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Reverse mortgages
For homeowners 62 and older. These are useful in some situations and clearly wrong in others, and there is more bad information floating around about this product than about any other one I place.
Last reviewed 22 August 2026 · Mark Ruhl, NMLS #105591
What it actually is
A reverse mortgage lets a homeowner 62 or older convert equity into cash without making a monthly mortgage payment. The most common form is a HECM (a Home Equity Conversion Mortgage, which is insured by FHA). Interest accrues and the balance grows over time, and the loan comes due when the last borrower dies, sells, or permanently moves out.
You still own the home. Your name stays on the title. The bank does not take your house, and that is the single most persistent myth about this product, and it's simply false. What is true is that the balance grows rather than shrinks, and that reduces what's left over for your heirs.
Your obligations don't disappear
This is where reverse mortgages actually go wrong, so I'd rather be direct about it than let you find out later. You still have to pay property taxes, homeowner's insurance, and any HOA dues, and you still have to keep the home maintained. Fall behind on any of those and the loan can be called due. Every foreclosure story you have ever read about a reverse mortgage traces back to this, not to the loan itself.
When it's a good answer
- House-rich and cash-poor, and wanting to stay put. That's the core case, and it's a real one.
- Eliminating an existing mortgage payment to free up monthly cash flow.
- A standby line of credit that grows over time, used as a retirement buffer. Financial planners have warmed up to this one considerably.
- HECM for Purchase, meaning you buy a right-sized home with a large down payment and no monthly payment. Underused, and badly explained almost everywhere.
When it's the wrong answer
- You plan to move within a few years. The upfront costs never get the time they need to amortize.
- Leaving the house to heirs matters more to you than current cash flow does.
- You're already struggling with taxes and insurance. This makes that situation worse rather than better.
- It's somebody else's idea. If a family member, or an advisor with something to sell, is the one pushing this, slow the whole thing down.
HUD requires independent counseling before a HECM, and I think that requirement is exactly right. I'd also want to talk this through with your family in the room if that's appropriate, because it's a decision with consequences for people other than you.
And I'll tell you plainly if I think a HELOC, or downsizing, or doing nothing at all is the better move. Reverse mortgages pay well, which is exactly why you should want someone who is willing to say no to one.
Common questions
Can I lose my home?
Not by taking the loan. You can lose it by failing to pay property taxes or insurance, or by moving out permanently, which are the same obligations that any homeowner has.
What happens to my heirs?
They can repay the loan and keep the house, or sell it and keep whatever is left over after the payoff. HECMs are non-recourse, so if the balance ends up exceeding the home's value, FHA insurance covers the difference and your heirs owe nothing extra.
Is it taxable income?
Proceeds are generally treated as loan advances rather than as income, but confirm that with your CPA, and ask specifically about any effect on needs-based benefits.
Is this the right one for you?
Tell me the situation in plain language and I'll tell you which program actually fits, including the times when the answer turns out to be a different one than the page you're reading.