If you are 62 or older and own your home, you may have heard about reverse mortgages but still have questions. A reverse mortgage lets you turn part of your home equity into cash without selling your house or making monthly loan payments. It sounds simple, but the details matter. This reverse mortgage FAQ answers the most common questions homeowners ask, from eligibility and costs to what happens to the loan when you move or pass away. By the end, you will know exactly how this product works and whether it fits your retirement plan.

What Is a Reverse Mortgage and How Does It Work?

A reverse mortgage is a loan secured by your home that allows homeowners aged 62 and older to borrow against their equity. Unlike a traditional forward mortgage, you do not make monthly principal and interest payments. Instead, the loan becomes due when you sell the home, move out permanently, or pass away. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA).

With an HECM, the lender sends you money in one of several ways: a lump sum, a line of credit, monthly payments, or a combination. The amount you can borrow depends on your age, the appraised value of your home, and the current interest rate. The older you are and the more equity you have, the larger your loan proceeds. You retain title to your home, and you continue to pay property taxes, homeowners insurance, and maintenance costs.

Because the loan balance grows over time as interest accrues, your equity decreases. However, an HECM is a non-recourse loan, meaning you or your heirs will never owe more than the home is worth when the loan is repaid. If the home sells for less than the loan balance, the FHA insurance fund covers the difference.

Who Qualifies for a Reverse Mortgage?

Eligibility for a reverse mortgage is different from a regular home loan. To qualify, you must meet these basic requirements:

• Be at least 62 years old (the age of the youngest borrower or eligible spouse).
• Own your home outright or have a low remaining mortgage balance that you can pay off with the reverse mortgage proceeds.
• Live in the home as your primary residence.
• Participate in a counseling session with a HUD-approved counselor.
• Pass a financial assessment to show you can pay ongoing property charges.

The property must be a single-family home, a 2- to 4-unit home with you living in one unit, a HUD-approved condominium, or a manufactured home that meets FHA standards. Cooperative apartments are not eligible unless they are on the FHA approved list.

Your credit score and income are not the main qualifying factors, but lenders do review them to ensure you can handle taxes and insurance. If you have a history of missed property tax payments, the lender may set aside funds from your loan to pay these charges, which reduces the amount you receive. For more details on the age requirement, see our guide on the reverse mortgage age requirement.

How Much Money Can You Get From a Reverse Mortgage?

The amount you can borrow is called the principal limit. For an HECM, this is calculated based on your age, the interest rate, and the maximum claim amount, which is capped at $1,149,825 for 2025. Generally, the older you are, the higher the percentage of your home’s value you can borrow. For example, a 70-year-old might access around 50% of the home’s value, while an 85-year-old might access closer to 65%.

The value of your home also matters. If your home is appraised at $400,000, your principal limit will be a percentage of that amount, not the full value. The lender will also subtract any existing mortgage or liens that you need to pay off at closing. You can use the mortgage calculator on MortgageZone to estimate potential proceeds, but keep in mind that a reverse mortgage calculator is different and requires specific inputs.

Here is a simplified example:

1. Your home appraises for $300,000.
2. You are 75 years old, and the principal limit factor is 0.56.
3. Your maximum claim amount is $168,000.
4. You have an existing mortgage balance of $40,000 that must be paid off.
5. Your net proceeds are $128,000, minus closing costs and any set-asides.

Keep in mind that if you choose a lump sum payment, you will receive the full amount at closing, but this option may have higher costs and can affect your eligibility for certain government benefits. A line of credit, on the other hand, grows over time, giving you access to more funds in the future.

What Are the Costs and Fees?

A reverse mortgage is not free money. There are upfront and ongoing costs that you should plan for. These include:

• Origination fee: the lender charges this to process the loan, capped at $6,000 for HECMs.
• Mortgage insurance premium (MIP): an initial premium of 2% of the home value, plus an annual premium of 0.5% of the loan balance.
• Appraisal fee: typically $300 to $600.
• Title search and insurance: varies by state.
• Recording fees and other closing costs: usually 1% to 2% of the loan amount.
• Servicing fee: a monthly charge, often $30 to $35, that the lender adds to the loan balance.

You can finance these costs into the loan, meaning you do not pay them out of pocket. However, this increases your loan balance and reduces the equity you have left. It is important to compare quotes from multiple lenders to find the best terms. MortgageZone can help you compare offers from different lenders to ensure you get competitive rates and fees.

How Do You Receive the Money?

