Reverse Mortgage Explained: How It Works and Who Qualifies at 62+

Types of Reverse Mortgages

There are three kinds of reverse mortgage. Most people end up with a HECM, but it pays to know all three before you pick one.

How Much Can You Get From a Reverse Mortgage?

The amount you can borrow is called the principal limit. It is a percentage of your home's value, and three things drive it:

• Age of the youngest borrower (or eligible non-borrowing spouse). The older you are, the larger the share of your home you can access.
• Interest rates. Lower expected rates mean a larger principal limit.
• Home value. For a HECM, the value used is the lower of the appraisal, the sale price (on a purchase) or the 2026 FHA limit of $1,249,125.

Any mortgage you still owe is paid off first, along with closing costs you choose to finance. What is left is yours to use as a line of credit, monthly payments or a lump sum.

The first-year limit

On a HECM you can generally use up to 60% of your principal limit in the first 12 months. If you need more to pay off an existing mortgage and closing costs, you can use the amount needed for those required payoffs plus another 10% of your principal limit. The rest becomes available after the first year.

Why the line of credit matters

With an adjustable-rate HECM, the unused part of your line of credit grows over time at the loan's interest rate plus the 0.5% annual mortgage insurance rate. The lender cannot freeze or reduce it because home values drop, as long as you keep up with taxes, insurance and the home. That is very different from a regular HELOC. A fixed-rate HECM pays one lump sum at closing instead.

Reverse Mortgage vs. HELOC vs. Cash-Out Refinance

If you have strong income and want to keep the most equity, a HELOC or cash-out refinance may cost less. If you want to stop making a mortgage payment, or want a credit line that cannot be cut, a reverse mortgage is often the better fit. I can show you all three side by side. See every homeowner option.

When a Reverse Mortgage Is Repaid, and What Heirs Need to Know

A reverse mortgage becomes due when the last borrower sells the home, passes away, or lives somewhere else for more than 12 months in a row, such as a nursing home. It can also become due if property taxes, homeowners insurance or upkeep are not kept current.

• Time to decide. Heirs typically have 30 days to tell the loan servicer their plans and about 6 months to sell or refinance, with up to two 90-day extensions if they are actively working on it.
• Keep the home. Heirs can pay off the loan with their own money or a new mortgage. On a HECM they never pay more than the balance or 95% of the home's appraised value, whichever is less.
• Sell the home. Any money left after the loan is paid belongs to the heirs. If the sale brings in less than the balance, FHA insurance covers the difference. Heirs are not personally on the hook.
• A surviving spouse. A spouse who was not on the loan can often stay in the home as an eligible non-borrowing spouse, as long as they were named at closing and keep paying taxes, insurance and upkeep. They cannot take new draws from the loan.

Buying a Home With a Reverse Mortgage (HECM for Purchase)

You can also use a HECM to buy a new home, for example to downsize or move closer to family. You bring a down payment from savings or the sale of your current home, and the reverse mortgage covers the rest. After closing there is no monthly mortgage payment. The home must become your primary residence, and you need to move in within 60 days of closing.

Reverse Mortgage Myths

How Homeowners Use a Reverse Mortgage

There is no rule on how you spend the money. These are the most common reasons people come to me:

• Get rid of a monthly mortgage payment and free up cash flow every month.
• Keep a standby line of credit for medical bills, home repairs or market downturns, so you are not forced to sell investments at a bad time.
• Cover in-home care so you can stay in your own home longer.
• Delay Social Security to lock in a larger lifetime benefit.
• Pay off higher-interest debt such as credit cards or a HELOC with a payment.
• Update the home for aging in place, like a first-floor bedroom, grab bars or a walk-in shower.
• Help family while you are alive to see it.

Reverse Mortgage Counseling: What to Expect

Before you can apply for a HECM, you meet with an independent, HUD-approved housing counselor. It usually takes 60 to 90 minutes by phone or in person, and family members are welcome to join. The counselor walks through how the loan works, what it costs, your other options, and what happens when the loan is repaid. You receive a counseling certificate, which the lender needs before your application can move forward. Counselors do not work for any lender. Fees vary, and many agencies will reduce or waive the fee if it is a hardship. Find one with the CFPB housing counselor search.

Can You Refinance a Reverse Mortgage?

Yes. If your home value has gone up, or the FHA limit has risen since you closed, a new HECM may give you access to more money or a better rate. HUD requires a refinance to be worth it: the increase in what you can borrow generally has to be at least five times the cost of the refinance. Counseling is required again, though it can be waived in some cases. You can also refinance a reverse mortgage into a regular mortgage if your situation changes.

What Adult Children Should Know

Many of my reverse mortgage conversations include sons and daughters, and I encourage it. The key points for family:

• Your parent keeps the title and the home stays in the estate.
• The loan does not become your debt. If the home sells for less than the balance, FHA insurance covers the gap on a HECM.
• When the time comes, you can keep the home by paying the lesser of the balance or 95% of its appraised value, or sell it and keep any equity left over.
• Ask to be listed as an alternate contact with the loan servicer so you are kept informed.

Reverse Mortgages in All 50 States

I help homeowners 62 and older nationwide, in all 50 states. HECMs are an FHA program available across the country. Proprietary (jumbo) reverse mortgages are offered state by state, and each lender sets its own list, so what is available depends on your state and your home. Because I compare HECM and proprietary options from several reverse mortgage lenders, I can show you which ones fit your home wherever you live, by phone, video and e-signing. State rules and property tax programs differ too, so ask your county about senior property tax exemptions, freezes or deferrals before you apply.

Figures reflect 2026 FHA HECM rules. Proprietary reverse mortgages have their own guidelines. This is general information, not a commitment to lend. Not all applicants qualify. Book a free call to see your own numbers.