Reverse Mortgage Pros and Cons: What You Really Need to Know

For many Americans over age 62, home equity is their largest asset. A reverse mortgage offers a way to access that value without selling your home or making monthly mortgage payments. As of 2025, it remains a widely used but often misunderstood financial option for supplementing retirement income.

Before considering a reverse mortgage, it’s important to understand exactly how it works—and what you’ll be responsible for.

What Is a Reverse Mortgage?

A reverse mortgage is a special type of loan for homeowners age 62 and older. Instead of making payments to a lender, you receive money based on your home’s equity. The loan amount grows over time with interest and fees, and it’s repaid only when you move out, sell the home, or pass away.

In the United States, the most common type is the Home Equity Conversion Mortgage (HECM), which is federally insured by the FHA.

Basic Eligibility:



  • You must be 62 or older




  • You must live in the home as your primary residence




  • The home must be paid off or have substantial equity




  • You must attend a mandatory counseling session with a HUD-approved advisor



How the Money Is Paid Out

You can receive the loan proceeds in different ways:



  • A lump sum




  • Monthly payments




  • A line of credit




  • A combination of the above



There are no required monthly loan payments. However, you are still responsible for property taxes, homeowners insurance, and basic home maintenance. Failing to meet these responsibilities can result in foreclosure.

Pros of a Reverse Mortgage



  • Extra Cash for Retirement: Offers a tax-free way to cover expenses like healthcare, home repairs, or daily living costs.




  • No Monthly Mortgage Payments: If you still owe on your current mortgage, the reverse loanpays it off first, potentially freeing up a large portion of your monthly income.




  • Stay in Your Home: You don’t have to sell or move out. A reverse mortgage allows you to stay in place for as long as you meet loan conditions.



Cons and Key Responsibilities



  • Rising Loan Balance: Interest and fees are added to the loan each month, meaning your debt grows over time—reducing the equity left for your heirs.




  • You Still Have Costs: Even though you’re not making payments, you must keep up with taxes, insurance, and upkeep. Falling behind could trigger foreclosure.




  • Loan Comes Due: When the last borrower moves out or passes away, the loan must be repaid—typically by selling the home.



Common Misunderstandings

Myth: I’ll lose ownership of my home.

Fact: You still own your home. A reverse mortgage is a lien, not a transfer of ownership.

Myth: My heirs will owe money if the loan is more than the home is worth.

Fact: HECMs are non-recourse loans. This means your family can never owe more than the home’s appraised value when the loan is due. If the home sells for less than the balance, FHA insurance covers the difference.

Is It Right for You?

A reverse mortgage isn’t for everyone. It can be a helpful tool for seniors with strong home equity but limited cash flow. However, it requires a clear understanding of your responsibilities—and honest conversations with your family or financial advisor.

Look at your full financial picture, consider your long-term plans, and think carefully before using your home’s equity. When used properly, a reverse mortgage can provide meaningful support in retirement. When misunderstood, it can lead to costly problems.