Explore by category
Are reverse mortgages good or bad? Get the facts
In this article:
Quick answer: Reverse mortgages aren’t inherently good or bad. Whether one makes sense depends on a homeowner’s circumstances, goals, responsibilities, and plans for the home, as well as the loan’s costs and terms. Their mixed reputation reflects both the product’s history and considerations borrowers still need to weigh today.
Key Points
Some concerns about reverse mortgages stem from earlier versions of the product, before borrower safeguards and regulatory requirements were put in place.
Borrowers today must complete counseling and a financial assessment, and limits apply to how much they can access during the first year.
Although reverse mortgages have changed over time, homeowners still need to weigh the costs, ongoing responsibilities, and potential effect on their home equity before deciding whether to get one.
Reverse mortgages have been around for decades, but their reputation hasn’t always been positive. If you’ve heard conflicting opinions—or warnings to stay away—you may be wondering if reverse mortgages are good or bad.
To answer that question, it helps to understand where their reputation came from and what has changed. In this guide, we’ll look at the history behind some common concerns, the safeguards that apply today, how reverse mortgages actually work, and the factors homeowners may want to consider when deciding whether one makes sense for you.
How did reverse mortgages get a bad reputation?
The first known reverse mortgage dates back to 1961, when a lender in Maine created a loan to help a widow remain in her home after her husband’s death. Other reverse mortgage products emerged over the following decades.
Congress authorized the Home Equity Conversion Mortgage (HECM) program in 1987, and the first HECM insured by the Federal Housing Administration (FHA) was issued in 1989. As reverse mortgages became more widely available, several issues emerged that influenced both the product’s reputation and the rules governing HECMs:
Gaps in oversight put older homeowners at risk
Earlier reverse mortgage borrowers didn’t have the safeguards that apply to HECMs today. Over time, regulators introduced requirements intended to reduce certain risks and strengthen consumer safeguards, including measures like reverse mortgage counseling, financial assessments, and protections for certain non-borrowing spouses.
Borrowers could access too much too quickly
Initially, borrowers could take a large portion of their available proceeds at once. That left fewer resources available later as interest and fees accrued on the amount borrowed.
The U.S. Department of Housing and Urban Development (HUD) subsequently introduced limits on how much HECM borrowers may access during the first 12 months. The amount available during this period may be higher when funds are needed to cover some required expenses, such as paying off an existing mortgage and certain closing costs.
Some homeowners didn’t fully understand the loan terms
Reverse mortgages can be complex, and borrowers need to understand how the loan balance grows, which expenses remain their responsibility, and when the loan may become due.
HECM borrowers must now complete counseling with a HUD-certified agency before obtaining the loan. Counseling covers how the loan works, borrower responsibilities, costs, alternatives, and circumstances that can cause the loan to become due.
→ Learn more: Reverse mortgage counseling: What to expect and why it’s required
How do reverse mortgages work today?
A reverse mortgage loan may allow eligible homeowners to access a portion of their home equity without selling the home. The loan balance increases as the homeowner accesses funds and interest accrues, along with applicable fees.
The loan generally becomes due after a maturity event, such as when the last borrower dies, sells the home, or no longer occupies it as a principal residence. However, certain safeguards may apply to an eligible non-borrowing spouse. Failure to meet loan obligations may also cause the loan to become due.
The most common reverse mortgage is the FHA-insured HECM, which is available to eligible homeowners age 62 and older. Proprietary reverse mortgages may have different eligibility requirements.
To learn more, please visit the CFPB’s “Reverse Mortgages: A Discussion Guide.”
What protections are in place for reverse mortgage borrowers?
HECMs now include multiple requirements and safeguards for homeowners.
| Safeguard | How it helps |
| HUD-approved counseling | Prospective HECM borrowers must complete counseling before obtaining the loan, which provides an opportunity to learn about costs, responsibilities, how the loan works, and alternatives. |
| Financial assessment | Lenders evaluate certain aspects of a borrower’s finances to determine their ability to meet ongoing obligations such as property taxes and homeowners insurance. In some cases, funds may be set aside to help pay certain property charges. |
| First-year disbursement limits | HECM rules generally limit how much borrowers may access during the first 12 months, although exceptions may apply. |
| Non-recourse protection1 | HECMs are non-recourse loans, which generally means the borrower or their estate won’t owe more than the home is worth when the loan is repaid.1 |
| Right of rescission | For HECMs subject to rescission requirements, borrowers have 3 business days after closing to cancel the loan. HECMs used to purchase a home generally don’t have the same federal rescission right. |
What are the eligibility requirements for a reverse mortgage?
HECM borrowers must be at least 62 years old. Some proprietary reverse mortgages may be available to younger homeowners, depending on the product and state.
Other HECM requirements involve the home, existing mortgage debt, occupancy, financial assessment, and HUD-approved counseling.
→ Take a closer look: Reverse mortgage requirements: Are you eligible?
How much can you borrow with a reverse mortgage?
For a HECM, the amount available depends on factors such as the age of the youngest borrower or eligible non-borrowing spouse, as well as home value, interest rates, and the HECM lending limit, which is $1,249,125 in 2026. If you still owe money on your existing mortgage or need to use the loan to cover certain required expenses, such as closing costs, you’ll have less money available for other uses.
Because these factors vary, there isn’t a single percentage of home equity that every borrower can access.
→ Find out more: How much can I get from a reverse mortgage?
What fees and costs are associated with a reverse mortgage?
Reverse mortgages can include both upfront and ongoing costs. Upfront costs may include origination charges, appraisal fees, other closing costs, and, for HECMs, an upfront FHA mortgage insurance premium. Interest and other charges may accrue over the life of the loan.
