanding both the potential advantages and the trade-offs can help you decide whether this option aligns with your goals.

These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.

To learn more, please visit the CFPB’s “Reverse Mortgage: A Discussion Guide.”

In this article, we’ll lay out reverse mortgage pros and cons in plain English to make it easier to determine whether this option makes sense for you.

What are the pros of a reverse mortgage?

For many homeowners 62 and older, home equity represents a significant part of their overall wealth. A reverse mortgage may offer means to access that equity while continuing to live in the home they love.

A key advantage is that eligible homeowners can convert home equity into cash without selling the property or taking on monthly mortgage payments. Instead, they receive funds based on available equity and loan terms.

The most common type of reverse mortgage is the home equity conversion mortgage (HECM), which is insured by the Federal Housing Administration (FHA). It follows specific guidelines designed to protect borrowers, including required counseling and borrowing limits.

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. It’s also important to note that loan options vary by state.

→ Learn more: What is a reverse mortgage and how does it work?

These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.

Let’s take a closer look at the potential advantages offered by reverse mortgage loans.

Do reverse mortgages require monthly mortgage payments?

Unlike traditional mortgages, a reverse mortgage does not require monthly principal and interest payments. Instead of paying down the balance each month, interest and applicable fees are added to the loan over time, which means the amount owed gradually increases. This structure could provide cash flow flexibility for retirees who want to reduce monthly expenses while continuing to live in their homes. However, borrowers must still pay property taxes, homeowners insurance, maintain the home, and comply with loan terms. The loan typically becomes due and payable when you sell the home, move out permanently, pass away, or don’t comply with loan terms. At that point, it is usually repaid through the sale of the home or with other available funds.

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

How can a reverse mortgage provide greater financial flexibility in retirement?

Retirement offers the potential for more freedom after years of work schedules and vacation limits. A reverse mortgage could help cover essentials like day-to-day needs or healthcare expenses. It can also fund more discretionary pursuits, like a kitchen remodel, bucket list trip, adult child’s first home purchase, or grandchild’s education. Some homeowners even use the funds to finally turn passion projects into a reality.

A reverse mortgage is not a one-size-fits-all solution for retirement, but it could be part of a broader strategy.

Can borrowers access home equity and still remain in the home?

A reverse mortgage allows you to tap into your home’s equity while continuing to live there—without selling or giving up ownership. The title remains in your name, which can be especially important for homeowners who want to age in place, maintain community ties, and/or preserve the comfort of a familiar space. Instead of downsizing or relocating to access cash, you can unlock funds while staying in the home you love. However, the property must remain your primary residence. And, to avoid default, you must stay current on property taxes, homeowners insurance, maintenance, and all loan terms.

The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms.

Are reverse mortgage proceeds taxable?

There’s good news every April 15, too. The money you receive from a reverse mortgage is generally not considered taxable income because it is loan proceeds, not earned income. However, it’s always wise to consult a tax professional for guidance based on your individual circumstances.

Not tax advice. Consult a tax professional.

What is non-recourse protection, and does it apply to all reverse mortgages?

With a federally insured home equity conversion mortgage (HECM), you don’t need to worry about owing more than your home’s value when the loan becomes due. HECMs are non-recourse loans, meaning repayment is limited to the home’s market value at settlement. If the balance exceeds the home’s value, neither you nor your heirs are responsible for the difference; any shortfall is covered by federal mortgage insurance, typically through the sale of the property. If heirs wish to keep the home, they may repay the lesser of the full loan balance or 95% of the current appraised value. This protection applies only to HECMs—proprietary reverse mortgages may have different terms.

A non-recourse reverse mortgage transaction limits the homeowner’s liability to the proceeds of the sale of the home (or any lesser amount specified in the credit obligation).

Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold.

Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.

What payout options are available with a reverse mortgage?

