What is a Reverse Mortgage and Who Qualifies?

August 19, 2025
By Mike Olson

couple sitting on couch at home reviewing papers and with laptop open

A reverse mortgage is a special type of home loan that allows older homeowners to convert part of their home’s equity into cash without having to sell the house or make monthly mortgage payments. Unlike a traditional mortgage where you pay the lender each month, with a reverse mortgage the lender pays you – hence the name “reverse.” Typically, these loans are available to seniors age 62 or older. They can provide a source of income in retirement while enabling you to “age in place” (stay in your home), but they also come with important requirements, costs, and considerations. In this guide, we’ll explain how reverse mortgages work, who can qualify, the different types (focusing on the popular HECM program), as well as the pros, cons, and timing considerations to help you decide if this financial product is right for you.

How Do Reverse Mortgages Work?

A reverse mortgage allows you to borrow against the equity in your home. You receive money from the lender – either as a lump sum, monthly payments, a line of credit, or a combination of these – and generally do not have to repay the loan or make monthly loan payments as long as you live in the home as your primary residence. The loan is eventually repaid when you sell the home, move out permanently, or pass away, typically through the sale of the house. At that time, the proceeds from selling the home go to pay off the loan balance, and any remaining equity belongs to you or your heirs.

Several key features make reverse mortgages unique:

No Monthly Mortgage Payments: You don’t have to make monthly principal or interest payments to the lender, which can help your cash flow in retirement. However, you remain responsible for property expenses like property taxes, homeowners insurance, HOA dues, and maintenance costs. Failing to keep up with these can lead to default or foreclosure, so it’s critical to budget for them even without a regular mortgage payment.
Interest Accrues Over Time: Since you aren’t paying down the loan, interest and fees are added to the loan balance each month, causing the balance to grow over time. The longer you have the reverse mortgage, the more your loan balance will increase (and home equity may decrease) due to accumulated interest.
You Retain Home Ownership: You remain the owner of your home with a reverse mortgage; the lender places a lien on the property (just as with any mortgage) as security. You cannot be forced to sell or move as long as you fulfill the loan obligations (such as paying taxes/insurance and maintaining the home). The loan does not have to be repaid until you leave the home or default on the terms.
Loan Repayment and Heirs: When a reverse mortgage ends, the loan is typically repaid by selling the home. If the sale of the home exceeds the loan balance, any extra value (equity) goes to you or your heirs. If the sale does not cover the full loan balance, HECM reverse mortgages are non-recourse, meaning neither you nor your heirs are personally liable for the difference – you’ll never owe more than the home is worth when sold. The FHA insurance on HECM loans covers any shortfall so the lender is paid back. Heirs usually have the option to keep the home (by paying off or refinancing the loan at 95% of its appraised value) or to sell the home and use the proceeds to pay off the reverse mortgage debt. This gives your estate some flexibility, but it’s important to discuss plans with family ahead of time.

In summary, a reverse mortgage can turn a portion of your home equity into accessible funds while allowing you to stay in your home. Importantly, the debt will increase over time (as interest adds up) and your home equity will decrease unless housing prices rise significantly. Now let’s look at the types of reverse mortgages available, with a focus on the most common and government-insured option.

Types of Reverse Mortgages (HECM vs. Proprietary vs. Single-Purpose)

Not all reverse mortgages are the same. There are three main types:

