A reverse mortgage is a loan option for homeowners age 62 and older that converts a portion of a home’s equity into cash while allowing the owner to remain in the house. Unlike a traditional mortgage, borrowers typically don’t make monthly payments; instead, the loan balance increases over time and becomes due when the home is sold, the borrower permanently leaves, or the last eligible borrower dies. This guide breaks down who qualifies, what it costs, the benefits and drawbacks, and key steps to take before committing.

Eligibility requirements for seniors

To be eligible for a reverse mortgage, the main borrower must be at least 62 years old. The property must be the borrower’s principal residence, which could be a single-family home, certain condominiums, or a manufactured home that meets program requirements. Borrowers must either own the home outright or have a low remaining mortgage balance that can be paid off with reverse mortgage proceeds.

Lenders will also assess the homeowner’s ability to keep the house in good condition and remain current on property taxes, homeowner’s insurance, and any required HOA fees. Some lenders require a financial assessment to make sure these ongoing obligations are affordable. Additionally, federal rules require counseling from a HUD-approved housing counselor before closing on most reverse mortgage products to ensure borrowers understand the implications.

Costs and fees to expect

Reverse mortgages come with several up-front and ongoing costs. These vary by lender and loan type, so comparing offers is important. Typical fees include origination charges, mortgage insurance premiums (for FHA-insured Home Equity Conversion Mortgages), closing costs such as appraisal and title services, and monthly servicing fees.

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Cost Type	Typical Range	Description
Origination Fee	$2,500 - $6,000	Fee charged by the lender for creating the loan; often based on home value and lender policies.
Mortgage Insurance Premium	2% upfront, 0.5% annually	FHA-insured HECMs charge a 2% initial MIP and an annual MIP of about 0.5% of outstanding loan balance.
Closing Costs	$1,000 - $3,000	Includes appraisal, title search, recording fees, and other settlement expenses.
Service Fees	$30 - $35 monthly	Ongoing loan servicing and administrative fees charged by some lenders.

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Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.

Benefits and limitations

A major benefit of a reverse mortgage is access to home equity without monthly mortgage payments, freeing cash for living expenses, healthcare, home repairs, or to delay drawing from other retirement assets. Borrowers retain ownership and can continue to live in the home as long as they meet loan obligations.

However, there are important limitations. Borrowers must continue to pay property taxes, homeowners insurance, and maintain the property. Failing to meet these obligations can trigger loan default. Because interest accrues and payments are not made monthly, the loan balance grows over time, which can reduce the equity left to heirs. Reverse mortgages may also affect eligibility for need-based benefits in some cases, so consulting a benefits specialist is recommended.

How the home secures the loan and repayment works

The home serves as collateral for a reverse mortgage, and the lender records a lien on the property. The loan typically becomes due in full when the last surviving borrower either sells the home, permanently moves out, or dies. At that point the loan balance (principal plus accrued interest and fees) must be repaid—usually through the sale of the property. If the sale proceeds are less than the loan balance, FHA-insured HECMs protect borrowers and their heirs by covering the shortfall, meaning neither the borrower nor heirs are responsible for more than the home’s market value.

Heirs can also choose to repay the loan and keep the home, or sell the property to settle the balance and retain any remaining equity.

Making an informed decision

A reverse mortgage can be a helpful tool for supplementing retirement income, managing unexpected costs, or providing financial flexibility, but it isn’t the right choice for everyone. Before moving forward, take these steps:

• Meet with a HUD-approved housing counselor to receive an objective explanation of program rules, costs, and alternatives.
• Compare offers from several lenders, paying attention to interest rates, mortgage insurance costs, and servicing fees.
• Consult a financial advisor and, if relevant, a tax professional to understand how the loan will interact with your overall retirement plan and taxes.
• Discuss your plans with family members or potential heirs so they understand how the reverse mortgage may affect inheritance.

Final considerations

Reverse mortgages offer a way to unlock home equity while remaining in your house, but they come with ongoing responsibilities and costs that can affect your financial legacy. Careful research, counseling, and comparison-shopping are essential to determine whether this option aligns with your long-term housing and retirement goals. If you decide it’s appropriate, choose a reputable lender and make sure you fully understand the terms before signing.