What is a reverse mortgage, and how does it work?
A reverse mortgage is a loan designed for homeowners aged 55 or older that allows them to access the equity in their home without selling it. Instead of making monthly payments to the lender, the loan balance increases over time, and repayment is deferred until the homeowner moves out, sells the home, or passes away.
Who qualifies for a reverse mortgage?
Homeowners aged 55 or older, with significant equity in their homes, may qualify. The property must be their primary residence and meet FHA requirements. Credit and income evaluations are generally more lenient compared to traditional loans.
For the full checklist, see how to qualify for a HECM reverse mortgage.
How is a reverse mortgage different from a traditional mortgage?
With a traditional mortgage, you make monthly payments to the lender. With a reverse mortgage, the lender pays you, either in a lump sum, monthly payments, or a line of credit. There are no monthly payments required for a reverse mortgage, but you do remain responsible to pay your property taxes and homeowner’s insurance.
What types of reverse mortgages are available?
There are three main types of reverse mortgages:
- Home Equity Conversion Mortgages (HECMs): These are FHA-insured reverse mortgages and the most common type, with strict guidelines for borrower protection. South River Mortgage offers the HECM program.
- Proprietary Reverse Mortgages: These are private loans offered by companies like South River Mortgage, designed for higher-value homes or borrowers aged 55 and older. Our proprietary HomeForLife product falls into this category.
- Single-Purpose Reverse Mortgages: Offered by some state and local government agencies, these loans are for specific purposes like home repairs or property taxes and are not widely available. South River Mortgage does not offer single-purpose reverse mortgages at this time.
Can I take a reverse mortgage as a lump sum?
Yes, but only with one kind of HECM. Under HUD rules, a fixed-rate HECM pays out as a single lump sum at closing (24 CFR 206.17). An adjustable-rate HECM can pay you through a line of credit, monthly payments, or a mix of both. The CFPB notes that a line of credit usually costs less than a lump sum, because you pay interest and fees only on the money you use.
What is a non-recourse loan?
A non-recourse loan is one the lender can collect only from the home, not from you or your family. HUD’s rules say a HECM borrower has no personal liability for the loan balance, and the lender cannot get a deficiency judgment against you (24 CFR 206.27). So if the balance grows larger than the home is worth, neither you nor your heirs owe the difference.
Can I cancel a reverse mortgage after closing?
Usually yes, if the HECM is on the home you already own. Federal law gives you until midnight of the third business day after closing, or after you receive the required disclosures if that is later, to cancel (12 CFR 1026.23). This right does not apply to a HECM for Purchase, because that loan buys the home. To cancel, notify the lender in writing within the window.
What are the age requirements for a reverse mortgage?
For FHA-insured Home Equity Conversion Mortgages (HECMs), homeowners must be at least 62 years old. Proprietary reverse mortgage products, like our HomeForLife loan, may have a minimum age requirement of 55 depending on your state.
Does my home need to be paid off to qualify?
No, but you must have sufficient equity in your home. Any existing mortgage balance will be automatically paid off with the reverse mortgage proceeds.
Are there specific types of homes that qualify for a reverse mortgage?
Yes, eligible properties include single-family homes, multi-family homes (up to four units, with one unit occupied by the borrower), and FHA-approved condominiums.
Can I buy a home with a reverse mortgage?
Yes. A HECM for Purchase lets you buy a home and take out the reverse mortgage in the same closing. You pay part of the price from your own funds, such as the proceeds from selling your current home, and the loan covers the rest. The new home has to be your principal residence, and HUD requires you to move in within 60 days of closing (24 CFR 206.39).
Do I need counseling before I get a reverse mortgage?
Yes, for a HECM. You must meet with a counselor from a HUD-approved housing counseling agency before you can complete your application (24 CFR 206.41). The session covers how the loan works, its costs, and other options. The CFPB says agencies may charge a reasonable fee but cannot charge you if you can’t afford it. Find a counselor with HUD’s agency search.
What is the HECM lending limit this year?
For 2026 the HECM lending limit is $1,249,125. It is the highest home value FHA will use when it works out how much you can borrow, and it applies from January 1 through December 31, 2026, per HUD Mortgagee Letter 2025-22. Your home can be worth more than the limit, but value above it does not raise a HECM’s loan amount.
