A reverse mortgage is a loan that lets homeowners age 62 and older borrow against their home equity without making monthly mortgage payments. The loan balance grows over time because interest and fees are added to it, and it is repaid later, usually by selling the home. The most common type is the federally insured Home Equity Conversion Mortgage, or HECM.
How does a reverse mortgage work?
With a regular mortgage, you pay down what you owe each month. A reverse mortgage runs the other way. The lender pays you, and your debt rises. The Consumer Financial Protection Bureau explains that a reverse mortgage lets you borrow using your home as security, that your title stays in your name, and that interest and fees are added to the balance each month.
Someone who borrows a modest amount at 70 may owe far more at 85, and the equity left in the home shrinks as the balance climbs.
You still own the house, so you still carry the costs of owning it. Under 24 CFR 206.205, the borrower must pay property taxes and hazard insurance (plus flood insurance where it applies), along with homeowners' association and condominium fees. The borrower must also keep the property in good repair, according to 24 CFR 206.27. Falling behind on these is one of the ways a reverse mortgage can come due early.
What is a HECM, and how is it different from other reverse mortgages?
A HECM is the reverse mortgage insured by the Federal Housing Administration (FHA), part of the Department of Housing and Urban Development (HUD). Its rules are written into federal regulation at 24 CFR part 206, so the terms are more standardized than with a private loan. Private reverse mortgages, sometimes called proprietary reverse mortgages, are not FHA insured. Their terms come from the lender and the contract you sign, so read that contract closely and compare it with what the HECM rules promise.
Feature
HECM
Proprietary reverse mortgage
Insured by FHA
Yes
No
Minimum age
Youngest borrower must be 62 (24 CFR 206.33)
Check your contract
Required counseling
Yes, with a HUD-approved counselor (24 CFR 206.41)
Check your contract and state law
Repayment deferred until the loan comes due
Yes (24 CFR 206.19)
Check your contract
No personal liability for the balance
Yes (24 CFR 206.27)
Check your contract for a non-recourse clause
Who qualifies for a HECM?
Three rules matter most. First, 24 CFR 206.33 says the youngest borrower must be 62 or older at closing. Second, the home must be your principal residence, which the regulation defines as the place where you keep your permanent home and typically spend most of the calendar year. Third, you must meet with a counselor before you borrow.
The counseling rule is in 24 CFR 206.41. The borrower, and any non-borrowing spouse or non-borrowing owner, must receive counseling from a HECM counselor approved by HUD. The counselor must cover the information federal law requires and, when there is a non-borrowing spouse, what that spouse must do to stay in the home. You then give the lender a physical copy of the counseling certificate. The Federal Trade Commission adds that the counselor should come from an independent, government-approved housing counseling agency.
How can you get the money?
Under 24 CFR 206.19, a HECM can pay out in several ways:
Equal monthly payments for a fixed number of months (the term option).
Equal monthly payments for as long as you live in the home as your principal residence (the tenure option).
A line of credit you draw on when you choose.
A mix of monthly payments and a line of credit.
One lump sum, available only on fixed-rate HECMs.
Some money may also be set aside inside the loan for repairs or for future property taxes and insurance.
What does a reverse mortgage cost?
Expect interest and closing costs, plus FHA mortgage insurance premiums (MIP). The regulation at 24 CFR 206.105 sets the ceiling: the upfront premium may not exceed three percent of the maximum claim amount, and the monthly premium may not exceed 1.50 percent of the remaining insured principal balance (up to 1.55 percent in one situation the rule describes). HUD may adjust these premiums by notice, so the rate your lender quotes today is what counts. Ask the lender for a written breakdown of every fee.
The monthly premium can be added to the loan balance, and under the CFPB's description interest and fees are added too. That means you may pay little out of pocket at closing, but you are paying through a larger debt later. You can repay a HECM in full or in part at any time with no charge or penalty, as 24 CFR 206.209 states.
When does a reverse mortgage have to be repaid?
The loan comes due under the rules in 24 CFR 206.27(c). It becomes due and payable when the last borrower dies and no surviving borrower lives there, or when a borrower conveys all of his or her title and no other borrower keeps title. Other events can make it due, with HUD approval:
The home stops being a borrower's principal residence for a reason other than death, and no other borrower lives there.
A borrower is away from the home for more than 12 consecutive months because of physical or mental illness, and no other borrower lives there.
The borrower does not provide for paying the property charges, such as property taxes and hazard insurance.
The borrower fails to meet another obligation under the mortgage, such as keeping the home in good repair.
A borrower who corrects the problem can often reinstate the loan, even after foreclosure has started, with limited exceptions listed in 24 CFR 206.125. Do not ignore a letter from the servicer.
What do you or your heirs owe if the home is worth less?
This is the non-recourse feature. The regulation says the borrower has no personal liability for the outstanding loan balance, the lender may enforce the debt only through sale of the property, and the lender cannot get a deficiency judgment (a court order for the shortfall) against the borrower if the mortgage is foreclosed. The FTC says most reverse mortgages have this kind of non-recourse clause, which means you or your estate can't owe more than the value of the home.
Heirs have choices when the loan comes due after a death. Under 24 CFR 206.125(a)(2), the servicer must notify the borrower's estate and heirs and give them 30 days from that notice to take one of several steps: pay the full balance, sell the home, give the lender a deed in lieu of foreclosure (handing over the property to avoid foreclosure), or take another step HUD permits. The sale option sets a floor: the home must sell for at least an amount HUD sets by notice, and that amount cannot exceed 95 percent of the appraised value. The regulation counts a transfer of title by operation of law as a sale. The regulation does not say whether an heir who wants to keep the house can buy it at that figure, so ask the servicer in writing what amount applies to you. The regulation also requires the servicer to order an appraisal within 30 days after an applicable party requests one in connection with a potential sale.
