A reverse mortgage allows seniors to access cash from the equity they've amassed in their home.
While a traditional home equity loan requires ongoing monthly payments, a reverse mortgage allows you defer repayment until you leave the home.
But reverse mortgages can also come with high interest rates and unique risks to homeowners.
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What is a reverse mortgage?
A reverse mortgage allows homeowners to get a loan based on the value of their house. Unlike a home equity loan, you don't owe any money until you no longer live in the house.
The principal and any interest are due in full when the borrower (or eligible spouse) sells the property, stops using it as their primary residence or passes away.
You're also required to maintain the home and continue paying property tax and homeowners insurance, or the lender can foreclose.
How does a reverse mortgage work?
While payment isn't due immediately, interest on a reverse mortgage compounds monthly.
A reverse mortgage can have a fixed or variable rate, usually depending on whether the funds are received in a lump sum (fixed) or as a line of credit or monthly installments (variable).
Reverse mortgages are non-recourse, meaning the borrower can never owe more than the value of their home when the loan is being repaid. If the property's value has declined, the difference is covered by insurance.
The most popular kind of reverse mortgages, home equity conversion mortgages (HECMs) are insured by the FHA and come with restrictions; You must be 62 and, in 2026, the maximum loan amount is $1,249,125.
Eligibility for a reverse mortgage depends primarily on your age and the amount of equity you have in your home. For an FHA-backed home equity conversion mortgage (HECM):
- You must be at least 62 years old
- You must have considerable equity in the home or own it outright
- You can't borrow more than $1,249,125 (2026 limit).
- The property must be your primary residence
- You must maintain upkeep on the home
- You must continue paying taxes and insurance
- You meet with a HUD-approved counselor
- You can't be behind on any federal debt, like student loans or tax payments
The property must also meet other FHA standards, like being free of safety hazards. It can be a multi-family home of up to four units, as long as one unit is owner-occupied.
There are also proprietary loans available starting at age 55 that don't have specific universal loan caps.
A reverse mortgage with a tenure payments structure provides equal, guaranteed monthly income for as long as a homeowner stays in the house —even if that income exceeds the home's value.
As a non-recourse loan, repayment is limited to the home's dollar value, and any difference must be absorbed by the lender or HUD.
How do you repay a reverse mortgage?
Payment is due when the house is sold or the last borrower moves out or dies. At that point, the property can be sold with the proceeds used to repay the principal, interest and any fees.
- If you sell the house for more than the loan balance, you can keep the difference.
- If you sell the home for less than the loan balance but equal to its appraised value, the proceeds will go towards paying off the loan and the remaining debt will be repaid with your mortgage insurance.
- If the reverse mortgage comes due after your death, your heirs can sell the home for the full loan balance — or at least 95% of its appraised value, if the amount owed is more than what the property is worth.
Besides selling the home, you can close out a reverse mortgage with a lump sum or a series of cash payments, by refinancing it into a HELOC or other home equity product, or by transferring ownership to the lender through a deed in lieu of foreclosure.
Your heirs will typically have 30 days to buy, sell or turn the home over to the lender, according to the Consumer Financial Protection Bureau, although that deadline can be extended to up to six months.
Types of reverse mortgage
There are several types of reverse mortgages, which can be backed by the federal government or other sources.
Home equity conversion mortgages
Insured by the Federal Housing Administration, HECMS are the most common reverse mortgages. They're reserved for homeowners 62 or older and, in 2026, the maximum loan amount is $1,249,125, regardless of your home's worth.
Borrowers can use a HECM for any reason, including buying another property. A popular strategy with homeowners looking to relocate or downsize, these HECMs for Purchase come with the same restrictions as traditional HECMs.
However, the new property must be your principal residence within 60 days of closing.
Proprietary reverse mortgages
Private lenders also issue reverse mortgages that aren't insured by the FHA. They tend to have higher interest rates, but they're usually available to borrowers as young as 55 and can be as large as $4 million.
Finance of America offers both HECMs and HomeSafe Standard, a proprietary reverse mortgage that doesn't come with origination fees or mortgage insurance.
Finance of America
Loan types
HECM, HomeSafe Standard, HomeSafe Second
Minimum equity
50%
Maximum loan
Up to $4 million (HomeSafe), $50,000 and $1 million (HomeSafe Second),
Age limit
62 for HECM, 55 for HomeSafe Second, 60 for EquityAvail, 55 for HomeSafe (60 in Massachusetts, New York and Washington, 62 in North Carolina and Texas),
Availability
Finance of America is a division of Finance of America Reverse which is licensed nationwide. In CA, NM, and OK, it does business as Finance of America Reverse. In NY, it does business as FAReverse, LLC
Pros
- Jumbo reverse mortgages are available up to $4 million
- Doesn't require mortgage insurance premiums or origination fees on HomeSafe
Cons
- No online application
- Not transparent about rates or fees
Another solid option for an HECM is Longbridge Financial, which has lower rates than many competitors and doesn't charge a monthly service fee.