How much money can I receive with a reverse mortgage?
The amount depends on your age, the home’s value, the interest rate, and the type of reverse mortgage. Older homeowners with higher equity may qualify for more.
To get a free estimate, use our free reverse mortgage calculator by clicking the link below:
Do I still own my home with a reverse mortgage?
Yes, you retain ownership of your home. The reverse mortgage is simply a lien against the property.
What happens to my reverse mortgage if I sell my home or move out?
The loan becomes due when you sell your home, move out permanently, or pass away. The proceeds from the sale are used to pay off the loan, and any remaining equity belongs to you or your heirs.
Are there monthly payments required with a reverse mortgage?
No monthly payments are required. You are only responsible for maintaining the home, paying property taxes, and homeowners insurance.
Do I have to keep paying property taxes and insurance?
Yes. With a HECM you must keep paying your property taxes, homeowners insurance and any condo or HOA fees, and keep the home in good repair (24 CFR 206.205). The CFPB warns that failing to pay taxes or insurance may lead to foreclosure. If these bills are hard to keep up with, talk to a HUD-approved counselor right away; state and local programs may help.
Can I refinance a reverse mortgage?
Yes. You can pay off a HECM with a new HECM, or with another type of loan if you qualify for it. For a HECM-to-HECM refinance, the lender must give you an anti-churning disclosure that compares the cost of the new loan with how much more you could borrow (24 CFR 206.53). New counseling can be skipped only in limited cases HUD sets, such as when the gain clearly outweighs the cost.
What are the costs associated with a reverse mortgage?
Costs may include an origination fee, mortgage insurance premiums, and customary closing costs. All fees are disclosed upfront and can typically be financed into the loan.
For how the FHA insurance premium is calculated, see reverse mortgage MIP explained.
How are reverse mortgage interest rates determined?
Rates are based on market conditions and can vary depending on whether you choose a fixed or adjustable-rate loan.
Do you pay interest on a reverse mortgage?
Yes. Interest accrues monthly and is generally added to the loan balance rather than paid through a required monthly mortgage payment. Annual mortgage insurance premiums and any servicing fee also increase the balance (CFPB). Interest is calculated on a balance that includes earlier interest, so the amount owed grows over time. The balance is repaid when the loan becomes due.
Are reverse mortgage rates fixed or variable?
Both are available, and the choice changes how you receive your money. Under HUD rules, a fixed-rate HECM pays one lump sum at closing, while an adjustable-rate HECM offers a line of credit, monthly payments, or both (24 CFR 206.17). The rate also affects how much you can borrow: the CFPB notes that lower interest rates generally mean a higher borrowing limit.
Are HECM for Purchase fees different?
Mostly no. A HECM for Purchase follows the same FHA cost rules as any HECM: an initial mortgage insurance premium, an annual premium of 0.5% of the balance, third-party closing costs, and an origination fee of no more than $6,000 (CFPB; 24 CFR 206.31). The difference is that the same closing also completes your home purchase, and you bring your down payment to it.
What is the mortgage insurance premium (MIP)?
MIP is the FHA insurance every HECM carries. You pay an initial premium at closing, which can be paid from the loan, and an annual premium equal to 0.5% of your outstanding balance that is added to the balance each month (CFPB). The CFPB explains that this insurance guarantees you receive your expected loan advances. It is separate from your homeowners insurance.
When does a reverse mortgage need to be repaid?
A reverse mortgage needs to be repaid when you move out, sell the home, or pass away. You or your heirs can either sell the home or refinance to pay off the loan.
What happens to my reverse mortgage after I pass away?
Your heirs can choose to repay the loan and keep the home, sell the home to pay off the loan, or allow the lender to sell the home. Any remaining equity belongs to your heirs.
Will my heirs be responsible for the reverse mortgage debt?
No, reverse mortgages are non-recourse loans. If the loan balance exceeds the home’s value, your heirs are not responsible for the difference.
Read more in can you still leave your house to your kids with a reverse mortgage?
Are children responsible for their parents' reverse mortgage?
