A reverse mortgage allows homeowners aged 62 and older to convert home equity into cash without selling their home or making monthly mortgage payments. In 2026, reverse mortgages remain a controversial but potentially useful tool for seniors with significant home equity but limited cash flow.
The most common type is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA). With a HECM, the loan is repaid when the borrower sells the home, moves out permanently, or passes away.
How reverse mortgages work
With a reverse mortgage, the lender pays you — either as a lump sum, monthly payments, a line of credit, or a combination. The loan balance grows over time as interest and fees accumulate. You retain ownership of the home, but the loan must be repaid when the home is no longer your primary residence.
To qualify, you must be at least 62 years old, own your home outright or have a low mortgage balance, and live in the home as your primary residence. You must also continue paying property taxes, homeowners insurance, and maintenance costs.
Pros and cons
Pros:
- Provides supplemental income without requiring you to sell your home.
- Loan proceeds are generally tax-free.
- You can never owe more than your home is worth (non-recourse feature).
- Funds can be used for any purpose, including medical expenses, home modifications, or daily living costs.
Cons:
- Closing costs and fees are high, typically 3-5% of the home's value.
- The loan balance grows over time, reducing equity for heirs.
- You must continue paying property taxes, insurance, and maintenance. Failure to do so can result in foreclosure.
- Interest rates are typically higher than traditional mortgages.
- May affect eligibility for Medicaid or other needs-based assistance.
Alternatives to consider
Before pursuing a reverse mortgage, consider:
- Downsizing to a smaller, less expensive home.
- A home equity loan or HELOC if you can afford monthly payments.
- Refinancing your existing mortgage to lower payments.
- Selling and renting, freeing up all equity for other uses.
- State and local assistance programs for seniors.
Final thoughts
Reverse mortgages are complex financial products with significant long-term implications. They can provide valuable cash flow for seniors who plan to stay in their homes, but they are not suitable for everyone. Consult a HUD-approved housing counselor before applying, and discuss the decision with your family and financial advisor.