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A reverse mortgage — most commonly a Home Equity Conversion Mortgage (HECM) insured by the FHA — lets homeowners aged 62 and older borrow against their home equity without making monthly mortgage payments. Instead of paying the lender each month, the loan balance grows over time as interest accrues. You receive money as a lump sum, monthly payments, a line of credit, or a combination. The loan becomes due when the last borrower permanently leaves the home, sells it, or passes away. At that point, the home is typically sold and proceeds repay the loan. If the home sells for more than the loan balance, the remaining equity goes to you or your heirs. If it sells for less, the FHA insurance covers the shortfall — you or your heirs are never personally liable for more than the home's value.

To qualify for a HECM, all borrowers must be at least 62 years old and the home must be your primary residence. Eligible property types include single-family homes, 2–4 unit properties (if you occupy one unit), FHA-approved condominiums, and manufactured homes meeting FHA standards. The home must have sufficient equity — generally, borrowers with no mortgage or a low remaining balance qualify most easily. HUD also requires that you complete HUD-approved counseling before applying, stay current on property taxes, homeowners insurance, and HOA fees, and maintain the home in good condition. There is no income or credit score minimum for HECM qualification, though a financial assessment is conducted to ensure you can meet ongoing obligations.

No — you are not required to make monthly mortgage payments on a HECM reverse mortgage as long as you live in the home as your primary residence. However, you must continue to pay property taxes, homeowners insurance, and any HOA fees. You must also maintain the property. Failure to meet these obligations can trigger default and potential foreclosure, even on a reverse mortgage. Some borrowers voluntarily make payments to slow the loan balance growth and preserve more equity for their heirs — this is allowed, but not required. The loan balance (principal plus accrued interest plus MIP) grows each month and is repaid when the home is sold.

The HECM loan becomes due and payable when the last surviving borrower dies, sells the home, or permanently moves out (defined as not living in the home as a primary residence for 12 consecutive months, such as for a nursing home stay). Heirs typically have 6 months (with possible extensions to 12 months) to sell the home, refinance the loan, or repay the balance to keep the home. If the loan balance exceeds the home's value, heirs can simply sell the home and walk away with no personal liability — the FHA insurance covers the shortfall. If heirs want to keep the home, they must repay the lower of the loan balance or 95% of the appraised value. Any remaining equity after loan repayment goes to the estate.

A reverse mortgage reduces the equity that passes to heirs because the loan balance (including interest and insurance premiums) grows over time. However, HECM loans are non-recourse — heirs are never responsible for more than the home is worth. If the home is sold and the proceeds exceed the loan balance, heirs receive the difference. If not, FHA insurance covers the gap. From a tax perspective, reverse mortgage proceeds are generally not considered taxable income because they are loan advances, not earnings. However, heirs who inherit and sell the home may face capital gains tax on the difference between the home's fair market value at death (stepped-up basis) and the sale price. Estate planning with a financial advisor or estate attorney is recommended if preserving home equity for heirs is a priority.

HECM closing costs are higher than conventional mortgages and typically include: (1) Origination fee — up to $6,000, depending on home value; (2) FHA Upfront Mortgage Insurance Premium (MIP) — 2% of the Maximum Claim Amount; (3) Annual MIP — 0.5% of the loan balance per year; (4) Appraisal fee — $450–$600 for a formal FHA appraisal; (5) Title insurance and closing costs — $1,500–$3,000; (6) HUD counseling fee — typically $125–$200; (7) Monthly servicing fees — up to $35/month. Total upfront costs typically range from $15,000 to $25,000 for most borrowers, often financed into the loan rather than paid out of pocket. The ongoing annual MIP plus interest cause the loan balance to grow significantly over time, which reduces the equity available to heirs.

Both a reverse mortgage and a HELOC (Home Equity Line of Credit) let you access home equity, but they work very differently. A HELOC requires monthly payments of at least interest, has a variable rate, and has a draw period (typically 10 years) followed by a repayment period. HELOCs are available to homeowners of any age who qualify based on income and credit. A reverse mortgage requires no monthly payments, is available only to borrowers aged 62+, and the loan balance grows over time. HELOCs are generally cheaper for borrowers who can afford payments and want to preserve equity. Reverse mortgages are better suited for retirees who need to supplement income without a monthly payment obligation. A HELOC can be frozen or reduced by the lender if home values fall; a HECM line of credit cannot be reduced once established and actually grows over time at the loan's interest rate.