How Reverse Mortgages Work

What is a reverse mortgage?

A reverse mortgage is a loan that lets homeowners 62 and older convert part of their home equity into cash — without selling the home or making required monthly principal and interest payments. The most common type is the FHA-insured HECM (Home Equity Conversion Mortgage).

You keep the title to your home. The loan balance grows over time as you receive funds and as interest accrues. Repayment is typically due when you sell, move out permanently, or pass away.

Who is eligible?

• At least one borrower must be 62 or older
• The home must be your primary residence (single-family, condo, or certain multi-unit properties)
• You must have sufficient equity in the home
• You must be able to pay property taxes, homeowners insurance, and maintain the home
• All borrowers must complete HUD-approved reverse mortgage counseling before closing

How you receive your funds

You choose how to access your proceeds — and you can often combine options:

• Lump sum — a one-time payment at closing (often used to pay off an existing mortgage)
• Line of credit — draw funds as needed; unused credit may grow over time on a HECM
• Term or tenure payments — fixed monthly advances for a set period or for life
• Modified combinations — tailored to your retirement cash-flow plan

What happens at repayment?

The loan becomes due and payable when the last borrower permanently leaves the home — by selling, moving, or passing away. Heirs can repay the loan and keep the home, or sell the property and keep any remaining equity.

Because HECM loans are non-recourse, you and your heirs never owe more than the home's value at the time of repayment, even if the loan balance exceeds that value.

The counseling requirement

HUD requires independent counseling from a HUD-approved agency before you can apply. This session ensures you understand how the loan works, your obligations, and alternatives. It is a consumer protection — not a sales step — and typically takes about 90 minutes.