You can choose from several payment plans, depending on your financial goals. The options are:

• Tenure: equal monthly payments for as long as you live in the home.
• Term: equal monthly payments for a fixed number of years.
• Line of credit: draw funds at any time, up to the maximum amount.
• Modified tenure: a combination of a line of credit and monthly payments.
• Modified term: a combination of a line of credit and term payments.
• Lump sum: a single payment at closing, available only for fixed-rate HECMs.

Each option has pros and cons. Monthly payments provide steady income, but a line of credit offers flexibility and can be a valuable emergency fund. The line of credit also grows over time, which can be beneficial if you need a larger amount later. Your choice will affect the interest rate type as well. Adjustable rates are common for most payment options, while fixed rates are only available with a lump sum.

Can You Sell a House With a Reverse Mortgage?

Yes, you can sell your home at any time, even with an active reverse mortgage. When you sell, the loan balance becomes due, but you keep any remaining equity after the sale. The proceeds from the sale are used to pay off the reverse mortgage, and you receive the surplus. If the sale price is less than the loan balance, the FHA insurance covers the shortfall, and you do not owe the difference.

Selling a home with a reverse mortgage is a common way to move to a smaller place, relocate to be near family, or transition to assisted living. The process is similar to selling any home, but you must notify the lender and arrange for payoff. For a step-by-step explanation, read our guide on how to sell a house with a reverse mortgage.

What Happens to a Reverse Mortgage When You Die?

When the last borrower or eligible spouse passes away, the loan becomes due. Your heirs have options: they can repay the loan and keep the home, sell the home to pay off the loan, or deed the home to the lender if they do not want to keep it. The heirs have up to 30 days to decide, and they can request extensions up to 12 months in certain circumstances.

If the home is sold for less than the loan balance, your heirs will not owe the difference, thanks to the non-recourse feature. They can also choose to purchase the home for 95% of its appraised value if they want to keep it. It is important for heirs to understand their rights and deadlines. For more detail, see our article on what heirs need to know about reverse mortgage repayment.

What Are the Risks and Downsides?

While a reverse mortgage can provide financial relief, it is not without risks. The biggest risk is losing your home if you fail to meet your obligations. You must continue to pay property taxes, homeowners insurance, and maintain the property. If you fall behind, the lender can foreclose. This is a serious consequence that should not be taken lightly.

Another downside is the cost. The upfront fees and insurance premiums are higher than a traditional mortgage, and the loan balance grows over time, reducing your equity. This means you may have less to leave to your heirs. Additionally, receiving reverse mortgage funds can affect your eligibility for Medicaid and Supplemental Security Income (SSI) if you do not spend the money within the same month you receive it.

To mitigate these risks, work with a reputable lender and consider your long-term plans. A reverse mortgage is most beneficial if you plan to stay in your home for several years. If you are likely to move within a short period, the upfront costs may outweigh the benefits.

How Does a Reverse Mortgage Affect Your Heirs?

Your heirs are not personally responsible for the loan. The debt is tied to the home, not to you or your estate. If the home is worth more than the loan balance, your heirs can sell it, pay off the loan, and keep the profit. If the home is worth less, they can walk away without owing anything, but they will lose the home.

Heirs have the right to buy the home for 95% of its appraised value, which can be a good option if they want to keep the property in the family. However, they must act quickly, as the lender can initiate foreclosure if the loan is not resolved within the allowed time frame. Communication with your heirs about your reverse mortgage is essential to avoid surprises.

Is a Reverse Mortgage Right for You?

Deciding whether to get a reverse mortgage is a personal choice that depends on your financial situation and goals. It can be a smart tool to supplement retirement income, pay for healthcare, or afford home renovations. However, it is not the right choice for everyone. If you plan to move soon, have a small amount of equity, or are concerned about leaving your home to heirs, a reverse mortgage may not be suitable.

Before making a decision, take advantage of the free counseling required for HECM loans. A counselor can help you understand the costs, benefits, and alternatives. You should also compare offers from multiple lenders to ensure you get the best deal. MortgageZone offers a free quote comparison service that connects you with lenders who specialize in reverse mortgages, helping you find a competitive rate and terms.

Ultimately, a reverse mortgage can provide financial security and peace of mind in retirement, but only if you use it wisely. By understanding this reverse mortgage FAQ, you are already on the right track. If you have more questions, speak with a HUD-approved counselor or a trusted financial advisor. And when you are ready to explore your options, MortgageZone is here to help you compare lenders and make an informed decision.