Sometimes. A spouse who is not a borrower can qualify as an Eligible Non-Borrowing Spouse and get a deferral, meaning the loan does not come due when the borrower dies. Under 24 CFR 206.55, that spouse must have been married to the borrower at closing and stayed married for the borrower's lifetime, been named in the loan documents, and lived in the home as a principal residence. After the borrower's death, the spouse must establish legal ownership or another right to remain in the home for life within 90 days, keep paying taxes and insurance, and keep up the home.
If the spouse stops meeting those conditions, the deferral ends. When the spouse still meets the basic qualifying conditions, the servicer must give 30 days to fix the problem. When the spouse no longer qualifies, it may not. A spouse who was not eligible at closing does not become eligible later.
How do you spot a reverse mortgage scam?
The FTC says to walk away if you feel pressured to finish the deal quickly. The CFPB warns against contractors who push a reverse mortgage to pay for repairs, and it notes that the Department of Veterans Affairs does not offer any reverse mortgage loans, so an ad suggesting VA backing is false. With most reverse mortgages, the CFPB says, you have three business days after the loan closes to cancel for any reason, without penalty, and you must notify the lender in writing. That right comes from the federal right of rescission in Regulation Z at 12 CFR 1026.23, which covers credit secured by your principal dwelling. It does not apply to a residential mortgage transaction, meaning a loan used to buy or build the home, so a reverse mortgage used to purchase a house has no rescission period. The FTC says to report fraud at ReportFraud.ftc.gov and to the CFPB, and it also lists your state attorney general and your state banking regulator. Our guides on signs you are dealing with a scammer and how to tell if an offer is a scam can help you recognize the pattern.
What to do
Decide why you need the money and list the cheaper options first, including selling or downsizing.
Ask for the lender's written cost breakdown and compare at least two lenders.
Book the HUD-approved counseling session and bring your spouse and any other adult owner.
Make sure every spouse is named in the loan documents.
Budget for property taxes and insurance, plus repairs, for as long as you live in the home, and tell your family where the loan papers are.
If you are an heir, call the servicer right away, ask for the payoff figure and the appraisal, and write down every deadline in the notice.
If you receive SSI or Medicaid, ask that agency how loan proceeds are treated before you borrow.
This is general information, not legal advice. Rules change and vary by state, so check the official sources linked above or talk with a licensed attorney in your state.
Check your state and local law
Landlord-tenant rules vary significantly from state to state — security-deposit caps, return deadlines, notice periods, and eviction procedures all differ. This article explains the general principles; for the rules that actually apply to you, look up your own state's law.
Local ordinances may apply. Your city or county may add protections — such as rent control, just-cause eviction, rental registration, or stricter housing codes — beyond state law. Check your local city or county ordinances too. This is general legal information, not legal advice.
It is a loan secured by your home that lets you, if you are 62 or older, borrow without making monthly mortgage payments. Interest and fees are added to the balance each month, so the debt grows. You still own the home and must pay property taxes and homeowners insurance, plus keep the house in repair. The loan is generally repaid when you leave the home or die, usually by selling it.
What is a HECM?
A Home Equity Conversion Mortgage is the reverse mortgage insured by the Federal Housing Administration, part of HUD. It is the most common type, according to the CFPB. Federal regulation sets its rules, including the age requirement, mandatory counseling with a HUD-approved counselor, and a ban on personal liability for the loan balance.
What happens to a reverse mortgage when the borrower dies?
The loan generally becomes due and payable unless a surviving borrower still lives in the home or an eligible non-borrowing spouse qualifies for a deferral. The servicer must notify the estate and heirs, who then have 30 days from the notice to pay, sell, hand over the home by deed in lieu of foreclosure, or take another permitted step.
Can my heirs owe more than the house is worth?
Not on a HECM. The regulation says the borrower has no personal liability for the loan balance, the lender may enforce the debt only through sale of the property, and no deficiency judgment is allowed after foreclosure. The FTC says most reverse mortgages work this way, so check the non-recourse clause in any private loan before signing.
Can you lose your home with a reverse mortgage?
Yes. The loan can come due if you stop living there as your principal residence, are away more than 12 consecutive months for illness, do not pay property taxes and insurance, or fail to keep the home in repair. A borrower who fixes the problem can often reinstate the loan, even after foreclosure begins, but the lender may refuse in limited cases.
Does my spouse have to leave if only I am on the loan?
Not necessarily. A spouse named in the loan documents who has lived in the home and meets the federal conditions can get a deferral. Within 90 days after the borrower's death, that spouse must establish ownership or another legal right to stay for life, and keep paying property taxes and insurance while keeping up the home.
Do I have to get counseling before a reverse mortgage?
For a HECM, yes. Federal regulation requires the borrower, plus any non-borrowing spouse or non-borrowing owner, to receive counseling from a HUD-approved HECM counselor and give the lender a copy of the certificate. The FTC says the counselor must come from an independent, government-approved agency. It says agencies often charge around $125, although it can be more, the fee can be paid from the loan, and you cannot be turned away if you can't afford it.
This article is general legal information, not legal advice, and may not reflect the most current law or the law in your jurisdiction. Laws vary by state and change over time. For advice about your specific situation, consult a licensed attorney.
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