How Does a Reverse Mortgage Work and Is It a Good Idea?
A reverse mortgage lets homeowners 62+ convert home equity into cash — but it comes with significant risks most people don't understand.
General information, not professional advice — see terms of use.
A reverse mortgage (HECM — Home Equity Conversion Mortgage) allows homeowners 62+ to borrow against home equity without making monthly payments. The loan balance grows over time as interest accrues.
How you receive funds: Lump sum, monthly payments, or line of credit.
When it's due: When you sell, permanently move out, or die. The home is typically sold to repay the loan, with remaining equity going to you or your heirs.
Amount you can borrow: Generally 40–60% of your home's appraised value, depending on your age and interest rates.
Costs: Expensive upfront — origination fee (up to $6,000), closing costs, and 2% FHA insurance premium. Interest accrues at 4–7%.
Serious risks: If you fail to pay property taxes, homeowner's insurance, or maintain the home, the lender can foreclose. Surviving spouses not on the loan can lose the home.
Follow-up questions
Can you lose your home with a reverse mortgage?
Yes. The most common reason for reverse mortgage foreclosures is failure to pay property taxes, homeowner's insurance, or HOA fees. These obligations continue even though you're not making mortgage payments.
What happens to a reverse mortgage when the borrower dies?
The loan becomes due within 30–60 days. Heirs can repay the loan and keep the home, sell the home and keep any equity above the loan balance, or walk away if the loan exceeds the home value (the FHA insurance covers the lender's loss).
Who should consider a reverse mortgage?
It may be right for equity-rich but cash-poor homeowners who plan to stay long-term, have no plans to leave the home to heirs, and have exhausted other options. It's generally NOT recommended as a first resort.
More real estate answers
This page is general information, not professional advice, and it may not reflect the latest rules where you live. For your own situation, talk to a qualified adviser. Spotted an error? Email per@upperia.se and we will fix it.