Home Equity Conversion Mortgage (HECM): This is by far the most popular reverse mortgage option in the U.S. – HECMs account for roughly 95% of all reverse mortgages. HECMs are insured by the Federal Housing Administration (FHA) and offered by FHA-approved lenders under HUD’s guidelines. Because of the federal insurance, HECMs come with certain consumer protections. For example, HECM borrowers (or their heirs) will never owe more than the home’s value at loan payoff, and if the lender goes out of business, the government insurance ensures borrowers still receive any promised loan funds. To get a HECM, you must be at least 62 years old (more on eligibility below) and you are required to attend counseling with a HUD-certified reverse mortgage counselor who will explain the costs, implications, and alternatives. HECMs also have a maximum loan limit (the highest home value that can be considered for lending purposes) – as of 2025 this lending limit is $1,209,750. In practice, this means if your home is worth more than about $1.2 million, a HECM will still only base your available equity on that capped amount. HECM funds can be used for any purpose, and you can choose to receive them as a lump sum, line of credit, monthly payments, or a mix. Most HECMs have adjustable interest rates (which can change over time, subject to caps), though fixed-rate HECMs exist if you take a full lump sum. Because of the upfront insurance and regulations, HECM loans often have lower interest rates or fees than other reverse mortgages, but they still can be expensive (we’ll cover costs later).
Proprietary Reverse Mortgages: These are private loans offered by banks or mortgage companies that are not FHA-insured. Proprietary reverse mortgages (sometimes branded as “jumbo” reverse mortgages) are often designed for homeowners with very high-value homes or those who don’t meet some HECM requirements. For example, proprietary programs may allow loan amounts above the HECM limit, even well over $1.2 million, and in some cases they accept younger borrowers – some proprietary reverse mortgages are available to homeowners as young as 55 or 60 years old, depending on the lender and state. These loans can expand access for people who need a reverse mortgage but aren’t yet 62, or who have expensive homes and want to tap more equity than a HECM would allow. However, because they lack federal insurance, proprietary reverse mortgages do not have the same guarantees. You must be more cautious: for instance, if the home’s value drops or the lender goes out of business, there is no FHA insurance to protect you or guarantee future payments. Interest rates on proprietary loans may be higher, and terms and fees vary by lender. If you consider a proprietary reverse mortgage, it’s crucial to compare offers from multiple lenders and make sure you clearly understand the terms (some lenders offering proprietary reverses still require independent counseling, which is a wise step even if not mandated). Example: One well-known proprietary product is often called a “jumbo” reverse mortgage – aimed at owners of high-value properties. These loans might allow borrowing more equity from a $2 million home (where HECM would cap out at ~$1.2M), or they may permit a 55-year-old to qualify (whereas HECM requires 62+). Proprietary offerings differ, so always ask each lender what unique programs they have.
Single-Purpose Reverse Mortgages: These are the least common type. Offered by some state or local government agencies or nonprofits, single-purpose reverse mortgages are small loans used for one specific approved purpose, such as paying property taxes or making necessary home repairs. They are typically available to older homeowners with low or moderate income, often at low or no interest. For example, a county might have a program to allow seniors to defer property taxes via a reverse mortgage that will be repaid when the home is sold. Single-purpose loans are not available everywhere and usually have strict rules (you can only use the money for that stated purpose) – but they also tend to be low-cost compared to HECMs or proprietary loans. If you are struggling with a specific expense like taxes or home improvements, it’s worth checking with your local Area Agency on Aging or housing department to see if any single-purpose reverse mortgage or property tax deferral programs exist in your area.

In this article, we’ll focus primarily on the HECM program, since that is the option most readers will consider. But remember that proprietary reverse mortgages do exist – if you have unique circumstances (such as being just under 62, or owning a high-value home), ask lenders about any private reverse mortgage products they offer. Always compare the benefits, interest rates, and fees, and get advice from a qualified counselor or advisor before choosing a proprietary loan.

Who Qualifies for a Reverse Mortgage?

Basic eligibility for a HECM reverse mortgage (the most common type) includes a few major requirements. To qualify, you must:

