The most common reverse mortgage in the United States is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA). HECMs are generally available to homeowners age 62 or older who meet applicable requirements.

Unlike a traditional mortgage, the loan balance generally increases over time because interest and applicable fees are added to the balance. The homeowner remains the owner of the property, but the home secures the loan.

A reverse mortgage can therefore affect retirement income, home equity, estate planning, and future housing choices. It should be considered as one part of a broader retirement plan rather than as a standalone financial solution.

What Is Home Equity?

Home equity is generally the difference between a home's current value and the amount owed against it.

For example:

Home value − existing mortgage balance = approximate home equity

A reverse mortgage allows an eligible homeowner to borrow against a portion of that equity.

However, the amount available is not simply the full value of the home. For an HECM, the available principal limit depends on factors including the borrower's age, the interest rate, and the home's value, subject to applicable FHA limits.

As the reverse mortgage balance grows, the homeowner's remaining equity generally decreases.

Reverse Mortgage Eligibility

For a standard HECM, eligibility includes several requirements.

A homeowner generally must:

• Be at least 62 years old

• Occupy the property as a principal residence

• Own the home outright or have an existing mortgage that can be paid off at closing

• Meet applicable financial obligations

• Maintain the property appropriately

• Continue paying required property taxes and homeowners insurance

• Complete counseling with a HUD-approved reverse mortgage counseling agency

Certain property types and circumstances can have additional requirements.

The CFPB notes that borrowers may also need to address outstanding federal debt and demonstrate an ability to meet ongoing property-related obligations.

Eligibility does not mean that a reverse mortgage is necessarily appropriate. A homeowner should also consider future housing needs, income, estate plans, and alternatives.

How a Reverse Mortgage Works

A simplified example illustrates the basic structure.

Suppose a homeowner has substantial equity in a principal residence and qualifies for an HECM.

Instead of making a conventional monthly mortgage payment, the homeowner receives funds according to the selected payment structure.

Over time:

Funds received + interest + applicable fees = growing loan balance

As the balance increases, available home equity generally decreases.

The homeowner continues to own the home, but the reverse mortgage creates a claim against the property. The loan generally becomes due when the last surviving borrower dies, sells the home, or no longer maintains it as a principal residence. Certain circumstances can trigger repayment sooner.

How Much Can Be Borrowed?

The available amount depends on several factors.

Important variables include:

• Age of the youngest borrower

• Home value

• Interest rate

• Existing mortgage balance

• Applicable FHA limits

• Loan-related obligations

• Selected payment structure

Older borrowers may generally have a higher principal limit than younger eligible borrowers under the HECM calculation, all else being equal.

For calendar year 2026, HUD lists the HECM maximum claim amount at $1,249,125, up from $1,209,750 in 2025. This is the FHA maximum claim amount used for HECM calculations and does not mean every borrower can receive that amount.

Reverse Mortgage Payment Options

HECM borrowers can generally choose among several ways to receive available proceeds.

A line of credit can provide flexibility because interest and related charges apply to amounts drawn rather than unused funds. A lump-sum structure can result in interest and fees applying to a larger outstanding balance.

The appropriate structure depends on the household's income needs, liquidity, retirement strategy, and expected future expenses.

Existing Mortgage and Reverse Mortgages

A homeowner does not necessarily need to have completely paid off an existing mortgage before considering an HECM.

However, an existing mortgage generally must be paid off when the reverse mortgage closes. The homeowner may use personal funds or part of the reverse mortgage proceeds for this purpose.

This can affect how much money remains available after closing.

For this reason, homeowners should understand the relationship between:

• Current mortgage balance

• Home value

• Available reverse mortgage proceeds

• Closing-related expenses

• Remaining liquidity

• Future housing expenses

Costs and Fees

A reverse mortgage is a loan and can involve multiple expenses.

Potential HECM-related expenses include:

• Origination fees

• Appraisal expenses

• Title-related expenses

• Recording fees

• Other closing expenses

• Initial mortgage insurance premium

• Interest

• Servicing-related charges

• Ongoing mortgage insurance premiums

Some expenses may be financed through the loan rather than paid directly at closing. Financing these expenses reduces the amount of proceeds available for other purposes and increases the loan balance.

The CFPB also notes that ongoing interest, mortgage insurance, and applicable fees can cause the loan balance to increase over time.

Property Taxes and Homeowners Insurance

A reverse mortgage does not eliminate the homeowner's responsibility for ongoing property expenses.

Borrowers generally must continue to:

• Pay property taxes

• Maintain homeowners insurance

• Keep the home in appropriate condition

• Maintain the home as their principal residence

Failure to meet these obligations can place the loan in default and potentially lead to foreclosure.

Some HECM borrowers may have funds set aside for certain property charges depending on the financial assessment and loan structure.

This is one of the most important factors to consider when evaluating long-term affordability.