Depending on the type of loan, reverse mortgage borrowers have several ways to receive their funds, which provides flexibility to address different financial goals and retirement needs. Rather than requiring a single disbursement structure, a reverse mortgage can be tailored through multiple payout options. Some homeowners prefer a lump sum for a large expense, while others choose steady monthly payments to supplement income. A line of credit offers on-demand access to funds as needed, and combination plans allow borrowers to blend approaches. This range of options makes it possible to align the loan structure with both immediate expenses and long-term financial planning.

Payout option	Best for homeowners who…
Lump sum	…need a larger amount upfront for a major expense, such as paying off an existing mortgage or completing a home renovation.
Monthly payments	…prefer steady, predictable income to supplement retirement cash flow over time.
Line of credit	…want flexible access to funds and prefer to draw money only as needed.
Combination	…want to customize their approach by blending immediate funds with ongoing access or monthly income.

Can you still leave your home to heirs after taking out a reverse mortgage?

If you’ve long dreamed of leaving your home to your children or if you’ve had a property that has been in your family for generations, you may be wondering if a reverse mortgage could interfere with your plans.

There’s good news: A reverse mortgage does not prevent you from leaving your home to your heirs. When the loan becomes due and payable, your heirs can refinance the reverse mortgage balance into a new loan, use their own funds to satisfy the balance, or purchase the home for 95% of its appraised value if the loan balance exceeds the home’s market value. (They can also sell the property to repay the loan.)

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What are the cons of a reverse mortgage?

As the saying goes, there is no such thing as a free lunch. While reverse mortgages can provide meaningful financial flexibility, they also come with important trade-offs that homeowners should carefully evaluate. The loan balance increases over time as interest accrues, which can reduce the equity available to you or your heirs. There are upfront costs to consider, and borrowers must continue meeting property-related obligations such as taxes, insurance, and maintenance. In addition, certain loan features and protections vary depending on the type of reverse mortgage. Understanding these factors is essential to determining whether a reverse mortgage aligns with your long-term financial goals.

Let’s break them down, one by one:

Do all reverse mortgages offer the same protections?

As a quick refresher, there are three main types of reverse mortgages:

• Home equity conversion mortgages (HECMs): Federally insured reverse mortgages issued by private lenders and insured by the Federal Housing Administration (FHA), subject to Housing and Urban Development (HUD) program guidelines and borrower protections.
• Proprietary (jumbo) reverse mortgages: Private loans offered by lenders, often designed for higher-value homes that exceed FHA lending limits.
• Single-purpose reverse mortgages: Loans typically offered by state or local government agencies or nonprofits and limited to a specific use, such as home repairs or property taxes.

Federal insurance protections—including non-recourse limits that prevent borrowers or heirs from owing more than the home’s value—apply only to HECMs. Other reverse mortgage products may have different structures, costs, and borrower safeguards, so it’s important to review the terms carefully.

A non-recourse reverse mortgage transaction limits the homeowner’s liability to the proceeds of the sale of the home (or any lesser amount specified in the credit obligation).

Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold.

Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.

These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.

Does a reverse mortgage reduce home equity over time?

With a traditional mortgage, monthly payments gradually reduce the loan balance and build equity over time. A reverse mortgage works differently. If you don’t make payments, interest and fees are added to the loan balance each month, increasing what’s owed rather than decreasing it. Over time, this compounding effect can significantly reduce the equity remaining in your home. For homeowners who plan to leave the property to heirs—or who may need to tap remaining equity later for long-term care or other expenses—this trade-off deserves careful consideration.

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

What upfront costs and fees come with a reverse mortgage?

Reverse mortgages include both upfront costs and ongoing borrowing expenses that you should carefully consider. These may include an origination fee paid to the lender for processing the loan, standard closing costs such as appraisal and title services, and a required counseling fee for HECM borrowers. In addition, interest accrues on the outstanding loan balance over time. Many of these costs can be financed into the loan rather than paid out of pocket, but doing so increases the starting balance and reduces available equity. Depending on your financial goals and how long you remain in the home, these fees may affect the overall cost-effectiveness of the loan.

