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Home » What is a Reverse Mortgage?

Written by

Brian McKay

| Fact checked | Published April 16, 2023 | Updated September 28, 2026 | 5 min read

What is a Reverse Mortgage?

A reverse mortgage is a loan for homeowners 62 or older that turns home equity into cash with no monthly mortgage payment. The balance grows with interest and fees and is repaid when you sell, move out permanently or pass away, and the federally insured HECM version requires HUD approved counseling and limits what you or your heirs owe to the home's value.

Key facts

Minimum Age: 62 years old
Title: Stays in your name
Monthly Payments: Not required
Right to Cancel: 3 business days after closing

A reverse mortgage is a specialized home loan designed for homeowners aged 62 and older that lets them borrow against the equity in their home without making monthly mortgage payments. Unlike a traditional mortgage where you pay the lender each month, a reverse mortgage works in the opposite direction; the lender pays you, makes funds available through a line of credit, or provides a lump sum. The title to the home stays in your name, and the loan does not become due until you sell the property, move out permanently, or pass away.

Most Important Fact: A reverse mortgage is a loan, not free money. Interest and fees accrue monthly and are added to the loan balance. The equity in your home decreases over time as the balance grows. It must ultimately be repaid, typically through the sale of the home.

How a Reverse Mortgage Works

The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA). Here is how the mechanics work:

You borrow against your home's equity while retaining ownership and the right to live in the home
No monthly mortgage payments are required, but you must continue paying property taxes, homeowners insurance, and HOA fees if applicable
Interest and fees are added to the loan balance monthly, so the balance grows over time
As the balance grows, your equity in the property decreases
The loan becomes due when you permanently leave the home, sell it, or pass away
If the loan balance exceeds the home's value at repayment, FHA insurance covers the difference; you or your heirs will not owe more than the home is worth

Who Qualifies for a Reverse Mortgage?

To be eligible for a HECM reverse mortgage, you must:

Be at least 62 years old (all borrowers on the loan must meet this age requirement)
Own your home outright or have substantial equity
Use the property as your primary residence
Not be delinquent on any federal debt
Complete a required counseling session with a HUD-approved housing counselor before proceeding
Demonstrate the financial ability to continue paying property taxes, insurance, and maintenance costs

How You Can Receive the Funds

HECM reverse mortgages offer several disbursement options:

Lump sum: a single upfront payment (only option available with a fixed-rate HECM)
Monthly payments: equal monthly disbursements for a set term or for as long as you live in the home
Line of credit: draw funds as needed; the unused portion grows over time
Combination: a mix of the above options

Reverse Mortgage Scams to Watch For

The reverse mortgage market has attracted its share of fraudulent actors. Be alert to these common schemes:

Contractor Scams: Contractors may approach homeowners (particularly after a natural disaster or as part of unsolicited door-to-door sales) suggesting a reverse mortgage to fund home repairs. This is a common fraud. Never allow a third party to steer you toward a reverse mortgage for their financial benefit.

Veterans Scams: Some mortgage advertisements falsely imply VA approval or promise special deals for veterans. The VA does not offer reverse mortgage loans. Any advertisement suggesting otherwise is deceptive. Verify any offer through a HUD-approved counselor before proceeding.

Your Right to Cancel

Federal law gives you a three-business-day right of rescission after closing on a reverse mortgage. This means you can cancel the loan for any reason within three business days of signing without penalty.

To exercise this right:

Notify the lender in writing within three business days of closing
Send the letter by certified mail and request a return receipt
Keep copies of all correspondence

The lender then has 20 days to return any fees you paid for financing the loan. This right applies specifically to HECMs and most other reverse mortgage types.

Is a Reverse Mortgage Right for You?

A reverse mortgage can be a legitimate financial tool for the right homeowner in the right circumstances. It may make sense if:

You are 62 or older and have substantial home equity
You plan to stay in the home long-term
You need to supplement retirement income without selling the home
You do not plan to leave the home's equity to heirs

It is less suitable if you want to preserve equity for your heirs, if you have a spouse under 62 who could be displaced (though non-borrowing spouse protections now exist), or if the combination of interest, fees, and insurance costs outweighs the benefit of the funds received.

Always consult with a HUD-approved housing counselor and an independent financial advisor before signing. Counseling is required by law for HECM borrowers and can reveal important alternatives you may not have considered.

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Frequently Asked Questions

What is a reverse mortgage? ▼

A reverse mortgage is a home loan for homeowners aged 62 or older that lets them borrow against home equity without making monthly payments. The loan balance grows over time with accrued interest and fees and is repaid when the borrower sells the home, moves out permanently, or passes away. Title stays in the borrower's name throughout.

Who qualifies for a reverse mortgage? ▼

For a HECM (the most common type), you must be at least 62, own your home outright or have significant equity, use it as your primary residence, and not be delinquent on federal debt. You must also complete a required HUD-approved counseling session before closing.

Do I lose my home with a reverse mortgage? ▼

No. You retain title to the home. The loan becomes due when you permanently leave, sell, or pass away. If the loan balance exceeds the home's value at that time, FHA insurance on HECM loans covers the difference; neither you nor your heirs owe more than the home is worth.

What are common reverse mortgage scams? ▼

Common scams include contractors pressuring homeowners into reverse mortgages to fund repairs, and ads falsely implying VA approval. The VA does not offer reverse mortgage loans. Always verify any offer with a HUD-approved counselor. Never let a third party initiate or control your reverse mortgage process.

Can I cancel a reverse mortgage after closing? ▼

Yes. Federal law provides a three-business-day right of rescission after closing. To cancel, notify the lender in writing within three business days by certified mail with return receipt requested. Keep copies of all correspondence. The lender has 20 days to return any financing fees you paid.

This article is for general information and is not financial advice. Rates shown are market averages, not offers; terms and fees are set by each institution.