How does a reverse mortgage work, and is it right for me?

How does a reverse mortgage work in plain English?

It's a loan against your home's equity where you don't make a monthly mortgage payment. Instead, the interest and fees are added to the balance over time. You keep the title and keep living in the home. The loan is repaid when the last borrower moves out, sells, or passes away, usually by selling the home, and any equity left over belongs to you or your heirs.

What you do still pay: property taxes, homeowners insurance, HOA dues if you have them, and basic upkeep. That's the deal, and it's how you keep the loan in good standing.

What do other countries call it?

Same idea, different name. In the U.S., it's a loan, and we'll show you exactly how it works.

Who is a reverse mortgage a good fit for?

• Homeowners 62 or older (some proprietary programs start younger, depending on state and program) with solid equity.
• People who want to eliminate a mortgage payment and free up monthly cash flow.
• Retirees who want a safety net: a growing line of credit for health care, home repairs, or a market downturn.
• People who want to age in place instead of selling and moving.

It's usually not the right fit if you plan to move in the next few years, or if paying taxes and insurance would still be a stretch. See alternatives to a reverse mortgage.

What are my options?

	FHA-insured HECM	Jumbo (proprietary) reverse	Reverse mortgage second (HomeSafe Second)
Who backs it	FHA insurance	Private lender	Private lender
Best for	Most homes up to FHA's national limit	Higher-value homes above FHA's limit	Keeping your current first mortgage
Your first mortgage	Paid off at closing	Paid off at closing	Stays in place
Minimum age	62	62, or 55 in some states	55 (62 in Texas)
Rate	Fixed or adjustable	Varies by program	Fixed
Counseling	Required (HUD-approved counselor)	Varies by program	Independent counselor

Jumbo reverse mortgages and reverse mortgage seconds are not FHA-insured HECMs. Terms, ages, and availability vary by program and state.

How can I take the money?

With a HECM, you can mix and match:

• Line of credit that you draw from when you need it (the unused part grows over time). See how the line of credit grows.
• Monthly payments for life while you live in the home, or for a set number of years. See monthly income for life.
• Lump sum at closing (fixed-rate option).
• HECM for Purchase: use a reverse mortgage to buy your next home, often a right-sized one, with no monthly mortgage payment afterward.

What does a HECM cost?

I believe in showing every cost upfront. On an FHA-insured HECM, the main pieces are set by HUD:

• Upfront FHA mortgage insurance: 2% of the home's value (up to FHA's national limit).
• Annual FHA mortgage insurance: 0.5% of the loan balance, added to the balance over time.
• Origination fee: capped by HUD at the greater of $2,500 or 2% of the first $200,000 of home value plus 1% of the amount over $200,000, and never more than $6,000.
• Standard closing costs: appraisal, title, escrow, recording, and the counseling session.

Most of these can be paid from the loan itself rather than out of pocket. Jumbo reverse mortgages and reverse seconds don't carry FHA insurance, so their cost structure is different; I'll lay it out side by side.

What protects me and my family?

• You can't be forced out as long as you live there as your main home and keep up with taxes, insurance, and upkeep.
• Non-recourse (HECM): neither you nor your heirs will ever owe more than the home is worth.
• Heirs have options: keep the home by paying off the loan (on a HECM, for the lesser of the balance or 95% of appraised value), sell it and keep any equity, or hand the keys over.
• Eligible non-borrowing spouses can have protections to stay in the home under HECM rules.
• Independent counseling: before a HECM, you meet with a HUD-approved counselor who doesn't work for us.

Example scenario (illustrative)

A 72-year-old widow in Tampa owns a $450,000 home and still owes $90,000, with a $1,100 monthly payment squeezing her budget. A HECM pays off the $90,000, ends that monthly mortgage payment, and sets up a line of credit for home repairs and emergencies. She keeps paying her taxes and insurance, keeps her home, and her monthly budget finally breathes.

Our take

In a lot of the world, a reverse mortgage is seen as a housing pension: you spent decades building equity, and now it works for you. It isn't free money, and it isn't for everyone. I'll show you every cost, run the numbers against selling or a HELOC, and encourage you to bring your kids or a trusted advisor to the conversation.