A reverse mortgage — most commonly a Home Equity Conversion Mortgage (HECM), insured by the FHA — lets homeowners age 62 and older convert home equity into cash without selling the home or taking on a monthly mortgage payment. Instead of you paying the lender, the lender pays you, and the loan balance grows over time as interest accrues.
Who it's best for
Homeowners 62+ who own their home outright or have substantial equity, plan to stay in the home long-term, and want additional income or a financial cushion without selling or taking on a monthly payment obligation. It's a poor fit for anyone planning to move within a few years, or anyone hoping to leave the home free and clear to heirs without them needing to address the loan balance.
How it actually works
- No monthly mortgage payment is required — but you must keep paying property taxes, homeowners insurance, and home maintenance, or the loan can become due.
- You choose how to receive funds: a lump sum, a line of credit, monthly payments, or a combination.
- The loan balance grows over time as interest and fees accrue, since you're not making payments against it.
- Repayment is triggered when the last surviving borrower moves out permanently, sells the home, or passes away — typically repaid by selling the home.
What it means for heirs
Heirs aren't personally liable for the debt. To keep the home, they must repay the loan balance or 95% of the home's appraised value, whichever is less; otherwise they can sell the home or let the lender sell it. If leaving the home to family free of any loan is a priority, a reverse mortgage works against that goal.
Reverse mortgages require HUD-approved counseling before closing by law. This is general information, not a recommendation — talk to a HUD-approved counselor and your family before pursuing one.