→ Learn more: Reverse mortgage fees and costs explained.

Are homeowners still responsible for taxes, insurance, and maintenance?

While precise terms vary by loan type and product, a reverse mortgage requires you to live in the property as your primary residence and keep up with home-related expenses like property taxes, homeowners insurance, and home maintenance.

Failure to meet these obligations or other loan terms could result in the loan becoming due and payable, which may lead to foreclosure.

What happens to a reverse mortgage when the borrower moves out or passes away?

The loan typically becomes due and payable after the last borrower sells the home, moves out permanently, passes away, or doesn’t comply with loan terms. Heirs generally have options to repay the balance and keep the home, often by refinancing or using other funds. If they choose to sell, HUD guidelines for HECMs typically allow up to six months to complete the sale, with possible extensions if certain requirements are met. If heirs are unable or unwilling to repay the balance, selling the home may be necessary.

Will reverse mortgage funds cover all retirement needs?

Reverse mortgages are not necessarily a silver bullet for retirement expenses. The amount you can borrow depends on factors, like:

• Your age
• The home’s appraised value
• Current interest rates
• The specific loan option selected

That means the reverse mortgage funds available may help, but not fully cover all long-term financial needs. A reverse mortgage is often considered part of a broader retirement strategy rather than a standalone solution.

Can a reverse mortgage affect eligibility for needs-based programs?

Reverse mortgage proceeds do not affect eligibility for Social Security retirement benefits or Medicare because they are considered loan advances, not income. However, if you keep unspent funds in a bank account, they may count as assets for needs-based programs such as Supplemental Security Income (SSI), Medicaid, or the Supplemental Nutrition Assistance Program (SNAP).

If those funds cause you to exceed program asset limits, you could lose eligibility for those benefits. Before moving forward, it’s wise to speak with a qualified benefits advisor to understand how a reverse mortgage may impact your situation.

How do reverse mortgages affect non-borrowing spouses?

If you or your spouse meets the age requirement but the other does not—or if one spouse is not listed as a borrower—additional planning may be necessary.

HECM guidelines include protections for eligible non-borrowing spouses that may allow them to remain in the home after the borrowing spouse passes away, provided certain conditions are met. These typically include being married to the borrower at the time of closing, living in the home as a primary residence, and continuing to meet all loan obligations, such as paying property taxes, homeowners insurance, and maintaining the property. However, during this period, the non-borrowing spouse would not be able to access additional loan proceeds.

Because these rules can affect long-term housing and financial plans, couples should carefully review their options and consider speaking with a qualified advisor before moving forward.

→See our guide for more on what a non-borrowing spouse needs to know about reverse mortgages.

Here’s a side-by-side comparison of reverse mortgage pros and cons:

Feature	Potential reverse mortgage advantages	Other important considerations
Payment structure	No required monthly mortgage payments.*	Interest and fees are added to the balance over time, increasing the amount owed and reducing equity.
Access to home equity	You can convert a portion of your home equity into cash without selling your home.	The amount available depends on age, home value, interest rates, and loan terms—and may not meet all retirement income needs.
Homeownership status	You retain ownership and can continue living in the home as your primary residence.	You must remain in the home and stay current on taxes, insurance, maintenance, and all loan terms to avoid default.
Payout flexibility	Depending on the product, you can choose from multiple payout options, including a lump sum, monthly payments, a line of credit, or a combination.	Choosing a payout structure that doesn’t align with your needs could limit flexibility later.
HECM protections	FHA insurance provides non-recourse protection, meaning you or your heirs will not owe more than the home’s value (HECMs only). Required counseling adds another layer of protection.**	These federal protections apply only to HECMs. Proprietary loans may have different structures and safeguards.
Tax implications	Funds are generally not considered taxable income because they are loan proceeds.***	Unspent funds may affect eligibility for certain needs-based programs like Medicaid or Supplemental Security Income (SSI).
Repayment and heirs	Heirs can keep the home by refinancing, using other funds, or (for HECMs) purchasing it for 95% of the current appraised value if the loan balance exceeds the home’s market value.	If heirs are unable or unwilling to repay the balance, selling the home may be necessary.
Costs and fees	Many costs can be financed into the loan rather than paid out of pocket upfront.	Origination fees, closing costs, mortgage insurance (for HECMs), and servicing fees increase the loan balance.
Prepayment flexibility (HECMs)	There is no prepayment penalty—you can repay part or all of the loan at any time.	Because of upfront costs, reverse mortgages are generally better suited for longer-term homeowners.
Complexity and planning	Can be part of a broader retirement income strategy.	Reverse mortgages are more complex than traditional mortgages and require careful review and planning.