Be at least 62 years old. HECM loans are limited to seniors 62 and up – if you’re younger, you would need to look at proprietary options (some of which allow age 55+ in certain states). There is no maximum age – borrowers in their 70s, 80s or 90s can and do use reverse mortgages.
Own a home (primary residence) with significant equity. The home must be your principal residence (you live there at least 6 months out of the year), and you should have substantial equity in it – meaning you either own it free-and-clear or have a very low remaining mortgage balance. There’s no fixed equity percentage required by law, but in practice lenders often look for at least around 50% equity in the home. (Your home will be appraised to determine its value.) Any existing mortgage or lien on the house must be paid off at closing of the reverse mortgage – either using the reverse mortgage funds or other resources. For example, if you still owe $50,000 on a traditional mortgage, you could get a reverse mortgage that pays off that $50,000 (eliminating your monthly payment) – the reverse mortgage then becomes the primary lien on the home.
Live in an eligible property type. Not every property qualifies for a HECM. Eligible homes include typical single-family houses, duplex/triplex/fourplex properties (if you occupy one of the units), townhouses, and most HUD-approved condominiums. Manufactured homes can qualify if they meet FHA standards (built after June 1976 and on permanent foundations). Co-ops are generally not eligible for HECMs. The home should be in good condition; if repair issues are noted in the appraisal, you may be required to address them. You cannot qualify if the home is not your primary residence (for instance, no reverse mortgages on vacation homes or purely investment properties).
Meet financial obligations related to the home. Unlike some loans, reverse mortgages have no minimum income or credit score requirement for the borrower, since you aren’t making monthly payments. However, lenders will evaluate your finances to ensure you can afford ongoing property costs like taxes, insurance, HOA dues, and maintenance. Essentially, they want to be sure the reverse mortgage won’t set you up for failure. If you have a history of missing property tax payments or other financial red flags, the lender might require a portion of the loan to be set aside to cover taxes/insurance (this is called a Life Expectancy Set-Aside). You also cannot be delinquent on any federal debts – for example, if you have unpaid federal income taxes or federal student loans in collection, you’d need to resolve those before getting a HECM.
Obtain counseling from a HUD-approved reverse mortgage counselor. Independent counseling is mandatory for all HECM applicants. You’ll meet (by phone or in person) with a certified housing counselor who will make sure you understand how the reverse mortgage works, review the costs and alternatives, and answer any questions. After counseling, you’ll receive a certificate that is required before you can complete a loan application. This session is a crucial consumer protection – it usually costs about $125 (often it can be financed into the loan if needed) and ensures you are making an informed decision. Even some proprietary reverse mortgages voluntarily require counseling because it’s so important.
Maintain the home as your primary residence. After getting a reverse mortgage, you must continue to live in the home the majority of the year. Extended absences can trigger a loan default – for instance, if you move out or live away (e.g. in a nursing home) for more than 12 consecutive months, the loan may become due. Temporary absences (like a few months of travel or medical rehab) are generally fine, but the home cannot be left vacant long-term. You also must not transfer the title or add new owners without approval, as that could violate the loan terms.
Keep the property in good repair and pay required taxes/insurance. As noted earlier, you must keep current on your property tax bills, homeowners insurance premiums, and any HOA fees, and you’re responsible for basic upkeep of the home. If you fail to pay taxes or insurance, or let the home deteriorate significantly, the lender can declare a default and foreclose. A reverse mortgage is not a no-strings free income – you have ongoing obligations, even though no monthly payment is required.

If two spouses (or co-owners) are on the title, generally both should be 62+ to be co-borrowers on a HECM. It is possible for one spouse to be under 62 – in that case, the older spouse would be the sole borrower and the younger is a “non-borrowing spouse.” Current HUD rules protect an eligible non-borrowing spouse: if the borrower dies, the younger spouse can continue living in the home without immediately repaying the loan, as long as they were married and listed when the loan originated and they continue to meet the loan obligations (taxes, etc.). However, the non-borrowing spouse cannot receive any further loan proceeds after the borrower passes, and once that spouse leaves the home, the loan comes due. It’s important to discuss this scenario during counseling if you have a younger partner. (For proprietary reverse mortgages, spousal protections can vary – be sure to ask the lender about how they handle non-borrowing spouses or heirs.)

Summary of HECM Qualification: In short, if you’re 62 or older, have a primary residence with a lot of equity, are financially capable of maintaining the property and paying taxes/insurance, and are willing to go through counseling, you likely meet the basic qualifications for a reverse mortgage. Each lender will ultimately determine if you qualify based on their risk assessment and HUD guidelines. Always be truthful about your situation in the application and with your counselor – the goal is to ensure this loan will improve your financial situation, not jeopardize your home.

