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The truth about reverse mortgages: What borrowers need to know
In this article:
- Truth 1: A reverse mortgage is a type of home equity loan—not free money
- Truth 2: There are different types of reverse mortgages with different eligibility requirements
- Truth 3: You still own your home
- Truth 4: There are costs and fees involved
- Truth 5: You have multiple ways to access reverse mortgage funds
- Truth 6: Your heirs have options to keep your home
- Truth 7: Reverse mortgages include certain borrower safeguards
- Truth 8: Your reverse mortgage lender can't kick you out of your home for no reason
- Is a reverse mortgage loan right for you?
- Frequently asked questions
Key points
A reverse mortgage may allow eligible older homeowners to access a portion of their home equity without making monthly mortgage payments. However, it is still a loan that must be repaid.
Borrowers retain ownership of their home but must continue to meet obligations such as living in the property as their primary residence, paying property taxes and homeowners insurance, and maintaining the home.
Reverse mortgages offer multiple payout options and give heirs choices on how to handle the home when the loan becomes due.
Ask ten people what they think about reverse mortgages, and you’ll probably hear ten different answers: Some positive, some skeptical, and a few based more on myth than fact.
It’s understandable. Confusion and outdated information about reverse mortgages often make it hard to know what’s true. This guide breaks down the truth about reverse mortgages, including how they work, clears up a few common misconceptions, and highlights safeguards potential borrowers should know.
Truth 1: A reverse mortgage is a type of home equity loan—not free money
Reverse mortgages are not a blank check with no obligations. Here’s the straightforward truth:
A reverse mortgage is a type of loan that may allow older homeowners to draw from their home equity through tax-free loan proceeds. It is not income, and it’s not free.
Because there are no required monthly mortgage payments, fees and interest that accrue are added to the outstanding balance, which increases over time. To keep the loan in good standing, you’ll need to continue paying costs related to owning a home, including maintenance fees, taxes, and insurance.
At the end of the loan—generally when you pass away, move, sell the home, or no longer meet the loan terms—you or your estate must repay the balance, often by selling the home, though there are other options.
→ Learn more: How do you repay a reverse mortgage?
Truth 2: There are different types of reverse mortgages with different eligibility requirements
When considering a reverse mortgage, it’s important to know that there isn’t just one type. There are actually three types of reverse mortgages, each with its own rules and eligibility requirements. The two most common types are:
Home Equity Conversion Mortgage (HECM)
Most reverse mortgages are HECM loans, which are insured by the Federal Housing Administration (FHA) and are available to homeowners aged 62 and older. With a HECM, you’ll pay an initial and ongoing mortgage insurance premium (MIP), which helps protect both you and the lender. These loans also come with federal consumer protections and require a session with a counselor certified by the U.S. Department of Housing and Urban Development (HUD).
Proprietary reverse mortgages
The other option is a proprietary reverse mortgage, a category of reverse mortgages offered by private lenders. Depending on the loan and lender, these may be available to homeowners as young as 55 and often have higher loan limits than HECMs, potentially allowing some borrowers to access more of their home equity.
Proprietary reverse mortgages can be a good fit if your home’s value exceeds the FHA limit of $1,249,125 figure in 2026 or if you want more flexible loan terms. However, it’s important to carefully review the loan agreement, ongoing costs, and any mortgage insurance requirements.
Truth 3: You still own your home
Another persistent myth about reverse mortgages is the idea that the lender takes ownership of your home—but that isn’t accurate. When you take out a reverse mortgage, you remain the owner of the home, and your name stays on the title as long as you meet all loan obligations.
The loan process involves signing a mortgage agreement, just like with other home loans. Mortgage companies originate and service reverse mortgages, guiding borrowers through the loan process and ensuring regulatory compliance. The lender simply has a lien on the property, similar to any regular mortgage.
That is not to say that you can never lose your home—a reverse mortgage is a loan that uses your home to secure the loan. However, foreclosure is the final step in a much longer process, and you’ll have several options to resolve the loan before it reaches that point.