No. Adult children do not personally owe a parent’s HECM balance because the loan is non-recourse (24 CFR 206.27). A surviving co-borrower may continue the loan, and an eligible non-borrowing spouse may qualify for a repayment deferral while meeting ongoing requirements. When repayment becomes due, heirs can sell the home or pay off the loan to keep it; the CFPB explains the payoff options, including protections when the balance exceeds the home’s value.
What happens to my reverse mortgage if I go into a nursing home?
If you are the only borrower, the loan can become due after an absence of more than 12 consecutive months because of physical or mental illness, including a nursing-home stay (24 CFR 206.27). A co-borrower who continues living there can keep the loan while meeting ongoing obligations, including taxes, insurance and upkeep. A spouse who is not a borrower has different, conditional protections; the CFPB explains those requirements.
Can a family member take over a reverse mortgage?
No. A HECM cannot simply be transferred to a relative. Repayment generally becomes due when the last borrower dies, sells the home or stops using it as a principal residence, subject to program rules (24 CFR 206.27). An eligible non-borrowing spouse may qualify for a conditional repayment deferral; that does not make the spouse a borrower. A relative can instead pay off the loan to keep the home. See the CFPB’s explanation of heirs’ options.
What happens to a reverse mortgage after a divorce?
It depends on who stays in the home. The loan is not due while at least one borrower still lives there as a principal residence and keeps up the taxes, insurance and upkeep (24 CFR 206.27). If the spouse who keeps the house is not a borrower, the loan can become due once the borrower moves out. A divorced non-borrowing spouse also loses the right to stay after the borrower dies (24 CFR 206.59).
Can my spouse stay in the home if they are not on the loan?
Often, yes. If your spouse qualifies as an Eligible Non-Borrowing Spouse, repayment is deferred after your death for as long as they live in the home as their principal residence and meet the loan’s ongoing obligations (24 CFR 206.55). They cannot draw more money from the loan during that time (24 CFR 206.61). The CFPB explains who counts as an Eligible Non-Borrowing Spouse.
What are the main benefits of a reverse mortgage?
- No monthly mortgage payments required.
- Access to tax-free cash from your home equity.
- Flexibility to receive funds as a lump sum, monthly payments, or line of credit.
To weigh these against the trade-offs, see our reverse mortgage pros and cons guide.
Are there risks or downsides to getting a reverse mortgage?
Just like anything in life, there are certain risks that reverse mortgages can pose. These are some items that you may wish to discuss with your HUD-approved housing counselor when making the decision to obtain a reverse mortgage. The loan balance increases over time, reducing your home equity. Borrowers must also stay current on property taxes, insurance, and maintenance.
We cover each downside, and who a reverse mortgage is not for, in our reverse mortgage pros and cons guide.
Why choose South River Mortgage for my reverse mortgage needs?
We are a HUD-approved FHA mortgage lender and the fourth largest reverse mortgage lender in the U.S. Our proprietary HomeForLife product offers unique benefits like speed of closing and customized options for your needs.
How long does the loan process take with South River Mortgage?
On average, we close loans in just 26 days after receiving the home appraisal—much faster than the industry standard.
What makes South River Mortgage different from other lenders?
We make use of technology to help homeowners close their loans faster—without annoying phone menus or impersonal service. Our personalized service and fast turnaround times ensure you get the financial solution you need without unnecessary delays. It’s the reason we have a 4.5-star rating on Google.
Are reverse mortgage proceeds taxable?
The IRS addresses this in Publication 554: “Because reverse mortgages are considered loan advances and not income, the amount you receive isn’t taxable.” The same publication says interest that accrues on a reverse mortgage isn’t deductible home mortgage interest as it builds up; Publication 936 covers when it can be deducted. For your own return, check with a tax professional.
How does a reverse mortgage affect Medicaid?
Medicaid treatment depends on your state and the specific program. Contact your state Medicaid office before choosing how to receive reverse mortgage money. SSI is a separate program: loan proceeds are not income when received, but money retained into the following month can count as a resource (SSA POMS SI 01120.220). That SSI rule does not establish Medicaid eligibility or how your state will treat the proceeds.
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