11 Reverse Mortgage Facts to Know Before You Borrow

You’ve likely heard commercials about reverse mortgages and how they can help seniors get an extra income stream. But a 30-second ad won’t tell you all the important reverse mortgage facts. Below, we’ll share 11 important pieces of information you should know before you consider this loan, specifically for homeowners aged 62 and up. 

Overall, reverse mortgages are useful tools that help seniors turn their home equity into cash for living expenses. However, they come with fees, restrictions, and fine print that borrowers must be aware of before taking out the loan.

Table of Contents

1. 1. Reverse mortgages are for ages 62+
2. 2. Your house needs to be your primary residence
3. 3. Reverse mortgages come with premiums and fees
4. 4. You must complete mandatory counseling.
5. 5. You can borrow over $1M with a reverse mortgage
6. 6. Reverse mortgages are non-recourse loans
7. 7. Your reverse mortgage loan payments are deferred
8. 8. Reverse mortgage income could affect government benefits
9. 9. You’re still responsible for property maintenance and taxes
10. 10. The size of your loan depends on several factors
11. 11. Your spouse doesn’t need to be on the loan

1. Reverse mortgages are for ages 62+

If you’re interested in getting a reverse mortgage, you must be at least 62 years old, according to the U.S. Department of Housing and Urban Development. If you live with a spouse or partner, only one of you must meet the age requirement. So it’s possible to get a reverse mortgage under 62 as long as your spouse is 62 or older.

Although many lenders offer reverse mortgages, the National Reverse Mortgage Lenders Association reports that nearly all reverse mortgages are a product called a Home Equity Conversion Mortgage (HECM). These are insured by the Federal Housing Administration (FHA). 

Lenders issued 26,521 HECMs during the 2024 fiscal year, a decrease from prior years, but other types of reverse mortgages are not FHA-insured. You can also apply for a proprietary reverse mortgage loan or a single-purpose reverse mortgage loan. Learn more about reverse mortgage age requirements here.

2. Your house needs to be your primary residence

You can’t take out a reverse mortgage on a second home or a vacation home. Not only must you live in your house for most of the year, but you also need to own your home outright to get a reverse mortgage, according to the Consumer Financial Protection Bureau. If you have a low balance left on your mortgage, you can use your reverse mortgage to pay it off.

The primary residence requirement can be a problem if you have health issues and have to move to a hospital or nursing home. If this happens and you’re away for more than a year, the entire balance of your reverse mortgage will be due unless you have a co-borrower who lives at home. 

3. Reverse mortgages come with premiums and fees

It’s worth comparing the costs of a reverse mortgage against other equity lending products before borrowing. With a reverse mortgage, you’ll pay a 2% initial mortgage insurance premium plus yearly mortgage insurance premiums equal 0.5% of the loan. You’ll also need to pay closing costs and substantial origination fees.

Origination fees are either $2,500 or 2% of the first $200,000 plus 1% of the amount over $200,000. Origination fees are capped at $6,000. These fees go to your lender; it’s not used to pay down your principal. Some lenders also charge monthly service fees. It’s critical to research lenders and ask about the fees before committing.

Because you don’t make monthly payments toward the loan as payments are deferred, it’s easy to lose track of how much your balance increases over time due to these fees. 

4. You must complete mandatory counseling.

To take out a reverse mortgage that’s approved by HUD, you’ll need to complete mandatory counseling. According to the National Council on Aging, you can meet with a reverse mortgage counselor in person or on the phone. During the session, a counselor will discuss the pros and cons of a reverse mortgage.

A counselor can also notify you of any benefits or services you might qualify for to help you financially. Once you’ve completed your counseling, you’ll get a certificate of completion, which you’ll use to prove to your lender that you completed this mandatory qualification.

During mandatory counseling, you might realize that a reverse mortgage can help you improve your cash flow. You may also find out about other government programs or lending products that could be a better fit. Keep your options open, and only choose a reverse mortgage if it’s the best financial product for your situation.

5. You can borrow over $1M with a reverse mortgage

The FHA recently updated the maximum claim amount for HECMs. Now, the maximum is just over $1.2 million. Although an HECM is the most common type of reverse mortgage, there are other types, including a jumbo reverse mortgage. You can borrow up to $4 million with a jumbo reverse mortgage.

