Reverse Mortgage (HECM)
A reverse mortgage, most commonly the FHA-insured HECM, lets qualifying homeowners 62 and older convert home equity into a line of credit, monthly draws, or a lump sum, without a required monthly mortgage payment. You keep title to your home, and you remain responsible for property taxes, insurance, and upkeep. It is a real loan with real rules, so let's walk through it straight.
A reverse mortgage borrows against your equity without requiring a monthly mortgage payment. Instead of you paying the balance down, interest and fees are added to the balance over time, and the loan is repaid when the home sells, usually after you move out or pass away. That growing-balance mechanic is the heart of the product, and anyone selling you one should say it as plainly as that.
The federally-insured version, the HECM, carries real consumer protections: a mandatory session with a HUD-approved counselor before you can apply, a non-recourse guarantee so the debt can never exceed the home's value at repayment, and protections for an eligible non-borrowing spouse. Proceeds can arrive as a line of credit that grows over time, fixed monthly draws, a lump sum, or a mix.
The honest family conversation: every dollar drawn plus its interest comes out of the equity your estate would have inherited. For some households that's exactly the point, using the house to fund the retirement. For others it collides with heirs-first goals. I'd rather have that conversation with you and your family up front than have the product surprise anyone later.
If you may move within a few years, the upfront costs are hard to justify. If leaving maximum equity to your heirs is the priority, a reverse works directly against it. And if you comfortably qualify for a HELOC or a standard refinance, one of those often solves the same problem for less. I broker all three, so I have no reason to push you toward this one; we'll pick whichever tool your numbers actually favor.
| Reverse (HECM) | Cash-out refinance | |
|---|---|---|
| Monthly mortgage payment | Not required; taxes, insurance, upkeep still owed | Required every month |
| Age requirement | 62 and older | None |
| Loan balance over time | Grows as interest accrues | Shrinks as you pay it down |
| Required counseling | Yes, HUD-approved, before application | No |
| When it's repaid | Home sold or no longer your primary residence | Monthly over the loan term |
Program availability, guidelines, and pricing vary by lender and by the state where the property is located, and change without notice. This comparison is educational, not a credit decision or an offer. Program restrictions apply.
No. Title stays in your name. The lender holds a lien, the same as any mortgage. The loan comes due when the home is sold or is no longer your primary residence, or if the property charges like taxes and insurance go unpaid, which is why staying current on those is a condition of the loan.
It depends on your age, your home's value, current rates, and any existing mortgage balance that must be paid off first. Older borrowers with more equity generally have access to more. I'll run your actual figures rather than hand you a generic percentage.
When the loan comes due, heirs can sell the home and keep any equity above the balance, or keep the home by paying off the loan balance (or 95 percent of the appraised value if the home is worth less than the balance). The HECM is non-recourse, so no one ever owes more than the home's value at repayment. I encourage adult children in the room for this conversation; it goes better for everyone.
Live in the home as your primary residence, keep property taxes and homeowners insurance current, and maintain the property. Those obligations don't disappear with the monthly payment, and falling behind on them can trigger the loan. Any honest reverse conversation leads with that.
Loan proceeds are generally not taxable income because they're borrowed money, not earnings, but the interest also isn't deductible the way regular mortgage interest can be until it's actually paid. Confirm your specifics with your tax advisor. I don't provide tax advice.
