A reverse mortgage lets homeowners age 62 and older borrow against their home equity without monthly mortgage payments. The loan is repaid when the borrower moves out, sells or dies.
How they work
- You keep title and live in the home.
- The loan balance grows with interest and fees.
- Repayment is due when the last borrower leaves the home, sells or dies.
- You must keep paying property taxes, insurance and maintenance.
Costs and risks
- Upfront fees and mortgage insurance premiums.
- Interest that compounds, reducing equity for heirs.
- Risk of foreclosure if you fail to pay taxes or insurance or move out.
- Possible effects on needs-based benefits.
Protections
Federally insured reverse mortgages require counseling from an approved agency. Non-borrowing spouses have some protections under HUD rules, if certain conditions are met. Non-recourse features generally limit what you or heirs owe to the home's value.
Before you apply
- Compare alternatives such as downsizing or a home equity loan.
- Talk to your family and a counselor.
- Beware of high-pressure sales and scams.
- Understand how heirs will repay.
- Consider consulting an elder law attorney.
Frequently asked questions
Can I lose my home?
Yes, if you do not meet loan obligations.
Do I owe more than the house is worth?
For federally insured loans, usually not, because of non-recourse protection.