Pros and Cons of Reverse Mortgages

Reverse mortgages can be very helpful for some homeowners, but they also have downsides. Below are the major pros and cons to consider:

Pros of Reverse Mortgages

Provides Additional Income (Tax-Free): A reverse mortgage can supplement your retirement income and improve your cash flow. You can use the money for any purpose – covering everyday expenses, medical bills, home repairs, travel, etc. – and the funds you receive are not taxable income (they are loan proceeds). This can be a lifesaver for seniors with limited savings.
No Monthly Mortgage Payments: You don’t have to make monthly mortgage payments on a reverse loan. This can significantly reduce financial stress, especially if you’re on a fixed income. Eliminating an existing mortgage payment is often one of the first uses of a reverse mortgage (you can pay off your old mortgage with the reverse loan). Not having to pay a mortgage each month allows you to redirect that money to other needs. (Note: You still must pay your property taxes, insurance, and upkeep as discussed – those are not covered by the reverse mortgage).
Stay in Your Home (Age in Place): A key benefit is that a reverse mortgage enables you to remain in your home instead of selling it to access your equity. If you love your home and community, this can be invaluable. It provides a way to tap your home’s value without moving or downsizing. Many retirees prefer to “age in place” with familiar neighbors and surroundings, and a reverse mortgage can fund care or modifications to make that possible.
Flexible Payout Options: HECM reverse mortgages offer flexible ways to receive the money. You can take a lump sum, set up monthly payments for life (tenure) or a set term, or keep a line of credit to draw on as needed. The line of credit option has a growth feature – any unused credit line actually grows over time, increasing your available funds (this growth rate is based on the interest rate). This can act as a financial safety net for future needs. You can even change payout options later (for example, start with a line of credit and switch to monthly payments).
Never Owe More Than the Home’s Value: As long as you have an FHA-insured HECM, it is a non-recourse loan. This means that when it’s time to repay, if the loan balance has grown larger than your home’s value, you (or your heirs) are not personally on the hook for the difference. The lender cannot claim other assets or seek a deficiency judgment; they can only be repaid up to the sale price of the home. This protection is crucial – it offers peace of mind that you won’t saddle your family with debt beyond the home. (For proprietary reverse mortgages, you need to check if similar non-recourse protections apply – many are structured to be non-recourse as well, but since they’re not FHA-insured, it’s a question to ask the lender.)
Heirs Keep Any Remaining Equity: Just because you take out a reverse mortgage doesn’t mean the bank “gets your house.” In fact, the home still belongs to you (and your estate), and after the loan is repaid, any leftover equity goes to you or your heirs. If your home increases in value over the years, it’s possible there will be equity left. Your heirs can choose to sell the home or even repay the loan and keep the house if they wish (for example, by refinancing or using other funds). The reverse mortgage must be paid off when you’re gone, but the equity above the payoff is preserved for your family.
Federally Regulated and Counseling Required (for HECMs): The HECM program has built-in safeguards: independent counseling, limits on how much you can withdraw in the first year, and oversight by HUD. This helps prevent some predatory practices. Also, if the lender disappears or can’t make payments (in the case of monthly payouts or lines of credit), the FHA insurance ensures you still receive your money. These protections make HECMs a safer option compared to some other equity-tapping methods.
Can Improve Quality of Life: Ultimately, the biggest “pro” is that a reverse mortgage can provide cash to improve your quality of life in retirement. It can help you afford to stay in a home that might otherwise be too expensive to maintain. It can fund in-home care services, home modifications (like wheelchair ramps or walk-in tubs), or simply reduce financial anxieties. Used judiciously, a reverse mortgage can relieve the pressure on your other retirement assets, allowing them to last longer.

