Reverse mortgage basics

The common federally insured version, a Home Equity Conversion Mortgage, or HECM, is for homeowners who are generally 62 or older and who live in the home as their primary residence. Private reverse mortgages exist too, with their own age and property rules.

You keep title to the house. The amount you can borrow depends on your age, the value of the home, current interest rates, and the program’s limits. A lender calculates that amount. This site does not.

Payout choices often include a lump sum, monthly payments, a line of credit, or a combination. You typically do not make a monthly principal-and-interest payment to the lender. Interest and fees are added to the loan balance, so the amount owed grows over time.

You still have to live in the home, keep it insured, pay property taxes and homeowners insurance, and maintain the property. Failing at those obligations can put the loan in default even when no monthly mortgage payment is due.

Hecms include an upfront mortgage insurance premium, ongoing mortgage insurance, origination charges, and the usual closing costs. Before you can take a HECM, you must complete counseling with a HUD-approved counselor. That session is there so the costs, the growing balance, and the alternatives are explained by someone who is not selling the loan.

The loan is generally repaid when the last borrower sells, moves out permanently, or dies. Heirs can usually repay the loan or sell the house. With a HECM, they are not required to pay more than the home is worth if they choose to satisfy the debt by selling it through the program’s rules. A reverse mortgage is a loan with fees, not a gift of equity.