What Is a Reverse Mortgage? The Complete Guide
A reverse mortgage is a loan for homeowners age 62 and older that converts home equity into cash or a line of credit. Instead of paying the lender each month, you can receive funds while living in the home. The loan is repaid when you sell, move out permanently, or pass away.
The most common type is the HECM (Home Equity Conversion Mortgage), insured by the FHA. For 2026, FHA insures loans on home values up to $1,249,125 (HUD Mortgagee Letter 2025-22).
How it differs from a regular mortgage
| Regular mortgage | Reverse mortgage |
|---|---|
| You pay the bank monthly | No required monthly mortgage payments |
| Equity grows as you pay down | Equity decreases as you receive funds |
| Foreclosure if you miss payments | Foreclosure if you fail property obligations |
You keep title to the home. You must still pay property taxes, insurance, and maintenance.
Main payout options
- Line of credit (most flexible; unused portion can grow)
- Lump sum (limited for first-year draws on HECM)
- Tenure payments (monthly payments for life while you live in the home)
- Term payments (monthly for a set period)
Required steps before closing
Every HECM borrower must complete HUD-approved counseling with an independent counselor. Lenders also run a financial assessment to confirm you can afford ongoing property charges.
When this is NOT a good fit
- You cannot reliably pay property taxes, homeowners insurance, and maintenance
- You plan to move within a few years
- You need every dollar of home equity preserved for heirs
- Medicaid or SSI eligibility depends on keeping assets below program limits (consult an elder law attorney)
- You were pressured by a salesperson without time to research alternatives
Related guides
Frequently asked questions
Do I give up ownership of my home?
No. You remain on title. The lender has a lien, similar to a regular mortgage.
Are reverse mortgage proceeds taxable?
Loan proceeds are generally not taxable income because they are borrowed funds, not earned income. Confirm with a tax advisor.