Cons of Reverse Mortgages

Loan Balance Rises, Home Equity Decreases: Because you aren’t making payments, the loan balance will grow over time as interest and fees accrue. This means your home equity is being used up progressively. The longer you live in the home with an active reverse mortgage, the more equity will be taken by the loan. This leaves fewer assets for your heirs or for yourself if you eventually need to sell or move. In essence, a reverse mortgage spends your home equity while you’re alive, which is exactly the intent – but you need to be comfortable with reducing the inheritance or equity cushion.
Fees and Upfront Costs Can Be High: Reverse mortgages are not free money – the cost can be significant. HECM loans have an upfront FHA mortgage insurance premium (often 2% of the home’s value), plus origination fees (capped at $6,000 on HECMs) and standard closing costs (appraisal, title insurance, etc.). There may also be monthly servicing fees. Many of these costs get rolled into the loan balance instead of out-of-pocket, but that means your debt and interest start higher. Proprietary reverse mortgages don’t charge the FHA insurance, but they may have higher interest rates or their own fees. When comparing options, always ask for a breakdown of all fees. While a reverse mortgage can be worth it, the upfront costs make it inefficient for short-term use – if you might only stay in the home a couple more years, the fees might outweigh the benefit.
Must Keep Up Property Charges or Risk Foreclosure: Perhaps the biggest risk to be aware of is that even though you have no mortgage payments, you must continue paying your property taxes, homeowners insurance, and any other required property charges. If you fail to pay taxes or insurance, or if you let the property’s condition seriously decline, the lender can declare you in default and foreclose on the home. You’d get warnings and opportunities to fix the issue, but it’s a real risk. Many reverse mortgage foreclosures in the past resulted not from the borrower running out of equity, but from not paying taxes or insurance. To help, lenders do a financial assessment beforehand and may set aside part of your loan to cover these costs if they think you might struggle. Nonetheless, you need a plan to handle ongoing home expenses.
Impact on Benefits (Medicaid/SSI): While reverse mortgage funds are not taxable and do not affect Social Security or Medicare (those aren’t needs-tested), they can affect needs-based government benefits like Medicaid or Supplemental Security Income (SSI). Essentially, money from a reverse mortgage is treated as a loan advance and not income in the month you get it – but if you don’t spend it within the month and it sits in your bank account, it can count as an asset and potentially push you above asset limits for Medicaid/SSI. For example, a lump sum that you keep in the bank could disqualify you until you spend down that money. There are strategies to avoid this (like scheduling monthly draws rather than a big lump sum, or spending the funds on exempt resources), but you should consult with a benefits counselor if you rely on or anticipate needing Medicaid.
Could Leave Less (or No) Equity for Heirs: Because the loan eats up equity, there may be little to no value left in the home for your children or other heirs by the time the reverse mortgage is repaid. If leaving the home as an inheritance is a high priority, a reverse mortgage might not be the best choice. Heirs will either have to sell the house to pay off the loan or, if they want to keep it, pay off or refinance the balance (which could be challenging if the balance is near the home’s value). It’s important to discuss this with family so they know what to expect – the home won’t simply pass free and clear to them; the debt comes first. Surviving spouses who were not co-borrowers (or other family members living in the home) could be forced to move out if they can’t settle the loan after you’re gone. (HECMs now protect eligible non-borrowing spouses, as mentioned, but no other family members are protected – adult children living with you, for instance, would have to move or pay off the loan when you die or move).
You May Outlive the Loan’s Usefulness: In a scenario where someone takes a large lump sum upfront, it is possible to spend or go through that money and still have many years ahead of you. You could find yourself years later with no remaining reverse mortgage funds, and no equity left to draw on (because it’s all been used). This is why planning is crucial – a reverse mortgage is best used as part of a long-term financial strategy, not a quick fix. Additionally, if you end up needing to move into assisted living or with family, having used much of your home equity via reverse mortgage could limit your options for affording long-term care (since the home may need to be sold to pay off the loan at that point).
Not Suitable for Short-Term Needs or Planning to Move: The upfront costs of a reverse mortgage are spread out over time. If you leave the home soon after getting a reverse mortgage, those costs will have provided little benefit. Generally, a reverse mortgage makes sense only if you plan to stay in the home for several years. If you think you might move in a couple of years – due to downsizing, health, or any reason – then a reverse mortgage is probably not cost-effective. Likewise, if the home is no longer suitable (for example, it has stairs and you have mobility issues), using a reverse mortgage to delay an inevitable move might not be wise. In such cases, selling the home or looking at other options could be better.
Complexity and Misunderstanding: Reverse mortgages are sometimes confusing or misunderstood. Terms like “you don’t have to pay it back until you die or move” can be misinterpreted – some people don’t grasp that interest is still accruing and that they must uphold certain responsibilities. There have also been cases of scams and aggressive marketing targeting seniors for reverse mortgages or related financial products. Be wary of anyone pushing you to get a reverse mortgage quickly or suggesting you invest reverse mortgage funds into something like an annuity or investment product they’re selling – high-pressure sales tactics are a red flag. Always take your time to understand the loan, and consult a trusted advisor or counselor if you feel pressured or unsure.

