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Reverse Mortgages: Eligibility, Costs, and Counseling

A reverse mortgage can turn home equity into money, but it also adds loan costs and changes the household's future obligations. Eligibility alone does not establish whether it fits your plans. Compare the program types, discuss the costs, and use counseling to examine how the arrangement would work if your housing or care needs change.

The questions below use selected Consumer Financial Protection Bureau guidance, adapted and organized by Fynoptic. Source links and the dates displayed by those sources are provided at the end.

What is a reverse mortgage?

A Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is a special type of home loan only for homeowners who are 62 and older.

A reverse mortgage loan, like a traditional mortgage, allows homeowners to borrow money using their home as security for the loan. Also like a traditional mortgage, when you take out a reverse mortgage loan, the title to your home remains in your name. However, unlike a traditional mortgage, with a reverse mortgage loan, borrowers don’t make monthly mortgage payments. The loan is repaid when the borrower no longer lives in the home. Interest and fees are added to the loan balance each month and the balance grows. With a reverse mortgage loan, homeowners are required to pay property taxes and homeowners insurance, use the property as their principal residence, and keep their house in good condition.

How does a reverse mortgage get paid back?

With a reverse mortgage loan, the amount the homeowner owes to the lender goes up–not down–over time. This is because interest and fees are added to the loan balance each month. As your loan balance increases, your home equity decreases.

A reverse mortgage loan is not free money. It is a loan where borrowed money + interest + fees each month = rising loan balance. The homeowners or their heirs will eventually have to pay back the loan, usually by selling the home.

How do I watch out for scams related to reverse mortgages?

Contractor scams

Beware of contractors who approach you about getting a reverse mortgage loan to pay for repairs to your homes. It may be a scam. Don’t let yourself be pressured into getting a reverse mortgage loan.

Scams targeting veterans

The Department of Veterans Affairs (VA) does not offer any reverse mortgage loans. Some mortgage ads falsely promise veterans special deals, imply VA approval, or offer a “no-payment” reverse mortgage loan to attract older Americans desperate to stay in their homes.

How do I cancel a reverse mortgage using the right of rescission?

With most reverse mortgages, you have a three-day right to cancel a reverse mortgage. Within three business days after the loan is closed, you can cancel the deal for any reason, without penalty. This is known as your right of “rescission.”

To cancel, you must notify the lender in writing. Send your letter by certified mail, and ask for a return receipt so that you have documentation of when you sent and when the lender received your cancellation notice. Keep copies of any communications between you and your lender. After you cancel, the lender has 20 days to return any money you’ve paid for the financing of the reverse mortgage loan. If you believe there is a reason to cancel the loan after the three-day period, seek legal help to see if you have the right to cancel.

Can anyone take out a reverse mortgage loan?

No. Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgage loan, are a special type of home loan available only to homeowners who are 62 and older.

Age is one requirement for a HECM. The other requirements include:

  • Your home must be your principal residence, meaning you live there the majority of the year.
  • You must either own your home outright or have a low mortgage balance. Owning your home outright means you do not have a mortgage on it anymore. If you have a mortgage balance, you must be able to pay it off when you close on the reverse mortgage. You can use your own funds or money from the reverse mortgage to pay off your existing mortgage balance.
  • You cannot owe any federal debt, such as federal income taxes or federal student loans. You may, however, use money from the reverse mortgage loan to pay off this debt.
  • You must have enough of your own money or agree to set aside part of the reverse mortgage funds at your loan closing to pay ongoing property charges, including taxes and insurance, as well as maintenance and repair costs.
  • Your home must be in good shape. If your house does not meet the required property standards, the lender will tell you what repairs need to be made before you can get a reverse mortgage loan.
  • You must receive counseling from a HUD-approved reverse mortgage counseling agency to discuss your eligibility, the financial implications of the loan, and other alternatives.

What are some alternatives to a reverse mortgage?

Before taking out a reverse mortgage, make sure you understand this type of loan. You may want to look at other ways to make the most of your home and budget, such as waiting a while, using a home equity loan or line of credit, refinancing, downsizing, and lowering your expenses.

Waiting

If you take out a reverse mortgage loan when you are too young, you may run out of money when you’re older and more likely to have less income and higher health care bills.

Using a home equity loan or line of credit

A home equity loan or a home equity line of credit might be a cheaper way to borrow cash against your equity. However, these loans carry their own risks and usually have monthly payments. Qualifying for these loans also depends on your income and credit.

Refinancing

Depending on interest rates, refinancing your current mortgage with a new traditional mortgage could lower your monthly mortgage payments. Pay attention to the length of time you’ll have to repay your new mortgage, because this might affect your budget in retirement. For example, taking on a new 30-year mortgage when you are nearing retirement can become a hardship later. Consider choosing a shorter-term mortgage, such as a 10- or 15-year loan.

Downsizing

Consider selling your home. Moving to a more affordable home may be your best option to reduce your overall expenses.

Lowering your expenses

State and local programs can help with utilities and fuel payments, as well as home repairs. Many localities also have programs to help with property taxes: check with your county or town tax office. Information about these and other benefit programs is available through benefitscheckup.org.

How much does a reverse mortgage loan cost?

The cost of a reverse mortgage loan depends on the type of loan and the lender you choose. Typically, a reverse mortgage loan is more expensive than other home loans.

