What is a reverse mortgage?
A loan for homeowners 62 and older: a reverse mortgage sends you part of what the home is worth, and it is repaid when the home sells.
- Minimum age for a HECM: 62
- In HUD's latest twelve months, 24,529 HECMs closed
- 90% Share of the market goes to HECMs, per ACL
What is a reverse mortgage? Owners aged 62 or older can take this loan, which draws cash from part of the home's value with no monthly loan payment. Repayment comes later, usually out of the sale of the home, once the last borrower has died, sold the home or moved out.
The money flow is what the word "reverse" describes. A regular mortgage works the other way: you pay the lender, and what you owe shrinks. Under a reverse mortgage, the lender pays you instead, and your debt grows.
What a reverse mortgage means in simple terms
Picture borrowing against the home you already own, with the money paid back at the end.
- You do not give up the home. Your name remains on the title.
- You receive money. Monthly payments, a lump sum, a credit line you can draw on, or a mix of these.
- There is no monthly loan payment. Instead, the interest and fees go onto the balance.
- The home's bills are still yours to pay. Property taxes, insurance and upkeep remain your responsibility.
- The balance comes due later. To repay the loan, the home is usually sold. Money left over goes to you or to your heirs.
The federally insured loan has an age floor of 62, according to The CFPB's explainer.
The three types of reverse mortgage
Three types of reverse mortgage exist. What differs: who backs each one, how much they will lend and how you may use the money.
| Type | Who offers it | Use of money | Insured by FHA |
|---|---|---|---|
| HECM (Home Equity Conversion Mortgage) | FHA-approved lenders | Any purpose | Yes |
| Proprietary reverse mortgage | Private lenders | Any purpose | No |
| Single-purpose reverse mortgage loans loans | Some state and local agencies and nonprofits | One purpose the lender approves | No |
HECM
The FHA-insured HECM is by far the most common type. ACL, the federal agency focused on older adults says HECMs account for about 90 percent of the market. A 2026 limit of $1,249,125, along with the lending factors and fee caps, is set by HUD. Full detail on it is in the HECM guide.
Proprietary reverse mortgage
This is a private loan without FHA insurance, known as a proprietary reverse mortgage. Lenders mainly offer this loan for homes valued above the HECM limit, which is why the name jumbo reverse mortgage also applies. Lenders set their own rules for these loans. Read about jumbo reverse mortgage.
Single-purpose reverse mortgage loans
A single-purpose reverse mortgage covers one need, including home repairs or property taxes. Although usually the least expensive option, it is not available in every area and often serves only owners with lower incomes. The area agency on aging in your area, or a HUD-approved counselor, can say whether one exists where you live.
Who can get one?
Every borrower on a HECM must be 62 or older. The core rules from Washington's financial regulator say that all owners are 62 or older and at least one of them lives in the house. Beyond that, you need a counseling session, a financial assessment, an eligible home and enough equity. All of the details appear in reverse mortgage requirements.
What it costs
Upfront costs on a HECM are paid out of the loan itself. For a home valued at $450,000, the default worksheet lists upfront mortgage insurance of $9,000. It also shows an origination fee of $6,000 plus $3,500 in other closing costs. Then you have interest, plus 0.5% a year for mortgage insurance on the balance. All of the fees appear in reverse mortgage costs.
Reverse mortgage facts from HUD's data
Every HECM that HUD insures is published. Its most recent twelve months of data cover the following:
- Nationwide, 24,529 HECMs closed.
- 1,354 of them were used for a home purchase.
- The median for maximum claim amounts was $440,000.
- Principal limits had a median of $194,172.
- Just 12 of them were fixed-rate loans.
- A total of A total of 34 lenders made them.
When a reverse mortgage comes due
The loan comes due once the last borrower has died, sold the home or stopped living in it. DC's banking regulator adds that staying away for health reasons beyond 12 months also makes it due. Unpaid property taxes or insurance can also make the loan due. The loan balance is the most heirs ever owe, and to keep the home they pay at most 95% of the appraised value.
Questions people ask
What is a reverse mortgage in simple terms?
This loan lets you live in your home and pull money from its value now, and that debt is paid back when the home sells.
What are the three reverse mortgage options?
Three kinds exist: the FHA-insured HECM, a proprietary loan offered by private lenders and a single-purpose loan provided by some public agencies and nonprofits.
Which type of reverse mortgage is used most often?
HECM is the most widely used reverse mortgage type. According to ACL, HECMs hold about 90 percent of this market.
Is a reverse mortgage something you must pay back?
Yes, but not while you stay in the home and keep up with the loan terms. Repayment is made when the home sells, or when the final borrower moves out or dies.
What is a reverse mortgage and why is it bad?
Although it is not bad for everyone, it is costly and its balance increases each month, so less remains for you and your heirs. Both sides are covered in the pros and cons guide.
How does the 60% rule work for a reverse mortgage?
For the first year, you may take the higher of 60% of your principal limit and your required payoffs plus 10% of the principal limit. The rest of the money opens up after twelve months.