A reverse mortgage turns home equity into borrowed money for a homeowner 62 or older — with no required monthly principal-and-interest payment. That one feature is why it exists, and also why it is so often misunderstood: the payment is not waived, it is deferred, and the balance grows every month it is deferred. This page is how the standard reverse mortgage — the FHA-insured HECM — actually works: who can get one, what the borrower must keep doing, how the money comes out, and exactly when and how the loan ends.
On an ordinary mortgage the borrower sends a payment every month and the balance shrinks. A reverse mortgage runs the other way: the lender pays the homeowner, or extends a line of credit, and no monthly principal-and-interest payment is required. The interest on what has been borrowed — plus, on a HECM, the ongoing mortgage insurance premiums — is added to the balance, so the amount owed grows over time and the homeowner's equity shrinks by the same amount, unless the home's value rises faster. How much can be borrowed in the first place depends on three things: the age of the youngest borrower (older borrowers can draw more), current interest rates (lower rates allow more), and the home's appraised value, subject to the FHA maximum claim amount. A reverse mortgage is a loan, with a growing balance and real costs — it is not free money, not income and not a government check.
Most reverse mortgages are Home Equity Conversion Mortgages — HECMs — insured by the Federal Housing Administration (FHA) under the U.S. Department of Housing and Urban Development (HUD). Two gates stand in front of every HECM. The lender must be FHA-approved: no other lender can make one. And the borrower must first complete counseling with a HUD-approved counselor, who walks through how the loan balance grows, what it costs, and what the alternatives are, before any application can move forward. The money itself can be taken as a single lump sum, as monthly payments, as a line of credit to draw on when needed, or as a combination. Other reverse mortgages exist — proprietary loans offered by private lenders, often for higher-value homes, and single-purpose loans from some state, local government or nonprofit programs, typically restricted to one use such as paying property taxes or making home repairs — but the HECM is the standard the term usually means.
The borrower keeps title to the home — a reverse mortgage does not hand ownership to the lender — and in exchange takes on duties that last the whole loan. The home must remain the borrower's principal residence: moving out permanently ends the loan. Property taxes must be paid and homeowners insurance kept in force, on time, every year. And the home must be maintained in reasonable condition. These are not formalities: failing to pay taxes or insurance, or letting the property fall into disrepair, is a default that can make the loan due and payable, which is why lenders check a borrower's ability to carry those charges before approving the loan. A homeowner who cannot reliably keep up taxes and insurance is a homeowner a reverse mortgage can put at risk, however attractive the no-monthly-payment feature looks.
The loan comes due when the last surviving borrower dies, sells the home, or moves out permanently — and on default of the tax, insurance or maintenance conditions. It is then repaid from the home, usually by selling it. The HECM's non-recourse protection caps the bill: neither the borrower nor the heirs ever owe more than the home sells for, even when the balance that grew over the years is larger than the sale price — the FHA insurance fund covers the shortfall. That leaves heirs with three clean choices: repay the loan and keep the home, sell the home and keep whatever equity remains after the loan is paid, or hand over the keys and owe nothing further. What heirs cannot do is keep the home and ignore the loan: the debt attaches to the property, not to them personally, and settling it one of those three ways is part of settling the estate.
Homeowner HQ keeps the homeowner's side of the record straight while a loan like this runs: your own agent's monthly updates track your home's value and your equity — the two numbers a reverse mortgage pulls in opposite directions, as the home's value moves and the loan balance grows. The guides in this series cover the surrounding pieces side by side: how home equity is calculated, the difference between a home equity loan and a HELOC, a cash-out refinance, and what happens to a mortgage when a home is sold — so a homeowner weighing a reverse mortgage can see the whole picture, and bring real numbers to the HUD-approved counseling session the process requires anyway.
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A reverse mortgage is a home loan that lets a homeowner age 62 or older borrow against the equity in their home without being required to make a monthly principal-and-interest payment. Instead of the borrower paying the loan down each month, the loan balance grows over time: interest and mortgage insurance premiums are added to what is owed. How much the homeowner can borrow depends on the youngest borrower's age, current interest rates and the home's appraised value, subject to the FHA maximum claim amount. The borrower keeps title to the home and keeps living in it. It is a loan with a growing balance — not free money, not income and not a government benefit — and it comes due when the last borrower dies, sells the home or moves out permanently. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), the Federal Housing Administration program; proprietary reverse mortgages from private lenders and single-purpose reverse mortgages from some state, local government or nonprofit programs also exist, but the HECM is the standard.
A HECM — Home Equity Conversion Mortgage — is a reverse mortgage insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD). HECMs are available only through FHA-approved lenders, and before one can close the borrower must complete counseling with a HUD-approved counselor, who explains the costs, the growing balance and the alternatives. The youngest borrower must be at least 62, and the home must be the borrower's principal residence. The money can be taken as a lump sum, as monthly payments, as a line of credit the borrower draws on when needed, or as a combination of those. After closing, the borrower keeps title to the home and must keep living in it as their principal residence, pay the property taxes and homeowners insurance, and keep the home maintained — falling behind on taxes or insurance, or letting the home fall into disrepair, can make the loan due and payable.
A reverse mortgage comes due when the last surviving borrower dies, sells the home or moves out of it permanently — for example into care — and also if the borrower defaults on the loan's conditions, such as not paying property taxes or homeowners insurance. The loan is then repaid from the home itself, usually by selling it. A HECM is a non-recourse loan: neither the borrower nor their heirs ever owe more than the home sells for, even if the grown balance is higher than the sale price — the FHA insurance covers the difference. Heirs who want to keep the home may repay the loan and keep it; heirs who sell the home keep any equity left after the loan is paid off; and heirs who want neither can hand over the keys and walk away with no further obligation.