What is a reverse mortgage?
A reverse mortgage is a type of loan that allows older homeowners to borrow against the equity in their homes.
It is called a “reverse” mortgage because instead of making payments to the lender, you receive money from the lender. The money you receive and the interest charged on the loan increase the balance of your loan each month. Over time, the loan amount grows. Since equity is the value of your home minus any loans, you have less and less equity in your home as your loan balance increases, which could become a problem if you ever want or need to move.
Most reverse mortgages are known as Home Equity Conversion Mortgages (HECMs). The Federal Housing Administration (FHA), a part of the Department of Housing and Urban Development (HUD), insures HECMs.
Note: This webpage has information about HECMs, which are the most common type of reverse mortgage.
To qualify for a HECM:
- You must be at least 62 years old.
- Your home must be your principal residence.
- You must own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse mortgage loan. There are limits to how much money you can borrow. So, if you still owe a lot of money on your traditional mortgage, you might not qualify for a reverse mortgage.
- You must have the money to pay ongoing property charges including taxes and insurance, as well as maintenance and repair costs.
- You must also meet with a HUD-approved counselor to discuss your eligibility, the financial implications of the loan, and other loan alternatives.
If you or your parents are considering a reverse mortgage, make sure you get all the facts first. We have several resources to help you learn more about reverse mortgages. Check out:
- Reverse Mortgages: a discussion guide from the CFPB’s Office for Older Americans
- Answers to common questions about reverse mortgages
- A video for an overview of reverse mortgages
Talk to a HUD-approved reverse mortgage (HECM) counselor. Visit HUD's counselor search page or call HUD's housing counselor referral line at (800) 569-4287.