Reverse Mortgage FAQ: What Older Homeowners Should Know
If you’re a homeowner age 62 or older, you may have heard about a reverse mortgage. You might be wondering: What exactly is it? How does it work? Is it a good idea for me? In this blog, we’ll answer those questions and more — giving you clear, trustworthy information so you can decide if a reverse mortgage might fit into your retirement strategy.
What Is a Reverse Mortgage?
A reverse mortgage is a loan that allows eligible homeowners to tap into the equity in their home without making monthly principal and interest payments, as long as they remain living in the home as their primary residence. It’s typically available to homeowners age 62 and older for the most common type, known as a Home Equity Conversion Mortgage (HECM). The home is used as collateral, and you remain the owner of the property.
Who Qualifies?
Here are common eligibility criteria:
You must be a homeowner and live in the home as your primary residence.
You must be at least age 62 for the federally insured version (HECM).
The home must meet property eligibility requirements (single-family, condo, townhouse, or certain manufactured homes).
You must continue to pay property taxes, homeowners insurance, and maintain the home.
How Does It Work?
You apply through a lender offering reverse mortgages.
A home appraisal is done; loan costs, interest, insurance, and closing fees apply.
You can receive the money in several ways: as a lump sum, monthly payments, a line of credit, or a combination of these.
You don’t repay the loan while you live in the home and meet all requirements. The loan becomes due when you sell, move out permanently, or pass away.
Interest and fees accrue on the loan balance, which means the amount owed grows over time.
What Are the Advantages?
Provides access to cash for retirement, without monthly mortgage payments.
Can help homeowners stay in their homes when cash flow is tight but equity exists.
The most common reverse mortgage (HECM) is insured by the federal government, meaning you or your heirs won’t owe more than the home’s value when the loan is repaid.
What Are the Risks or Things to Consider?
Because interest and fees accrue, the loan balance grows and available equity decreases.
You still must pay property taxes, insurance, and maintain the home. Failure to do so can trigger loan repayment.
If you plan to move soon, the upfront costs may outweigh the benefits.
Large loan proceeds could affect eligibility for certain government benefits like Medicaid or SSI.
Not all reverse mortgages are equal — fees, rates, and terms can vary widely. Always shop and compare lenders.
Alternatives to Consider
Before proceeding, compare these alternatives:
A traditional home equity loan or line of credit (if you qualify based on income and credit).
Downsizing or relocating to a smaller or less expensive home.
Using other retirement income strategies or assets.
A “single-purpose” reverse mortgage offered by some nonprofits or state/local agencies.
Is a Reverse Mortgage Right for You?
There’s no one-size-fits-all answer. Consider:
Your age and how long you expect to remain in the home.
The home’s value, current mortgage balance, and available equity.
Your ability to continue paying taxes, insurance, and maintenance.
Your goals — monthly income, line of credit, staying put, or leaving a legacy.
The long-term costs and benefits based on your financial plan.
Consulting with a qualified reverse mortgage counselor (required for HECM loans) and trusted financial advisors before deciding.
Summary
A reverse mortgage can be a valuable tool for older homeowners to tap into home equity and improve cash flow — but it must be used carefully. It’s not free money; it’s a loan that increases your debt and reduces your home equity over time. For many, the key is to assess whether it aligns with long-term housing and retirement goals. If you’re considering one, talk to a knowledgeable advisor, review all costs, and make sure you fully understand how repayment works.
Call to Action
If you’re age 62 or older, own your home, and are curious whether a reverse mortgage fits your retirement plan, let’s schedule a no-obligation consultation. I’ll walk you through the process, explain your options, and help determine what makes the most sense for your goals.
