Reverse Mortgage Pros and Cons
A reverse mortgage lets a homeowner 62 or older turn home equity into cash without monthly mortgage payments, while the title stays in their name. In exchange, you keep paying property taxes, homeowners insurance, any HOA dues and upkeep, the balance grows as interest and fees are added, and the loan comes due when the last borrower dies, sells the home or moves out for good, or sooner if the taxes, insurance or upkeep fall behind. What follows covers the Home Equity Conversion Mortgage (HECM), the most common kind.
Last updated October 22, 2026The advantages, and what comes with each
- No monthly mortgage payment while you live in the home. You still pay property taxes, homeowners insurance, any HOA dues and upkeep, and interest and fees are added to the balance instead, so it grows.
- You keep the title. The home stays in your name, and you're responsible for it: if the taxes, insurance or upkeep fall behind, or it stops being your principal residence, the loan can come due.
- Choices in how the money comes. A HECM can pay out as monthly payments for a set term or for as long as you live in the home, as a line of credit, as a combination of those, or, with a fixed rate, as a single lump sum. Whatever you draw adds to the balance.
- You or your heirs won't owe more than the home is worth. If the balance grows past the home's value, selling at the appraised value settles it, and heirs who sell or keep the home don't pay more than 95% of its appraised value; mortgage insurance covers the rest. The growing balance still reduces the equity left.
- A co-borrower keeps the loan going. If one borrower dies, a co-borrower can stay in the home and keep receiving payments while meeting the loan's obligations.
- Time to change your mind. Most reverse mortgages give you three business days after closing to cancel, in writing, without penalty.
The drawbacks
- It costs more than most home loans. The CFPB says a reverse mortgage is typically more expensive than other home loans. Upfront costs include an origination fee, an initial mortgage insurance premium and closing costs. See what a reverse mortgage costs.
- The balance grows every month. Interest, an annual mortgage insurance premium and any servicing fee are added each month, and the next month's interest is charged on all of it.
- The home's bills stay yours. Falling behind on property taxes, homeowners insurance or upkeep can make the loan come due early.
- Moving out makes it due. The loan comes due when the last borrower or eligible non-borrowing spouse stops living in the home, including after more than 12 months in a row in a care facility.
- A younger spouse has narrower rights. A spouse under 62 can't be a borrower. If named in the loan as an eligible non-borrowing spouse, they may be able to stay after the borrower dies, but they won't receive money from the loan, and qualifying can be difficult.
- Less left for your heirs. As the balance grows, the equity they could inherit falls. To keep the home on a HECM, they have to pay the balance or 95% of the appraised value, whichever is less.
- Timing matters. The CFPB notes that taking a reverse mortgage too young can leave you short of money later, when income may be lower and health costs higher.
Counseling, and offers to watch for
HUD-approved counseling is required before a lender can process your HECM application. The session covers the loan's costs and obligations and the alternatives to it. The CFPB also warns about contractors who approach homeowners about a reverse mortgage to pay for repairs, and about ads aimed at veterans: the VA does not offer reverse mortgages.
| Who | Youngest borrower 62 or older; HUD-approved counseling required |
|---|---|
| Monthly mortgage payment | None while you live there; taxes, insurance, HOA dues and upkeep continue |
| Title | Stays in your name |
| Balance | Grows as interest and fees are added |
| When it's due | Last borrower dies, sells, moves out for good, or stops keeping up the obligations |
| Owed at the end | No more than the home's value; heirs pay no more than 95% of appraised value to keep or sell it |
| Right to cancel | Three business days after closing, for most reverse mortgages |
Related questions
Sources
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-reverse-mortgage-en-224/
- https://www.consumerfinance.gov/ask-cfpb/how-much-does-a-reverse-mortgage-loan-cost-en-237/
- https://www.consumerfinance.gov/ask-cfpb/what-happens-if-my-reverse-mortgage-loan-balance-grows-larger-than-the-value-of-my-home-en-1217/
- https://www.consumerfinance.gov/ask-cfpb/when-do-i-have-to-pay-back-a-reverse-mortgage-loan-en-236/
- https://www.consumerfinance.gov/ask-cfpb/what-happens-my-reverse-mortgage-when-i-die-en-2096/
- https://www.consumerfinance.gov/ask-cfpb/can-anyone-take-out-a-reverse-mortgage-loan-en-227/
- https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.