Reverse Mortgage Guide

• Equity Depletion: You are spending your “inheritance” today, which leaves less for your heirs later.

• High Fees: The upfront costs are higher than almost any other home loan type.

• Foreclosure Risk: You can still lose the home if you fail to pay property taxes or insurance, or if the home falls into major disrepair.

Before committing, consider these other ways to access cash:

• Downsizing: Selling your current home and buying a smaller, less expensive one.

• HELOC or Home Equity Loan: If you have enough income to handle monthly payments, these have much lower upfront fees.

• Sale-Leaseback: Selling your home to a company (or your children) and renting it back.

• Property Tax Deferral: Some local governments allow seniors to delay paying property taxes until the home is sold.

A reverse mortgage is often a good fit if you plan to stay in your home for the next 10+ years and have a clear plan for how the funds will improve your quality of life. It is generally not a good idea if you plan to move in the near future (due to high upfront costs) or if your primary goal is to leave the home as an unencumbered asset to your children.

• Boosted Cash Flow: Provides tax-free income to cover living expenses or debt.

• Stay in Your Home: Allows you to age in place without the burden of a monthly mortgage payment.

• Protection: Non-recourse status ensures you or your heirs aren’t stuck with a bill if the home’s value drops below the loan balance.

You have several flexible options for how you get your funds:

• Lump Sum: A single, one-time payment (often required for fixed-rate loans).

• Tenure: Equal monthly payments for as long as you live in the home.

• Term: Equal monthly payments for a fixed number of years.

• Line of Credit: Access to funds as needed, where the unused portion of the line grows over time.

Reverse mortgages are generally more expensive than traditional loans. Common 2026 costs include:

• Origination Fee: Capped at $6,000 for HECMs.

• Upfront Mortgage Insurance Premium (MIP): 2% of the home’s appraised value.

• Appraisal & Closing Costs: Similar to a standard mortgage (title search, recording fees, etc.).

• Ongoing Costs: A 0.5% annual MIP and monthly servicing fees (up to $35). Most of these costs can be financed into the loan so you don’t have to pay them out of pocket.

• Home Equity Conversion Mortgage (HECM): The most popular, federally insured version. In 2026, the FHA lending limit for HECMs is $1,249,125.

• Proprietary (Jumbo) Reverse Mortgage: Private loans for high-value homes that exceed government limits. These often allow for larger lump-sum payouts.

• Single-Purpose Reverse Mortgage: The least expensive option, offered by some state/local agencies or non-profits for a specific use, such as property taxes or home repairs.

To qualify for the most common type of reverse mortgage (an HECM), you must meet several criteria:

• Age: You (or at least one spouse) must be 62 or older (some private “jumbo” loans allow ages as young as 55).

• Equity: You must own your home outright or have significant equity (typically 50% or more).

• Residence: The home must be your primary residence where you live most of the year.

• Counseling: You must complete a session with a HUD-approved counselor to ensure you understand the long-term implications.

• Financial Assessment: You must demonstrate the ability to continue paying property taxes, homeowners insurance, and maintenance costs.

The lender uses your home as collateral and provides you with funds based on your age, current interest rates, and the home’s appraised value. As you receive payments, your loan balance grows and your home equity shrinks. In 2026, the interest and fees are added to the loan balance each month (compounding), meaning the amount you owe increases over time. Because these are “non-recourse” loans, you or your heirs will never owe more than the home is worth at the time of sale.

A reverse mortgage is a unique loan that allows older homeowners to convert a portion of their home equity into tax-free cash. Unlike a traditional “forward” mortgage where you pay the lender every month to build equity, in a reverse mortgage, the lender pays you. You retain the title to your home, and you are not required to make monthly mortgage payments. The loan is only repaid when the last surviving borrower dies, sells the home, or moves out for more than 12 consecutive months.