*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

**A non-recourse reverse mortgage transaction limits the homeowner’s liability to the proceeds of the sale of the home (or any lesser amount specified in the credit obligation).

Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold.

Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.

***Not tax advice. Consult a tax professional.

When should you consider a reverse mortgage?

A reverse mortgage may be worth considering if you’re looking to access your home equity while continuing to live in your home. This financial tool can be especially useful when it aligns with your broader retirement strategy and long-term goals. It generally works best for homeowners who have built substantial equity, plan to remain in the property for several years, and can comfortably manage ongoing housing-related expenses. When used thoughtfully, a reverse mortgage can provide added flexibility—whether to supplement income, create a financial cushion, or support specific objectives. You may want to explore this option if you meet the following criteria:

• Are at or near eligibility age: Most FHA-insured HECMs require you to be at least 62 (although some proprietary products may allow younger borrowers).
• Have significant home equity: You’ve built up substantial equity in your home and want to convert a portion of it into usable funds.
• Plan to remain in your home long term: Reverse mortgages generally work best for homeowners who expect to stay in the property for several years.
• Can comfortably manage ongoing housing costs: You’re able to continue paying property taxes, homeowners insurance, maintenance, and other property-related expenses.
• Want to increase retirement flexibility: You’re looking to supplement retirement income, create a financial cushion, or incorporate home equity into your broader retirement strategy.

Not sure where to start?

Our reverse mortgage specialists will be happy to help you.

Speak to a loan specialist

When should you not consider a reverse mortgage?  

A reverse mortgage isn’t right for everyone. In some situations, another financial option may make more sense. You may want to reconsider if you:

• Don’t meet the basic requirements: Most products require you to be at least 62, have sufficient equity, and live in the home as your primary residence.
• May struggle with ongoing costs: You must continue paying property taxes and homeowners insurance, maintaining the home, and meeting all loan requirements. If managing these obligations may be difficult, this loan could add pressure.
• Expect to move soon: Because of upfront costs, reverse mortgages generally work best for long-term homeowners.
• Want to leave your home debt-free to heirs: Since the balance grows over time, less equity may remain when the loan becomes due.

What are alternatives to a reverse mortgage? 

If you determine a reverse mortgage isn’t the best fit for your situation, there are other options worth considering. The right choice depends on your financial goals, income, credit profile, cash flow needs, and long-term housing plans. Some alternatives involve borrowing against your home and taking on new monthly payments, while others focus on reducing housing costs or unlocking equity without additional debt. Each approach comes with its own qualification requirements, risks, and trade-offs. Comparing these strategies carefully can help you select the solution that best aligns with your retirement priorities.

These include:

• Home equity line of credit (HELOC): A revolving line of credit that allows you to borrow against your home’s value and pay interest on the amount you use during the draw period. HELOCs often have lower upfront costs, but they require monthly payments and qualification based on income and credit.
• Home equity loan: A lump-sum loan repaid in fixed monthly installments. It offers predictable payments but adds a new monthly obligation.
• Cash-out refinance: A new mortgage that replaces your existing loan with a larger one, allowing you to receive the difference in cash. This may offer competitive rates, but it also requires monthly payments and qualification based on income and credit.
• Downsizing: Selling your home and buying a less expensive property can unlock equity without taking on new debt—and may lower taxes, insurance, and maintenance costs.
• Reducing housing expenses: Options such as renting out part of your home or exploring local tax relief programs may help lower costs without borrowing.