With a reverse mortgage, you agree to repay the money you borrowed, plus interest and fees. Unlike traditional mortgage loans, the amount you owe on a reverse mortgage loan grows over time.

What does reverse mortgage counseling cost?

Borrowers taking out a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage must receive counseling from a HUD-approved reverse mortgage housing counseling agency before receiving the loan.

Housing counseling costs vary depending on the agency and your income and debt obligations, along with other factors. HUD-approved housing counseling agencies are allowed to charge you a reasonable fee, but they cannot charge you a fee if you can’t afford it. They must explain all charges prior to counseling.

What are the other upfront costs of reverse mortgages?

Borrowers typically must pay one-time upfront costs at the beginning of a reverse mortgage loan. The costs include:

  • Origination fees ($6,000 or less, paid to the lender)
  • Real estate closing costs (paid to third parties) that can include an appraisal, title search, surveys, inspections, recording fees, mortgage taxes, credit checks, and other fees
  • An initial mortgage insurance premium, paid to the Federal Housing Administration

You can pay these costs in cash or by using the money from your loan. Using money from your loan proceeds means you don’t have to bring money to the closing. But it also means you have less available to spend out of the reverse mortgage loan proceeds.

What are the ongoing costs for reverse mortgages?

Ongoing costs are added to your loan balance each month. This means that each month you are charged interest and fees on top of the interest and fees that were added to your previous month’s loan balance. Ongoing costs may include:

  • Interest
  • Servicing fees paid to your lender to cover such costs as sending account statements, distributing your loan proceeds, and making certain that you keep up with the loan requirements
  • Annual mortgage insurance premium, equal to 0.5% of the outstanding mortgage balance
  • Property charges such as homeowners insurance and property taxes, and if applicable, flood insurance

Mortgage insurance guarantees that you receive your expected loan advances. This insurance is in addition to your homeowners insurance.

The larger your loan balance and the longer you keep your loan, the more you pay in ongoing costs. The best way to keep your ongoing costs low is to borrow only as much as you need.

Note: This information applies only to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.

What should I think about before applying for a reverse mortgage loan and what should I ask a reverse mortgage counselor?

If you are considering a reverse mortgage loan, start by understanding how one works and how it will affect you now and in the future.

A detailed discussion with a reverse mortgage counselor will give you important information to help you decide whether a reverse mortgage loan is right for you. In order to get a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage loan, you must receive counseling from a HUD-approved reverse mortgage counseling agency. However, you can talk to a reverse mortgage counselor even while you’re considering taking out a reverse mortgage loan.

Questions to ask a housing counselor

If you’re considering a reverse mortgage, here are some sample questions to discuss with a housing counselor:

  • How does a reverse mortgage loan work?
  • How is a reverse mortgage loan different from a traditional mortgage?
  • What are the upfront costs and fees in taking out a reverse mortgage loan?
  • What will be the ongoing costs and fees if I have a reverse mortgage loan?
  • How will a reverse mortgage loan affect my spouse, or other people living with me?
  • What happens if I want to sell my home once I have a reverse mortgage loan?
  • What happens to my home when I pass away?
  • What happens if I have to move to a nursing home?
  • How do I receive the money from my loan proceeds? Would it be better to take out the money as a line of credit, in monthly installments, or in a lump sum?
  • If I already have a mortgage on my house, how is that affected by a reverse mortgage?
  • What are my ongoing responsibilities once I have a reverse mortgage loan?
  • What other options should I consider other than a reverse mortgage loan?

If you discussed reverse mortgages with a lender before speaking with a counselor, tell your counselor about that discussion. Did the lender recommend a particular loan type? Did the lender try to sell you anything in addition to the reverse mortgage, or describe any conditions? Your counselor can give you unbiased information about the characteristics of the loan you may be considering.

What to do next

To learn whether a reverse mortgage is right for you, find a reverse mortgage housing counseling agency or call HUD's interactive voice system at 800-569-4287.

Are there different types of reverse mortgages?

Yes. There are several kinds of reverse mortgage loans: (1) those insured by the Federal Housing Administration (FHA); (2) proprietary reverse mortgage loans that are not FHA-insured; and (3) single-purpose reverse mortgage loans offered by state and local governments.

Most reverse mortgage loans today are Home Equity Conversion Mortgages (HECMs), insured by the Federal Housing Administration (FHA), which is a part of the U.S. Department of Housing and Urban Development (HUD). In addition to HECM loans, some lenders may offer proprietary reverse mortgage loans, which are not insured by the federal government and are typically designed for borrowers with higher home values.

Some state and local governments and non-profit organizations also offer single-purpose reverse mortgage loans. These reverse mortgage loans may be used only for the purpose specified by the lender (for example home repairs or property taxes). They may only be available in some areas and they may be only for homeowners with low to moderate income. These non-HECM reverse mortgage loans are not federally insured.

How to shop for a reverse mortgage

If you are interested in a reverse mortgage loan, you should compare loan options, fees, and interest rates from several lenders to make sure you will get the loan features you want and the lowest interest rate possible.


Sources and further reading

The CFPB source passages are U.S. government work in the public domain. Fynoptic has selected, organized, and adapted the material for this guide, including corrections identified through the additional sources listed above. Sources accessed October 27, 2026. This use does not imply agency endorsement or affiliation.

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