In summary, a reverse mortgage can offer financial freedom and flexibility for older homeowners, but it comes at the cost of reducing your home equity and can introduce new responsibilities. It’s not the right choice for everyone. Next, we’ll discuss when a reverse mortgage might make sense and what factors to consider regarding timing and personal circumstances.

When Is the Right Time for a Reverse Mortgage?

Timing a reverse mortgage involves both personal and market considerations. Because this loan will impact your largest asset (your home) and your future financial security, it’s important to think about when and if it makes sense for you. Here are some key points on timing and suitability:

Your Long-Term Housing Plans: A reverse mortgage is best suited for someone who intends to stay in their home for a long time – ideally for the rest of their life. If your home is your “forever home” and you love living there, a reverse mortgage can help you afford to do so comfortably. On the other hand, if you anticipate moving in the near future, the benefit of a reverse mortgage diminishes. For example, if you are 62 and think you might downsize to a smaller condo in five years, taking on a reverse mortgage now would mean paying closing costs and insurance for a short-term solution. You generally want to live in the home long enough to justify the upfront costs (breaking even could take a few years). Consider your health and mobility as well – if the home may become unsuitable (too large, or with stairs, etc.), weigh that into your decision.
Immediate Financial Needs vs. Future Needs: Ask yourself, “Why am I considering a reverse mortgage now?” If you need funds to cover current expenses, pay off an existing mortgage, or handle an urgent financial issue, a reverse mortgage could provide relief. Many people choose it when their cash flow is tight and they have substantial equity tied up in their home. However, also consider your future financial picture. If you tap a lot of equity now at age 62, you might have less available later in your 70s or 80s if new needs arise. Sometimes waiting a few years can increase how much you can get (because you’ll be older – lenders let you borrow a larger percentage at older ages). It’s a balance: taking it sooner provides help now but limits what’s left for later, while waiting might get you more money but you have to manage in the meantime. There is no one-size-fits-all answer; it depends on how urgently you need the funds and what other resources you have.
Interest Rates and Housing Market Conditions: Market conditions can affect a reverse mortgage. Two big factors are interest rates and home values. Reverse mortgage amounts are determined by a formula considering your age, home value, and prevailing interest rates. Generally, when interest rates are lower, borrowers can qualify for a higher principal limit (more money), and when rates are higher, the amount available is reduced. Also, the higher your home’s appraised value (up to the FHA’s loan limit), the more equity you can potentially tap. So, if your local housing market has seen prices rise, you might be able to access more cash now than a few years ago – some experts note that the strong home price appreciation in recent years has given seniors “a much bigger opportunity to tap their equity” safely. Conversely, if home prices have fallen or you’re in a down market, you might qualify for less. While you cannot truly time the housing market, being aware of these factors is useful. If interest rates are extremely high at the moment, and you have the flexibility, you might delay taking a reverse mortgage in hopes that rates drop (improving your terms) – or at least opt for a line of credit that you don’t draw on much until needed. On the flip side, if rates are low or your home value is at a peak, it could be an opportune time to lock in a reverse mortgage.
Age Considerations: Age is a qualifying factor – the older you are, the higher percentage of your home equity you can borrow (because the loan is expected to be outstanding for a shorter time). For instance, a 72-year-old will get more cash from the same home than a 62-year-old. If you are just at the minimum age of 62, you might consider whether you truly need the reverse mortgage now or if it would be better to wait until you’re older (and potentially qualify for more). Of course, waiting only makes sense if you don’t need the money urgently and can comfortably delay. Don’t wait so long that you endure financial hardship at 64 just to get a slightly bigger payout at 68 – there’s value in improving your quality of life sooner. But if it’s a close call, age can tip the scales on timing.
Good Candidate vs. Bad Candidate Scenarios: Financial planners often outline scenarios of who benefits most from a reverse mortgage. You might be a good candidate if you: plan to stay in your home long-term, need extra money to cover living expenses or healthcare, and have sufficient income to maintain the home (taxes, insurance) but not much left over for other needs. It also helps if your home is increasing in value, since that can preserve some equity and give you flexibility later. On the other hand, you might be a bad candidate for a reverse mortgage if: you’re planning to move or sell in a few years, you have serious health issues that could require relocating (e.g. moving to assisted living) in the near future, or you’re already struggling to afford home expenses like taxes and insurance (a reverse mortgage won’t eliminate those bills and falling behind could put you in default). Additionally, if you have other assets or income to meet your needs, you might not want to encumber your home unless necessary.
Consider Alternatives: Timing also involves looking at alternative solutions. Before committing to a reverse mortgage, explore if there are other ways to meet your financial goals. Could you refinance to a traditional mortgage or a home equity line of credit (and manage the payments)? Could you downsize to a less expensive home and invest the proceeds for income? Are there state or local programs to help with utilities, taxes, or other expenses (so you don’t need a loan)? Sometimes, a reverse mortgage is the best or only option – but it’s wise to compare. For example, a home equity loan usually has lower costs and no insurance fee, but you must make monthly payments and qualify with sufficient income/credit. Selling the home and moving might be emotionally hard, but if the house is too big, too hard to maintain, or too costly, it could make financial sense. Talk to a financial advisor or counselor about these alternatives. The mandatory HECM counseling will also walk through other possible resources. That said, if you’ve done the homework and a reverse mortgage still stands out as the solution that lets you stay in your home and enjoy retirement, then its time may be right.

