How a reverse mortgage works
With a regular mortgage, you pay the lender each month and your balance falls. With a reverse mortgage, the lender pays you, and interest and fees are added to what you owe each month. Your equity shrinks over time.
The federally insured version is the Home Equity Conversion Mortgage (HECM), backed by the Federal Housing Administration (FHA). To qualify, HUD requires that:
- you are 62 or older and the home is your principal residence;
- you own the home outright or have considerable equity;
- you aren’t delinquent on any federal debt and have the resources to keep paying taxes, insurance and HOA fees;
- you complete a session with a HUD-approved HECM counselor before applying.
How much you can borrow depends on the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and your home’s value, capped at the 2026 HECM limit of $1,249,125. You can take the money as monthly payments for life (tenure) or a set term, a line of credit, a combination, or a single lump sum, which is the only option with a fixed rate.
What it costs
| Cost | HECM rule |
|---|---|
| Upfront mortgage insurance | 2% of the home value (up to the limit) |
| Annual mortgage insurance | 0.5% of the outstanding balance |
| Origination fee | Greater of $2,500 or 2% of the first $200,000 plus 1% above that; capped at $6,000 |
| Servicing fee | Up to $30–$35 a month |
| Third-party closing costs | Appraisal, title, inspections, recording |
Source: HUD, “How the HECM program works”; CFPB. Checked October 2026.
On a $400,000 home, the origination fee and upfront insurance alone come to $14,000 before other closing costs. Most costs can be rolled into the loan, but that reduces what you receive and adds to the balance that accrues interest.
What happens to the home
The loan comes due when the last borrower dies, sells, or moves out, including living in a care facility for more than 12 consecutive months. Heirs can keep the home by paying the lesser of the loan balance or 95% of its appraised value, so they never owe more than the home is worth. Otherwise the home is usually sold.
Spouses need special attention. For loans with FHA case numbers assigned on or after August 4, 2014, a spouse who is not on the loan may be able to stay after the borrower dies, but only if they were married at closing, are named in the loan documents and live in the home. That spouse gets no further loan money.
Risks regulators warn about
- Foreclosure for unpaid property charges. The CFPB stresses that a reverse mortgage is “a home loan, not a government benefit.” If you fall behind on taxes, insurance or upkeep, you can lose the home. In May 2026, HUD’s Inspector General found that set-aside accounts meant to pay those bills for about 1,237 vulnerable borrowers will run out early because property costs rose.
- Misleading ads. A CFPB review of 97 ads found many implied reverse mortgages weren’t loans or offered lifetime security.
- Less left for heirs and for later. Compounding interest can consume much of your equity, which limits your options if you need to move into care.
How to decide
Ask yourself three questions. Will you stay in the home long enough to justify the upfront costs? Can you keep paying taxes, homeowners insurance and repairs for decades? Would a cheaper option work, such as downsizing, a standard refinance, or a home equity line of credit (averaging about 7.1% APR in early October 2026), which requires monthly payments but has lower upfront costs?
If your home is worth well above the HECM limit, private “jumbo” reverse mortgages lend up to $4 million at some lenders, without FHA insurance. Our reverse mortgage companies guide compares the largest HECM and jumbo lenders.
Free, independent help
The required HECM counseling session is your best protection. A HUD-approved counselor goes over the loan’s features, costs and obligations and your financial alternatives, and a lender can’t process your application until it has your signed counseling certificate. Lenders must give you a list of agencies but can’t steer you to a particular one. You can find a counselor through HUD’s HECM counselor roster or by calling (800) 569-4287. Consider bringing family members, and ask what happens if you need long-term care.
Guides in this section
Frequently asked questions
Do I still own my home with a reverse mortgage?
Yes. You keep the title, but you must live there as your principal residence and keep paying property taxes, homeowners insurance and maintenance. Falling behind on those can lead to foreclosure.
How much can I get from a reverse mortgage?
It depends on the age of the youngest borrower or eligible non-borrowing spouse, interest rates and your home's value, up to the 2026 HECM limit of $1,249,125. Upfront costs that you finance reduce the amount you receive.
What happens to a reverse mortgage when I die?
The loan usually becomes due and is repaid by selling the home. Heirs can keep the home by paying the lesser of the loan balance or 95% of the appraised value. A spouse not on the loan may be able to stay if specific conditions are met.
Is reverse mortgage counseling required?
Yes. HUD requires every HECM borrower to complete a session with a HUD-approved counselor before applying. The counselor goes over costs, obligations and alternatives, and the lender can't process your application without the counseling certificate.
What does a reverse mortgage cost?
HECMs charge a 2% upfront mortgage insurance premium, 0.5% a year on the balance, an origination fee of up to $6,000, servicing fees and third-party closing costs. Interest compounds monthly on the growing balance.
Sources
- HUD – How the HECM program works
- HUD – 2026 FHA loan limits announcement
- Consumer Finance Monitor – HUD announces 2026 loan limits for FHA forward mortgages and HECMs
- CFPB – What will a reverse mortgage loan cost me?
- CFPB – What happens to my reverse mortgage when I die?
- CFPB – Study finds reverse mortgage advertisements can create false impressions
- HUD OIG – HUD underestimated rising property charges for an estimated 1,237 HECM borrowers
- Boldin – Your guide to reverse mortgage counseling
- Finance of America – HomeSafe reverse mortgage
- MonitorBankRates – Average home equity rates, October 6, 2026
Rates, fees and terms change often. Figures were checked in October 2026; confirm current details with the provider before you apply.