Truth 4: There are costs and fees involved
A reverse mortgage is a loan, and like any loan, it comes with upfront costs and ongoing expenses. Understanding these fees can help you set realistic expectations and compare a reverse mortgage to other options, such as a home equity loan or Home Equity Line of Credit (HELOC).
Here are the primary costs associated with a reverse mortgage:
- Closing costs
- HUD-certified counseling session costs
- Loan origination fees
- HECM mortgage insurance premiums (MIPs)
- Interest on borrowed funds
These costs can vary depending on whether you choose a HECM or a proprietary reverse mortgage offered by a private lender. If high fees are a concern, make sure to compare the costs and terms of all your options before choosing a loan.
Truth 5: You have multiple ways to access reverse mortgage funds
A reverse mortgage loan offers several disbursement options, giving borrowers the flexibility to use their home equity in ways that align with their goals. Here are the most common ways borrowers may choose to draw funds:
- Lump sum: A one-time disbursement, often used for larger or unexpected expenses, such as paying off an existing mortgage or completing home repairs.
- Monthly disbursements: Steady, predictable amounts that may help with monthly expenses or supplement retirement income over a set period or for as long as you live in the home (depending on the loan type).
- Line of credit: Funds are available to use as needed. With HECMs, the unused portion of the line of credit may grow over time, offering additional financial flexibility.
- Combination options: Some borrowers choose a mix of monthly disbursements and a line of credit.
Whether the goal is to fund home improvements, manage medical expenses, support a family member, or simply create financial breathing room, these payout options allow borrowers to choose how they access their home equity.
To learn more, please visit the CFPB’s Reverse Mortgage: A Discussion Guide
Truth 6: Your heirs have options to keep your home
A common worry among homeowners considering a reverse mortgage is what will happen to their home later—and whether their family members, including heirs and spouses, can still inherit the home.
The good news is that heirs have several clear options, and they are never personally responsible for repaying the loan balance out of pocket. However, it’s important to understand that spouses not listed as borrowers, called non-borrowing spouses (NBS), may face eviction or be required to repay the loan to stay in the home after the borrower’s death if they fail to meet the loan’s terms. A 2021 update added protections, including expanded options for NBSs to remain in the home after a borrower’s death.
When the last surviving borrower or the eligible non-borrowing spouse moves, sells the home, passes away, or fails to meet loan obligations, the reverse mortgage becomes due and payable. At that point, heirs may:
- Sell the home and use the proceeds to repay the loan
- Repay the outstanding balance and keep the home (either from their own funds, the estate, or with a traditional loan, such as a mortgage)
- Walk away from the property
Because HECM reverse mortgages are non-recourse loans, if the loan balance exceeds the home’s value, heirs are never required to pay more than the home’s current market value.1
→ Learn more: Are heirs responsible for reverse mortgage debt?
Truth 7: Reverse mortgages include certain borrower safeguards
Reverse mortgages come with requirements and safeguards designed to protect borrowers, but the specific protections vary by type of reverse mortgage.
HECMs are subject to FHA requirements and include certain safeguards, including:
- Independent counseling: Before obtaining a HECM, borrowers must complete counseling with a HUD-certified housing counselor. Reverse mortgage counseling covers how the loan works, costs, borrower responsibilities, alternatives, and when the loan becomes due.
- Non-borrowing spouse protections: An eligible non-borrowing spouse may be able to remain in the home after the borrowing spouse dies without immediately repaying the HECM, provided certain requirements are met.
- Annual lending limits: FHA sets a maximum claim amount for HECMs each year, which helps determine how much a borrower may be eligible to access.
- FHA insurance: HECMs are non-recourse loans.1 Generally, borrowers or their estates will not owe more than the home is worth when the loan is repaid through the home’s sale.