Bottom line: The right time for a reverse mortgage is very individual. It’s when the balance of your financial needs, age, home equity, and market conditions align such that tapping into your home’s equity will genuinely help your situation without undermining your future plans. Many people take a reverse mortgage as a sort of “last resort” after other options, while others proactively use it as part of a retirement plan. Make sure you are comfortable with the decision and have a clear plan for the proceeds.

Getting Advice and Choosing a Lender

Once you’ve learned about reverse mortgages and think you might benefit from one, the next steps are crucial: get expert guidance and shop around for a good deal. Here’s what to do:

Speak with a HUD-Approved Counselor: If you’re considering a HECM, counseling is required and is a great opportunity to ask an expert all your questions. Even before formal counseling, you might seek advice from a financial planner or an organization like your local Area Agency on Aging. The goal is to ensure you’ve considered how a reverse mortgage fits into your overall financial picture. A counselor or advisor can also help you consider alternatives and plan how to use the loan wisely. Reverse mortgages can be complicated, so having a knowledgeable third party (who isn’t selling you anything) is invaluable.
Talk to Multiple Lenders: It’s important to shop around and compare offers from different reverse mortgage lenders – don’t simply go with the first advertisement you see or the celebrity spokesperson on TV. Different lenders may offer varying interest rates, fees, and even different proprietary products. By contacting several lenders, you can save thousands of dollars in costs and find the loan terms most favorable to you. One lender might waive an origination fee, or another might have a lower margin on the interest rate – those differences put money in your pocket. Also, not all lenders offer proprietary (jumbo or age 55+) reverse mortgages, so if you need a non-HECM product, you’ll have to find a company that provides it. The Federal Trade Commission recommends comparing at least a few offers and confirming all the fees and interest rates being quoted. Don’t hesitate to ask each lender to provide a Total Annual Loan Cost (TALC) disclosure for the scenarios you’re considering – this is like an APR specifically for reverse mortgages, showing the projected costs over time.
Understand the Details Before Signing: Reverse mortgages have many moving parts – interest rate (fixed vs adjustable), how you want to receive funds, what upfront costs are being rolled in, etc. Make sure the lender or counselor explains any fine print you don’t understand. For example, if it’s an adjustable-rate HECM, what’s the index and margin? What’s the lifetime interest cap? If it’s a fixed-rate HECM, know that you’ll get a one-time draw at closing (no line of credit later). Understand what could cause the loan to become due early (usually moving out or failing to pay taxes). Reputable lenders will encourage you to ask questions. If anyone pressures you to act fast or says “this offer expires if you don’t sign now,” treat that as a red flag. A reverse mortgage is a major decision – it’s worth taking your time.
