A reverse mortgage lets homeowners 62 and older turn home equity into cash without selling and without a monthly mortgage payment. The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM). I’ve been around these long enough to know they’re neither the miracle nor the trap they get described as. They’re a tool, and they fit some situations well and others not at all. I’ll tell you which yours is.
How it works
Instead of you paying the lender each month, the loan balance grows over time as interest accrues. You keep title to the home. You can take the proceeds as a lump sum, a line of credit that grows over time, monthly payments, or a mix. The loan comes due when the last borrower sells, moves out permanently, or passes away.
What you still have to do
You remain responsible for property taxes, homeowners insurance, and keeping the home maintained. Fall behind on those and the loan can be called. This is the part I make sure everyone understands before we go any further.
Your heirs are protected
HECMs are non-recourse. If the home is worth less than the loan balance when it’s due, neither you nor your heirs owe the difference; FHA insurance covers it. If the home is worth more, the equity above the balance belongs to you or your estate. Heirs can keep the home by paying off the balance or 95% of the appraised value, whichever is less.
Buying a home with a reverse mortgage
HECM for Purchase lets buyers 62 and older buy a home with a large down payment and no monthly mortgage payment afterward. It’s a common move for people downsizing or relocating closer to family who want to keep more cash in reserve.
Above the FHA limit
For higher-value homes, proprietary (non-FHA) reverse mortgages allow larger loan amounts. I’ll run both when it applies.
Counseling is required, and that’s a good thing
Every HECM borrower completes a session with an independent HUD-approved counselor before applying. It’s a required step, and I encourage adult children or advisors to sit in.