Some costs can be financed into the loan rather than paid out of pocket, reducing the proceeds otherwise available and increasing the loan balance.
→ Take a closer look: Reverse mortgage costs and fees explained
What are the payout options for reverse mortgage funds?
Depending on the loan and its terms, borrowers may be able to choose a lump-sum payment, line of credit, monthly payments, or a combination of disbursement methods. Not every option is available with every loan or interest-rate structure.
→ Explore further: Understanding reverse mortgage payout options
How can you use funds from a reverse mortgage?
Reverse mortgage proceeds may generally be used for a variety of purposes, subject to the loan terms. Examples include living expenses, home repairs or modifications, medical expenses, and other financial needs. Because the proceeds are borrowed funds rather than income, they generally aren’t considered taxable income.
Why aren’t reverse mortgages simply good or bad?
Consider Mike, 70, who has lived in the same home for decades and has no plans to leave. His mortgage is nearly paid off, but rising everyday expenses are putting more pressure on his retirement income. With much of his wealth tied up in his home, Mike is wondering whether a reverse mortgage could give him more financial flexibility without having to move.
But accessing that equity comes with tradeoffs. Mike would need to weigh the loan’s costs, his ability to continue meeting property-related obligations, and the impact of using his equity on what remains available for future needs or his heirs.
These tradeoffs will look different for every homeowner. For a closer look at how other homeowners have approached the decision, read stories from real Finance of America customers about their experiences.
Here are some factors to think about:
| A reverse mortgage may be worth considering if… | A reverse mortgage may not fit your plans if… |
| You plan to remain in your home for the foreseeable future. | You expect to move or sell the home relatively soon. |
| You want to access home equity without selling your home. | You don’t need or want to use your home equity. |
| You can continue meeting property-related obligations, including taxes, insurance, and maintenance. | Ongoing property expenses may be difficult to maintain. |
| You understand that the loan balance grows over time and are comfortable using some of your home equity. | Preserving as much home equity as possible for future needs or heirs is a high priority. |
| The costs and terms make sense compared with other options available to you. | Another borrowing or financial option better fits your needs. |
For a deeper look at the tradeoffs, explore the pros and cons of a reverse mortgage and whether a reverse mortgage may be a good idea.
So, are reverse mortgages good or bad?
Ultimately, the answer depends on what you need from the loan and how it fits into your long-term plans. Today’s HECMs offer safeguards that earlier reverse mortgages did not, but homeowners still need to weigh the costs, ongoing responsibilities, and potential effect on their home equity.
Taking the time to understand these tradeoffs—and comparing a reverse mortgage with other options like a home equity loan or home equity line of credit (HELOC)—can help you decide which approach best fits your needs. If you’re exploring what a reverse mortgage could look like, our reverse mortgage calculator can help you estimate how much home equity you may be able to access.
→ Worried about losing your home? See our guide: Who owns the house in a reverse mortgage?
Finance of America does not currently offer home equity loans.
Frequently asked questions about reverse mortgages
Are reverse mortgages a scam?
No. Legitimate reverse mortgages are regulated loan products, and HECMs are FHA-insured and subject to federal requirements. However, scammers are out there, so be cautious of pressure to take out a loan, spend the proceeds a certain way, or sign documents you don’t understand.
Are reverse mortgages safe and regulated?
Reverse mortgages are regulated loan products, and HECMs are FHA-insured and include safeguards such as required counseling, financial assessments, first-year disbursement limits, and non-recourse protection.¹ However, borrowers must continue to meet the loan terms, including applicable property tax, insurance, occupancy, and maintenance requirements.
How do I know if a reverse mortgage is right for me?
Housing counseling can help you evaluate the decision, even if your loan doesn’t require it. A HUD-certified housing counselor can explain how the loan works, its financial implications and alternatives, and your responsibilities so you can make an informed choice.
Can I pay off a reverse mortgage early if my situation changes?
Yes. A reverse mortgage can generally be repaid at any time. Contact your loan servicer to determine the current payoff amount and repayment instructions.
→ Learn more: How to get out of a reverse mortgage if your circumstances change
Can a reverse mortgage impact my eligibility for government benefits?
It can. Reverse mortgage proceeds generally don’t affect Social Security retirement benefits or Medicare, but retaining proceeds may affect eligibility for certain needs-based programs, such as Supplemental Security Income (SSI) or Medicaid. If you receive needs-based benefits, contact the agency that administers them to ask how reverse mortgage proceeds could affect your eligibility.
What happens if my home value drops after I get a reverse mortgage?
A decline in home value doesn’t automatically make a HECM due, so you can generally remain in the home as long as you continue to meet the loan requirements. And because HECMs are non-recourse loans, you or your estate generally won’t have to make up the difference if the loan balance ends up being more than the home is worth.1
Could a reverse mortgage leave me with too little home equity later?
It’s possible. The loan balance grows as you receive proceeds and interest and fees accrue. If that balance increases faster than your home’s value, your remaining equity can shrink, leaving less available for future needs or heirs.
Can my spouse stay in the home if I die first?
Possibly. A co-borrowing spouse can generally remain in the home as long as they continue to meet the loan requirements. An eligible non-borrowing spouse may also be able to remain in the home if they meet certain requirements.
→ Get the details: A non-borrowing spouse’s guide to reverse mortgage
1Non-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.
About the author
is a Senior Web Content Writer at Finance of America and a journalist with more than 20 years of experience specializing in business, and technology. Her work has been published in The Wall Street Journal, The Financial Times, and numerous other leading outlets.
Disclaimer
This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For tax advice, please consult a tax professional. For more information about whether a reverse mortgage fits into your retirement strategy, you should consult your financial advisor.