Retirement Planning Considerations

Home equity can represent a substantial portion of household wealth, particularly for older homeowners.

A reverse mortgage may therefore affect a broader retirement strategy involving:

• Social Security

• Retirement accounts

• Investment portfolios

• Pension income

• Emergency reserves

• Healthcare expenses

• Housing expenses

• Estate planning

• Future long-term care needs

One potential planning approach is to use home equity as a source of retirement liquidity while preserving other assets for later years.

However, the effect depends heavily on when funds are taken, how much is borrowed, interest rates, investment performance, tax considerations, and future housing needs.

Reverse Mortgage and Retirement Income

Reverse mortgage proceeds may be structured as monthly payments, a line of credit, a lump sum, or a combination of options.

A homeowner considering retirement-income planning should compare the reverse mortgage strategy with other available resources.

Relevant questions include:

• How much monthly income is needed?

• How long should retirement assets last?

• What emergency reserves are available?

• What healthcare expenses could arise?

• Is remaining in the current home important?

• Could the homeowner need to move later?

• How much home equity should remain for heirs?

• Would another borrowing or housing strategy be more appropriate?

The CFPB recommends considering alternatives before committing to a reverse mortgage. Potential alternatives can include delaying the transaction, a home equity loan or line of credit, refinancing, downsizing, or reducing expenses.

Impact on Home Equity

One of the most important trade-offs is the effect on home equity.

With a conventional mortgage, regular principal payments can reduce the loan balance.

With a reverse mortgage, the balance generally grows because interest and applicable charges are added to the amount owed.

Therefore:

Growing loan balance → potentially lower remaining home equity

The effect becomes more significant the longer the loan remains outstanding and the more funds are borrowed.

The CFPB explains that the homeowner's equity decreases as the reverse mortgage balance increases.

What Happens When the Homeowner Moves or Dies?

A reverse mortgage generally becomes due when the last surviving borrower dies, sells the home, or no longer lives there as their principal residence.

Certain rules apply to eligible non-borrowing spouses.

If the homeowner dies, heirs generally have options concerning the property, but the reverse mortgage balance must be addressed according to the applicable loan rules.

The CFPB explains that the loan may typically be repaid through the sale of the home or other available funds. For HECMs, the borrower or heirs generally do not have to repay more than the value of the home.

Reverse Mortgage and Heirs

Estate planning is an important part of the decision.

If preserving a home for children or other heirs is a priority, a reverse mortgage can affect the amount of equity eventually available to them.

Families should discuss:

• Whether heirs may want to keep the home

• How the loan could be repaid

• Whether other assets could be used for repayment

• The expected loan balance

• The home's expected future value

• Existing estate-planning documents

A homeowner should not assume that heirs automatically receive the property without addressing the reverse mortgage balance.

Reverse Mortgage and Long-Term Care

A reverse mortgage may also intersect with future long-term care planning.

For example, a homeowner may eventually move to:

• Assisted living

• A nursing facility

• A rehabilitation setting

• Another family residence

• A different permanent residence

Moving out of the home can affect the reverse mortgage because maintaining the property as a principal residence is generally an HECM requirement.

The CFPB notes that extended stays in healthcare facilities can have specific consequences depending on whether a co-borrower or eligible non-borrowing spouse remains in the home.

Therefore, homeowners considering a reverse mortgage should include potential future care needs in their retirement planning.

Taxes and Government Benefits

Reverse mortgage proceeds are generally loan proceeds rather than ordinary earned income. However, tax and public-benefit consequences can depend on the individual's circumstances and how funds are used.

A homeowner receiving needs-based benefits should understand whether accumulated funds could affect eligibility or resource limits.

Tax rules can also vary depending on the transaction and the homeowner's overall financial situation.

Before making a major decision, it can be appropriate to discuss the situation with a qualified tax or financial professional and review current government guidance.

Reverse Mortgage Alternatives

A reverse mortgage is only one way to access housing wealth.

Possible alternatives include:

Home equity loan: Provides a separate loan secured by the home, usually with scheduled repayment requirements.

Home equity line of credit: Provides access to a revolving borrowing limit, subject to lender terms and repayment requirements.

Downsizing: Selling the current residence and moving to a less expensive property can potentially release equity while changing housing expenses.

Refinancing: Depending on eligibility and market conditions, refinancing may change the structure of existing mortgage debt.

Retirement-asset withdrawals: Some households may use retirement accounts or other financial assets instead of borrowing against the home.

Delaying the decision: Waiting can be appropriate when immediate access to home equity is not necessary.

Each alternative has different risks, eligibility requirements, repayment obligations, and effects on retirement assets.

HUD Counseling Requirement

For an HECM, borrowers must receive counseling from a HUD-approved reverse mortgage counseling agency before receiving the loan. The counseling is intended to help borrowers understand eligibility, financial implications, and alternatives.