Remember that a jumbo reverse mortgage is a private loan, so it is not FHA-insured. Also, research several home equity lending products before choosing the best fit. Lending options like a home equity loan or a home equity line of credit might cost less overall, with fewer restrictions on where you need to reside.

6. Reverse mortgages are non-recourse loans

Your reverse mortgage should have a non-recourse clause. The FTC explains that this clause helps to protect your heirs. When you die, this clause means your heirs will never owe the bank more than your home is worth. So if you owe more on the reverse mortgage loan than your home sells for when you pass away, your heirs will not need to cover the difference.

In other words, your reverse mortgage lender cannot try to seek more from your heirs by demanding more payment or pursuing their personal assets. The lender can only seek loan repayment by selling the property. The lender cannot access any other part of your estate except for the home sale proceeds. 

You should notify your children or other heirs if you decide to get a reverse mortgage. Include copies of your loan paperwork with your will or estate attorney. That way, your heirs won’t be caught off guard by learning a loan is leveraged against the property’s equity.

7. Your reverse mortgage loan payments are deferred

The major difference between traditional mortgages and reverse mortgages is that reverse mortgage payments are deferred. That means you won’t make monthly loan payments. Instead, you receive either a lump-sum payment, monthly payments, or a line of credit. You can use this money to supplement your retirement income, pay off debt, or fund medical expenses.

The loan is due in full if you pass away, move out, or sell your home. Having deferred payments is an attractive option for seniors who need more monthly income in retirement but want to continue owning and living in their homes. Even though you don’t have to make monthly mortgage or loan payments, you’re still responsible for maintaining your home.

8. Reverse mortgage income could affect government benefits

According to the Administration for Community Living (ACL), a government organization that supports people living independently as they age, payments you get from securing a reverse mortgage are not taxable because your payments are a loan, not income.

Also, the ACL reports that getting reverse mortgage income won’t affect Social Security or Medicare benefits. It also won’t harm your Medicaid eligibility if you spend the payments each month. That’s because your eligibility for Medicaid is based on your total assets. Getting and keeping a large sum can put you over the asset limit.

9. You’re still responsible for property maintenance and taxes

When you have a reverse mortgage, it’s your responsibility to pay your property taxes and homeowners insurance. Reverse mortgages also require you to maintain your house regularly. That means you must fix any issues quickly, mow your lawn, and generally keep your house’s appearance neat. 

If you’re worried about affording property taxes, your lender can set aside part of your reverse mortgage loan to pay these bills. Some lenders can make these payments on your behalf, while others will send you the portion set aside when your payments are due. Speak with your lender if you’re concerned about your ability to maintain your home or pay taxes.

10. The size of your loan depends on several factors

The amount of money you can take out in a reverse mortgage depends on a few factors. According to the CFPB, the amount is based on your age, the value of your home, and the interest rate on your home. As we mentioned, it also depends on the type of reverse mortgage you take out. (HECM loans have lower limits than private loans.)

CBS reported that reverse mortgages typically enable borrowers to get between 40% and 60% of their home’s value. This is sometimes called the 60% rule for reverse mortgages. So if you have a home that’s worth more, you’ll be eligible to take out more. 

Older borrowers can typically borrow more because lenders will recoup their loans sooner. Some lenders also limit the amount you can withdraw in your first year.

---

Consider this:

Longbridge Financial, which earns our “best customer reviews” designation aong our top-rated reverse mortgage companies, offers a free estimate tool to help you see how much you may be eligible to borrow based on your age, home value, and other key factors. Its specialists can help walk you through options and answer your questions without pressure—something many reviewers appreciate when making such a big financial decision.

---

11. Your spouse doesn’t need to be on the loan

If you’re married, your spouse can join you as a co-borrower on the loan, or they can remain off of the loan. HUD offers protections for non-borrowing spouses. For example, even if the borrower gets sick and needs to move to a nursing home, the non-borrowing spouse is allowed to continue living in their home. The same is true if the borrower passes away.

As part of this protection, the non-borrowing spouse still must meet all loan requirements, such as paying property taxes, maintaining the property, and keeping insurance up to date.

Reverse mortgages are generally not my first recommendation for clients because they have fees and can be costly. However, if a client cannot afford to live without selling their home and still wants to live there, this is an option.