More monthly income: reverse mortgages, in plain English

A reverse mortgage lets an older homeowner borrow against the home’s value without making monthly loan payments. It can help some families. It also has real costs and rules that can put the home at risk if they’re missed.

What it is

The most common reverse mortgage is called a HECM, short for Home Equity Conversion Mortgage. It is insured by the FHA (Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, or HUD). HUD says the HECM is the only reverse mortgage insured by the federal government, and it is only available through an FHA-approved lender.

• The home stays in your parent’s name.
• No monthly mortgage payment is required while they live there.
• But interest and fees are added to the loan every month, so the amount owed goes up over time, and the equity left in the home goes down.
• The loan is usually repaid when the last borrower no longer lives in the home, often by selling the house.

Who qualifies (HECM basics)

• Age: the borrower must be 62 or older.
• Lives there: the home must be their principal residence, meaning where they live most of the year.
• Owns it, or nearly: they own the home outright or have a mortgage balance that can be paid off at closing (the reverse mortgage money can be used for that).
• No federal debt owed, such as federal income taxes or federal student loans. The CFPB says reverse mortgage money can be used to pay this off.
• Can keep up the house: they must have enough money, or agree to set some loan money aside, to pay property taxes, homeowners insurance, and upkeep.
• Home condition: the house must meet FHA property standards. The lender will say if repairs are needed first.
• Counseling: they must meet with a HUD-approved counselor first (see below).

Duplexes and small multi-unit homes: HUD’s FHA guide lists a 1-4 unit home where the borrower lives in one of the units as an eligible property type, along with single-family homes, HUD-approved condominiums, and some manufactured homes. Ask the lender to confirm that your parent’s specific property qualifies.

How much can be borrowed? HUD says it depends on the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and the lesser of the home’s appraised value, the sales price, or the FHA limit. For 2026, HUD set the HECM limit (called the “maximum claim amount”) at $1,249,125 nationwide. That is a cap on the home value used in the math, not the amount your parent would get. The actual amount is lower.

Required HUD counseling

Before getting a HECM, your parent must talk with a HUD-approved reverse mortgage counselor. The counselor is independent of the lender. They go over whether your parent qualifies, the money side of the loan, and other options. Under HUD rules, a non-borrowing spouse must also receive counseling.

• Find a counselor: call (800) 569-4287 or search HUD’s HECM Counselor Roster.
• Counselors may charge a reasonable fee, but the CFPB says they cannot charge you if you can’t afford it, and they must explain charges before counseling.
• You can go to counseling with your parent. Bring your questions (see the list below).

Costs

The CFPB says reverse mortgages are typically more expensive than other home loans. Costs include:

These can usually be paid out of the loan, which means less money is left for your parent. The CFPB says the best way to keep ongoing costs low is to borrow only what is needed.

Changed your mind? With most reverse mortgages there is a three-business-day right to cancel after closing. Cancel in writing, by certified mail with a return receipt.

Risks and rules your parent must keep

• Long stays away: If the borrower is away more than 12 months in a row in a health care facility (hospital, rehab, nursing home, or assisted living) and no co-borrower lives in the home, the loan must be paid off.
• Others living in the home (adult children, relatives) who are not borrowers may have to move out or pay off the loan when the borrower dies or leaves.
• Too early can mean too little later. The CFPB notes that taking a reverse mortgage too young can mean running out of money when health costs are higher.
• Other options to compare: waiting, a home equity loan or line of credit, refinancing, downsizing, or local programs that help with property taxes, utilities, and repairs.

If one spouse isn’t on the loan

This is one of the most important details. If Dad is the borrower and Mom isn’t (for example, because she’s under 62), Mom is a non-borrowing spouse.

• For HECMs with FHA case numbers assigned on or after August 4, 2014, a non-borrowing spouse may be able to stay in the home after the borrower dies, if they qualify as an “Eligible Non-Borrowing Spouse” under HUD rules. In general they must have been married to the borrower when the loan was signed and stayed married, be named in the loan papers, live in the home as their main home, and keep up the loan rules (taxes, insurance, upkeep).
• An Eligible Non-Borrowing Spouse does not get any more money from the loan.
• Older loans (before August 4, 2014) follow different rules.
• The CFPB says qualifying can be difficult and suggests help from an attorney or HUD-approved counselor.

What happens when they move out or pass away

• The loan becomes due when the last borrower (or Eligible Non-Borrowing Spouse) dies, sells the home, or no longer lives there as their main home.
• Heirs can keep the home by paying off the loan, sell it, or turn it over to the lender.
• If the loan balance is more than the home is worth, heirs can satisfy it by paying or selling for at least 95% of the home’s current appraised value. The CFPB says the rest of the loan is covered by the FHA mortgage insurance paid during the loan.
• Timing is tight: the CFPB says once heirs receive a due-and-payable notice, they have 30 days to buy, sell, or turn the home over. The CFPB says it might be possible to extend that, up to six months, so heirs can sell or get their own loan. HUD’s guide for heirs describes 90-day extensions with proof that they are actively trying to sell or repay.
• Property taxes and insurance stay the estate’s responsibility until the title transfers.

Scams to avoid

• Information you have to pay for. HUD warns about scam artists who charge thousands of dollars for information that is free from HUD.
• Contractors pushing a reverse mortgage to pay for repairs. The CFPB says this may be a scam.
• “VA reverse mortgages.” The Department of Veterans Affairs does not offer reverse mortgages. Be wary of ads implying VA approval or special veteran deals.
• Pressure. The CFPB says not to let yourself be pressured into a reverse mortgage. Slow down if anyone is rushing your parent.

Step-by-step checklist

1. Talk with your parent first. What is the money for? How long do they plan to stay in the home?
2. Check the basics: age 62+, lives there most of the year, can keep paying taxes, insurance, and upkeep.
3. Look at other options (downsizing, local tax or repair help, home equity loan) so you have something to compare.
4. Book HUD-approved counseling. Call (800) 569-4287. Go with your parent if they want you there.
5. If there’s a spouse or anyone else living there who won’t be a borrower, get clear, written answers about what happens to them.
6. Compare at least two FHA-approved lenders. Ask for costs in writing. Use HUD’s lender search to confirm a lender is FHA-approved.
7. Consider an elder-law attorney to review, especially if Medicaid, a trust, or family members in the home are involved.
8. Read everything before closing. Remember the three-business-day right to cancel.
9. After closing, set reminders for property taxes and insurance, every year.

What to ask the lender

• Are you an FHA-approved HECM lender? What is your NMLS number?
• Please give me all costs in writing: origination fee, mortgage insurance, closing costs, servicing fee, and interest rate.
• Fixed or adjustable rate? How does each choice change how my parent can take the money?
• How much will the balance likely grow over 5 and 10 years?
• Will part of the loan be set aside to pay taxes and insurance? Do you recommend that for us?
• My parent’s spouse (or another relative) lives here. Exactly what happens to them if my parent dies or moves to a care facility?
• Does this specific property (for example, a duplex, condo, or manufactured home) qualify?
• Will you ever suggest my parent use this money to buy an annuity, investment, or insurance product? (Be cautious if the answer is yes.)
• What happens if my parent falls behind on taxes or insurance?