Home equity

Reverse mortgages, explained honestly

The short answer

You draw your equity now and pay nothing monthly — but the balance grows, and it comes out of what's left.

For homeowners 62 or older, it turns equity into cash with no monthly payment.
Upfront costs are steep — origination, mortgage insurance, and closing fees.
Interest is added to the balance every month, so what you owe grows over time.
The catch: the growing balance is repaid when you leave the home — often leaving little for your heirs.

Written by Dana Acosta

Consumer-credit writer · 9 yrs

✓ Reviewed by M. Reyes, AFC®

Last reviewed Jul 2026

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How a reverse mortgage works

A reverse mortgage lets a homeowner aged 62 or older borrow against their equity. Most are HECMs — Home Equity Conversion Mortgages, insured by the federal government. You can take the money as a lump sum, a monthly payment, or a line of credit.

You make no monthly payments. Instead, the interest and fees are added to the balance each month, so what you owe rises over time as your equity falls. The loan comes due when the last borrower sells, moves out for good, or dies. You must still pay property taxes, insurance, and upkeep — falling behind on those can trigger foreclosure.

Put a real number on it

Upfront mortgage insurance premium

of the home's value, plus annual premiums

Grows

Your balance, every month

interest and fees compound against you

62+

The minimum age to qualify

for the youngest borrower

Illustrative — HECM rules and premiums are set by HUD and can change. Turn any fee into an APR →

⚠ The catch: the balance grows, and heirs inherit less

Because interest is added instead of paid, the amount owed climbs year after year while your equity shrinks. When you leave the home, the loan is repaid from its sale.

Your heirs can keep the home only by paying off the balance — often by selling it. For many families, a reverse mortgage means the house is no longer part of the inheritance.

✓ It may fit if

You're 62+, plan to stay in the home for years, and need the income.
Leaving the home to heirs is not a priority.
You can keep up taxes, insurance, and upkeep.

✕ Look elsewhere if

You might move or sell within a few years — the upfront costs won't pay off.
You want to leave the home to your family.
A HELOC, downsizing, or state aid could meet the need for less.

Cheaper moves to weigh first

Before a reverse mortgage, look at the lower-cost paths. A HELOC or home-equity loan costs far less upfront if you can handle a monthly payment. Downsizing frees equity without the compounding balance. And state or local programs — property-tax deferral, aid for older homeowners — can ease the pressure a reverse mortgage is meant to solve. A HUD-approved counselor is required before you take a HECM; use that session to weigh every option.

See how home-equity options compare on the home equity hub →