Proprietary reverse mortgages work differently. Private lenders offer these loans, which are not part of the FHA HECM program. They may have different borrowing limits, age requirements, costs, and protections for borrowers or spouses. Requirements also vary by product and applicable state and federal laws.
Whether you’re considering a HECM or a proprietary reverse mortgage, review the specific loan terms and protections to understand your rights and responsibilities before borrowing.
→ Learn more: Protecting your home from mortgage scams
Truth 8: Your reverse mortgage lender can’t kick you out of your home for no reason
One of the most pervasive myths about reverse mortgages is that the lender can kick you out of your home and sell it—leaving you or your spouse homeless.
The reality is much different, and we’ve covered some of the reasons why already. First, the lender doesn’t own your home; you do. They have a lien against your home, but as long as you maintain the home, continue paying property taxes and homeowners insurance, and meet the other loan requirements, you can stay in your home.
Second, there are protections in place for eligible non-borrowing spouses. In most cases, as long as your spouse is eligible and you were married at the time of the loan, they can generally stay in the home after your death, provided they continue to meet the loan terms. If foreclosure occurs, it is only after a structured process where you have multiple options to repay the loan.
Is a reverse mortgage loan right for you?
A reverse mortgage could be a valuable tool if it aligns with your goals, financial situation, and timeline. But it’s equally important to acknowledge when another approach may serve you better.
When considering a reverse mortgage, think about how the loan may affect your long-term retirement plans, how long you intend to remain in the home, and whether you expect to use your home equity for future expenses, such as home repairs, medical costs, or a move to assisted living or a nursing home. A HUD-certified counselor or financial advisor may help you evaluate the options and choose the path that best supports your retirement plans.
If you’re interested in seeing how much of your home equity you may be able to access, start with our reverse mortgage calculator. It’s a simple way to start learning about your options.
Frequently asked questions
What happens if you outlive a reverse mortgage?
You cannot outlive a reverse mortgage. The loan generally does not become due based on age or how long you have had it. It typically remains in place as long as you live in the home and continue to meet the loan requirements.
→ Learn more: Can you outlive a reverse mortgage?
Can you get a reverse mortgage if you still owe money on your home?
Yes, you may be able to get a reverse mortgage if you still have a mortgage. The existing mortgage must generally be paid off at closing using proceeds from the reverse mortgage or other funds. Some other options, such as a second-lien reverse mortgage, may allow you to keep your original mortgage in place.
Can you pay off a reverse mortgage early?
Yes. You can generally pay off a reverse mortgage at any time. You may also be able to make voluntary payments toward the balance even though monthly mortgage payments are not required.
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.
Can you sell a house if you have a reverse mortgage?
Yes. You can sell your home while you have a reverse mortgage. When the home is sold, the reverse mortgage balance becomes due, and any remaining equity after the loan is repaid belongs to you.
Can you refinance a reverse mortgage?
Yes, it may be possible to refinance a reverse mortgage, provided you meet the requirements for the new loan. Whether refinancing makes sense depends on factors such as your available equity, interest rates, loan costs, and the benefits the new loan would provide.
→ Learn more: Can you refinance a reverse mortgage?
Does a reverse mortgage affect Social Security or Medicare?
Generally, reverse mortgage proceeds do not affect Social Security or Medicare benefits because the money you receive is considered loan proceeds, not income. However, proceeds may affect eligibility for certain needs-based government benefits, such as Medicaid or Supplemental Security Income (SSI), depending on how the funds are received and held.
What is the downside of a reverse mortgage?
A reverse mortgage has costs and increases the amount you owe over time as interest and fees are added to the loan balance. It can also reduce the home equity available to you or your heirs. Borrowers must also continue to meet loan requirements, including paying property taxes and homeowners insurance and maintaining the home.
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 the Web Content Manager at Finance of America and a journalist with more than 10 years of experience whose work has appeared in MoneyWise, MSN, Yahoo! Finance, and The Motley Fool. She specializes in making complex financial topics accessible and is passionate about advancing financial literacy.
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.