Beware of Scams or Strings Attached: Sadly, there have been scams targeting seniors to take out a reverse mortgage and then invest the money in something fraudulent, or contractors insisting you get a reverse mortgage to pay for repairs. Be very cautious of any arrangement where someone is pushing you to get a reverse loan for a specific purpose that benefits them, such as buying annuities, investing in a business, or paying a particular contractor. You do not have to buy any other product to get a reverse mortgage – in fact, in many cases it’s illegal to require that. The money should be for your needs on your terms. If you encounter a high-pressure sales pitch, step back and consult an independent counselor or someone you trust.
Plan for Home Expenses and a Backup Strategy: If you decide to proceed, plan out how you will handle the ongoing obligations. Some borrowers choose to have the lender set aside funds for taxes and insurance (this can be voluntary or lender-required). Budget accordingly so those bills get paid. It can be wise to keep an emergency fund for home maintenance or unexpected costs so you’re never at risk of default. Also, consider your exit strategy – while no one likes to think about leaving their home, you or your heirs will eventually need to repay the loan. Discuss with your family or executor how you expect the loan to be repaid (most likely by selling the house). If your children want to keep the home in the family, they’ll need to pay off the loan (usually within about 6 months after you pass, though extensions can be requested). Having this conversation in advance can prevent confusion later.
Use the Funds Wisely: Finally, once you have a reverse mortgage, use the money carefully. Because interest is accruing, it’s generally not wise to take more cash out than you need at any given time. For instance, with a line of credit, only draw funds as necessary – unneeded money left in the credit line will grow (increase) over time, benefiting you. If you take a lump sum, consider consulting with a financial advisor on how to make it last. And remember the note about Medicaid/SSI – don’t let large amounts sit in your bank account unspent if you are on or near qualifying for those programs. There’s nothing wrong with using the money for comfort or even a vacation (it’s your equity, after all), just be sure you’ll still have enough for essentials and that you’re maintaining a safety net.

Encouraging Professional Advice: A reverse mortgage is a big decision that can greatly affect your financial well-being. It’s highly recommended to speak with more than one professional advisor – for example, talk to both a reverse mortgage lender and an independent financial planner or housing counselor. Multiple perspectives can help you see the full picture. Also, involving your family in the discussion (if you’re comfortable with that) can be helpful, since it may impact them later. By gathering information and comparing options, you’ll be empowered to make the choice that’s best for you.

In Conclusion

A reverse mortgage can be a powerful tool for the right homeowner – allowing you to unlock your home equity to improve your retirement years without giving up your home. It particularly benefits those who want to stay put and need additional income or financial flexibility. However, it’s not a decision to rush into. Carefully weigh the pros and cons, ensure you meet the qualifications and understand the responsibilities, and consult with experts. With due diligence, a reverse mortgage could provide you peace of mind and financial stability, helping you enjoy your home and your retirement on your terms. Remember, it’s all about what is appropriate for your situation – and if it is, a reverse mortgage might just be the key to a more comfortable and secure future at home.