Each option comes with its own costs and trade-offs. Comparing them carefully can help you choose the approach that best supports your retirement plans.

Finance of America does not currently offer home equity loans.

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How should you weigh the pros and cons of a reverse mortgage?

A reverse mortgage may be worth considering if you’re seeking additional cash flow in retirement and expect to remain in your home for several years. Because of upfront costs and the way interest accrues over time, it generally works best as a long-term strategy rather than a short-term solution. Instead of serving as a quick financial fix, a reverse mortgage tends to be most effective when it fits into a broader retirement plan. Before moving forward, it’s important to evaluate how this option aligns with your financial goals and long-term priorities.

As you evaluate your options, consider:

• How long you plan to stay in your home:Because of upfront costs, this option generally makes more sense if you expect to stay in your home for several years.
• How you would use the funds:Whether supplementing retirement income, creating a financial cushion, or covering a specific goal, having a clear plan matters.
• Your ability to meet ongoing obligations: You’ll still be responsible for property taxes, homeowners insurance, and maintaining the home.
• Your legacy goals: Since the loan balance grows over time, it may reduce the amount of home equity available to heirs.

Taking time to weigh both the advantages and trade-offs can help you make a confident, informed decision. If you’re considering how a reverse mortgage might fit into your retirement strategy, understanding how much equity you may be eligible to access is a practical first step.

See how much you may be able to access with our reverse mortgage calculator and decide whether a conversation with a specialist makes sense for you.

Frequently Asked Questions

What are the minimum requirements for a reverse mortgage?

To be eligible for a reverse mortgage, you must be 62 or older (or 55+ for some loan options), own your home outright or have a low remaining mortgage balance, and live in the home as your primary residence. You must also continue to pay property taxes, homeowners insurance, maintenance costs, and comply with all loan terms.

How do you get a reverse mortgage?

You begin the application process by speaking to lenders to review eligibility and loan options. For a HECM, independent counseling with a HUD-approved counselor is required. The process also includes an appraisal, underwriting, and closing, similar to a traditional mortgage.

These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.

How many years do you have to pay back a reverse mortgage?

There is no fixed repayment term for a reverse mortgage. The loan becomes due and payable when the last borrower sells the home, moves out permanently, passes away, or doesn’t comply with the loan terms. It is typically repaid through the sale of the home or with other funds.

Will I still own my home?

Yes. With a reverse mortgage, you retain ownership of your home, and the title remains in your name. However, you must continue to comply with all terms to keep the loan in good standing.

Can I lose my home with a reverse mortgage?

Yes, in some circumstances. You can remain in your home as long as it is your primary residence and you meet all loan obligations. Failure to pay taxes and homeowners insurance or to maintain the home may result in the loan becoming due and payable, which could lead to foreclosure.

How much can I borrow?

The amount available to borrow with a reverse mortgage depends on your age, your home’s appraised value, current interest rates, and the specific loan option. Generally, older borrowers and higher-value homes are associated with greater access to equity.

Does a reverse mortgage affect Social Security or Medicare?

No, reverse mortgage proceeds generally do not affect Social Security or Medicare because they are loan proceeds, not income. However, unspent funds held in a bank account could impact eligibility for certain needs-based programs, such as Medicaid or Supplemental Security Income (SSI).

Do the pros outweigh the cons of a reverse mortgage?

The answer to this question depends on your goals, financial situation, and long-term plans. For some homeowners, the added cash flow and flexibility can make a reverse mortgage a helpful part of a broader retirement strategy. For others, the growing loan balance, upfront costs, and impact on home equity may outweigh the advantages. Taking time to review both sides—and speaking with a trusted financial advisor—can help you decide what makes sense for you.