Counseling can be particularly useful for comparing:

• Current mortgage obligations

• Reverse mortgage proceeds

• Home-equity alternatives

• Retirement income

• Long-term care considerations

• Estate-planning goals

The counselor is separate from the lender and provides an additional source of information before the borrower commits to the loan.

Consumer Protections and Rescission

For most reverse mortgages, borrowers have a three-business-day right of rescission after closing.

This generally allows the borrower to cancel the transaction for any reason without penalty during the applicable period, provided the required written notice is given.

Borrowers should keep copies of important loan documents and communications.

They should also be cautious of claims that imply a reverse mortgage is government money, guaranteed retirement income, or a way to avoid all housing expenses.

Scams and Warning Signs

Reverse mortgages can attract scams targeting older homeowners.

Warning signs can include:

• Pressure to sign immediately

• Claims that the money is a government benefit rather than a loan

• Requests to send funds to an unrelated party

• Claims of special VA reverse mortgage programs

• Contractors encouraging a reverse mortgage for unnecessary work

• Requests to share financial credentials

• Promises that heirs will automatically receive the home without repayment obligations

The CFPB specifically warns that the U.S. Department of Veterans Affairs does not provide reverse mortgage loans.

Independent counseling and careful review of documents can help identify misleading claims.

Recent Reverse Mortgage Updates

For 2026, HUD increased the HECM maximum claim amount to $1,249,125, compared with $1,209,750 in 2025. The 2026 amount applies to HECM cases assigned on or after January 1, 2026.

The CFPB also published updated reverse-mortgage examination procedures in July 2026, highlighting ongoing attention to servicing, interest and mortgage-insurance calculations, property taxes, insurance, maintenance, and potential default issues.

These updates do not change the fundamental principle that a reverse mortgage is a loan secured by the home and that borrowers remain responsible for applicable property obligations.

Tools and Resources

HUD-approved counseling: Required for HECM borrowers and useful for comparing alternatives.

CFPB reverse mortgage resources: Provides explanations of eligibility, repayment, borrower responsibilities, risks, and consumer protections.

HUD HECM information: Provides federal information concerning HECM rules, limits, and program administration.

Retirement income worksheet: Compare Social Security, pensions, retirement accounts, home equity, and recurring expenses.

Home-equity worksheet: Record estimated home value, existing mortgage balance, other liens, and remaining equity.

Estate-planning checklist: Review wills, powers of attorney, beneficiaries, and plans for the property.

Questions to Ask Before Considering a Reverse Mortgage

Before making a decision, consider asking:

• Do I meet the basic HECM eligibility requirements?

• How much home equity would remain?

• How much could I potentially access?

• Which payment structure would fit my retirement plan?

• What interest rate applies?

• What fees and insurance charges apply?

• How will the balance change over time?

• Can I continue paying property taxes and homeowners insurance?

• What happens if I move into assisted living?

• What happens to the home after my death?

• What options will my heirs have?

• Would a home equity loan or line of credit be more appropriate?

• Would downsizing make more sense?

• How could the decision affect other retirement assets?

• Could it affect eligibility for any needs-based benefits?

• What does the HUD-approved counselor recommend?

FAQs

What age do you need to be for a reverse mortgage?
For the most common HECM reverse mortgage, the homeowner generally must be at least 62 years old and meet additional requirements.

Does the bank own my home after a reverse mortgage?
No. The homeowner generally retains title to the property. However, the home secures the loan, and the borrower must continue meeting obligations such as property taxes, homeowners insurance, maintenance, and principal-residence requirements.

Does a reverse mortgage eliminate the mortgage payment?
A reverse mortgage generally does not require the same monthly mortgage payments as a traditional mortgage, but the borrower remains responsible for required property charges such as taxes and insurance. Interest and applicable fees are added to the loan balance.

How does a reverse mortgage affect heirs?
The loan generally must be repaid when the last surviving borrower dies or the home is otherwise no longer the required principal residence. Heirs may have options for addressing the balance, but the reverse mortgage can reduce the equity remaining in the property.

What is the 2026 HECM limit?
HUD lists the 2026 HECM maximum claim amount as $1,249,125. This is a program limit used in HECM calculations and does not mean every eligible homeowner can access that amount.

Conclusion

A reverse mortgage can allow an eligible older homeowner to access a portion of home equity while continuing to live in the property. However, it is still a loan, and the balance generally grows over time as interest and applicable charges accumulate.

The decision can affect retirement income, remaining home equity, future housing choices, long-term care planning, and estate plans. Borrowers also remain responsible for important obligations such as property taxes, homeowners insurance, property maintenance, and principal-residence requirements.

For an HECM, HUD-approved counseling is required and can help homeowners compare the reverse mortgage with other housing and retirement strategies.