Longbridge Financial Reverse Mortgage
Annual Percentage Rate (APR)
Apply for personalized rates
Types of reverse mortgages
HECM reverse, HECM for purchase, Platinum Mortgage (proprietary loan with larger limits and a low age requirement of over 55)
Minimum equity
No specific minimum equity listed, but generally 50%
Pros
- Proprietary loan allows those as young as 55 to access a reverse mortgage, lower than the 62 that HECM reverse mortgages require.
- Accredited by the BBB with an A+ rating
- Available in all 50 states
- Provides a "scenario calculator," on website that can help estimate the cost of a reverse mortgage
Cons
- Can't complete application online
Single-purpose reverse mortgage
Nonprofits and local government agencies may also support reverse mortgages, but the funds must be used for an approved reason — such as paying property taxes or funding a home repair project. Available to owners 62 and older, single-purpose reverse mortgages typically offer lower interest rates but are harder to come by.
| Home Equity Conversion Mortgage | Proprietary | Single-purpose | |
|---|---|---|---|
| Age | 62 | 55 | 62 |
| Maximum loan limit | $1,149,825 in 2024 | Typically $4 million | Depends on lender |
| Backed by | FHA | Private lender | Non-profit or local government agency |
| Usage restrictions | None | None | Determined by lender |
| Best for | Homeowners who need a loan without monthly payments | Owners with high-value homes who want to unlock more cash | Owners with a specific expense, like repairs or property taxes |
Reverse mortgage refinancing
Just like any other home loan, you can refinance a reverse mortgage if interest rates have dropped, if your home's value has increased or if you want to add someone to the loan agreement.
Since HECM loan limits increase each year, homeowners may want to refinance to get more cash. The amount you are approved for depends on your age, your life expectancy, your home's value and the interest rate being offered.
You can also refinance a reverse mortgage into a traditional mortgage, but then your credit history and income will be considered.
Risks of a reverse mortgage
Because reverse mortgages don't require monthly payments, some homeowners believe there's no risk. But as with any mortgage, there is the possibility of foreclosure if you don't meet the terms of your loan.
From a financial standpoint, interest rates on reverse mortgages tend to be higher than conventional home loans. The interest is usually compounded, so your debt can grow quickly.
Failure to keep up with general maintenance or pay your property taxes or homeowners' insurance can put you in default and allow the lender to pursue foreclosure. Not residing in the house for at least six months out of the year (even to go to a rehabilitation center) is also grounds for default.
Even if you stay in the house for the rest of your life and meet your other obligations, you could be leaving your heirs with a financial and legal nightmare. if you don't make arrangements, they'll have as few as 30 days to sell the house, buy it themselves or turn it over to the lender.
Pros and cons of a reverse mortgage
- No monthly payments
- No credit score or income requirements
- Can help senior homeowners manage expenses in retirement
- Pays off an existing mortgage
- Funds aren't subject to income tax
- Much more home equity is required
- Higher interest rates and compounded interest
- Can impact eligibility for Medicaid or Supplemental Security Income
- Risk of foreclosure if you fail to pay taxes or insurance
- Can make it harder to pass on the home to heirs
Reverse mortgage alternatives
A reverse mortgage isn't the only option for pulling equity from your home.
Home equity loan
A home equity loan is a second mortgage that typically has a fixed interest rate. Since it uses your home as collateral, it usually offers a lower interest rate than a personal loan or a credit card.
Read: Best home equity loan lenders
Home equity line of credit
A HELOC is similar to a home equity loan but rather than a lump sum, it's offered as a secured line of credit that allows you to borrow money as you need it during a specified draw period.
In this phase, you usually only have to make interest payments. Once the draw period expires, you'll start repaying the principal and interest over a period of 10 to 20 years.
Home equity sharing
Home equity sharing allows an investor to give a homeowner cash in exchange for a portion of their home's future value. Repayment of the principal, plus a portion of the home's appreciation, is due when the home is sold or at the end of your agreed-upon term (anywhere from 10 to 30 years).
Homeowners with credit scores as low as 500 can qualify, but you typically must have at least 25% equity.
Cash-out refinance
A cash-out refinance mortgage replaces your existing mortgage with a larger one, ideally at a better rate. The proceeds are used to pay off your initial mortgage and you receive the remaining funds in cash. The borrower repays the loan in monthly installments over a term of between 10 and 30 years.
Reverse mortgage FAQs
What is the downside to a reverse mortgage?
A reverse mortgage comes with higher borrower costs and you'll still need to maintain the home and pay property taxes while you live there. Having a reverse mortgage can also make settling your estate more complicated for your heirs.
When do you pay back a reverse mortgage?
A reverse mortgage must be paid off when the borrower sells the house, passes away or no longer uses it as primary residence. You may pay have to repay it sooner if you don't pay your property taxes or homeowners insurance, or let the home fall into disrepair
Can you sell a home with a reverse mortgage?
Yes, you can sell a home with a reverse mortgage. But while some mortgages allow the borrower to transfer responsibility to someone else — a seller to a buyer, for example — reverse mortgages are not assumable. You would have to use the proceeds from the home sale to repay the reverse mortgage.
How do you pay off a reverse mortgage?
Payment is due when the house is sold or the last borrower dies. At that point, the home can be sold and the proceeds used to pay the mortgage. The loan can also be repaid with cash or by transferring the deed to the lender.
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