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Reverse Mortgages, Explained Plainly
How a HECM works, what it costs and when it is worth a conversation, from a mortgage broker who shops a network of approved lenders.
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Most people come to this topic with one question: "Am I giving up my home if I get a reverse mortgage?" The short answer is no. You still own your home. But a reverse mortgage is a loan, with real costs and real rules, and it is worth understanding before anyone sits down at your kitchen table to pitch you one.
This guide explains how the most common kind works, what you still pay, how it can help you buy your next home, what it costs, and the questions and warning signs to know. It draws on published information from HUD, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).
It comes from Surroundings. Maggie B. Hopkins is a mortgage broker whose loan options include reverse mortgages. As a broker, she shops loans across lenders so you can compare real options. Give yourself options, and do not limit yourself to one offer.
How a Reverse Mortgage Works
With a regular mortgage, you pay the lender every month. With a reverse mortgage, you do not make monthly mortgage payments. The lender advances money to you from your home's equity. Interest and fees are added to the balance each month, so the amount you owe grows over time, according to the CFPB.
The most common kind is the Home Equity Conversion Mortgage, or HECM. The FTC says HECMs are federally insured through HUD, and that the insurance protects the lender's repayment, not you. Here are the basics:
- Age. The CFPB describes HECMs as loans only for homeowners 62 and older.
- Counseling comes first. Before receiving a HECM, you must meet with a counselor from a HUD-approved housing counseling agency, the CFPB says. The FTC describes the agency as independent.
- You keep owning the home. The lender does not take your house. You remain the owner and keep living there.
- You still pay for the home. The FTC says you remain responsible for property taxes, homeowners insurance, repairs and HOA fees. The CFPB says you must live in the home as your main residence and keep it in good condition. Falling behind on these can put the loan in default.
- When the loan comes due. The FTC says the loan generally must be repaid when you die or move from the home. If you have a co-borrower, or an eligible non-borrowing spouse, the CFPB says the loan is not due until they have died or moved too. Ask about this if only one spouse will be on the loan.
- You cannot owe more than the home is worth. The FTC says most reverse mortgages are non-recourse, so your estate cannot owe more than the home's worth when it is sold to repay the loan. The CFPB says heirs who sell can pay off a HECM by selling for at least 95 percent of the home's appraisal, even if the balance is higher.
Money can come to you in different ways, such as a lump sum, monthly payments, a line of credit or a mix. The right choice depends on what you need the money for.
How Much Can a HECM Be Based On?
HUD sets a national cap on the home price a HECM can be based on, called the maximum claim amount. HUD announced that for FHA case numbers assigned on or after January 1, 2026, the HECM maximum claim amount is $1,249,125, up from $1,209,750 in 2025.
That cap is not what you receive. The amount you can actually get depends on the age of the youngest borrower or eligible spouse, current interest rates and your home's appraisal, and it is reduced by any existing mortgage that must be paid off. A lender can show you the estimate in writing.
HECM for Purchase: Buying Your Next Home
A reverse mortgage is not only for staying put. HUD's HECM for Purchase program lets a borrower 62 or older buy a new principal residence with a reverse mortgage. You make a large down payment, often from the sale of your current home, and the HECM covers the rest in the same closing. After that, there is no monthly mortgage payment on the new home, though you still pay taxes, insurance and upkeep.
This can matter when you are right-sizing. It may let you buy a home that fits your next chapter, keep more cash in the bank, and avoid a new monthly payment. It also has costs, and it uses equity you or your heirs might otherwise keep. Compare it side by side with paying cash or using a regular mortgage.
If you are thinking about selling and buying, our downsizing page explains how we plan both moves together. To compare a regular payment for the same home, try our mortgage calculator.
What a Reverse Mortgage Costs
Reverse mortgages can cost more up front than many other loans. The CFPB groups the costs this way:
Up front:
- Origination fees, charged by the lender
- Real estate closing costs, such as appraisal, title and escrow
- An initial mortgage insurance premium, paid to the Federal Housing Administration
Over time:
- Interest, added to your balance
- Servicing fees
- An annual mortgage insurance premium
- Property charges you pay yourself: taxes, homeowners insurance and HOA dues
Some of these costs can be paid from the loan, which means they grow with the balance. Ask every lender for a written estimate, then compare them line by line.
Questions to Ask Any Lender
- Is this a HECM, or a proprietary (private) reverse mortgage? Why are you recommending this one?
- What is the interest rate, and is it fixed or adjustable? What is the APR?
- What are the origination fee, closing costs and mortgage insurance, in dollars?
- How much can I receive, and in what form: lump sum, monthly, line of credit?
- What will my balance be in 5, 10 and 15 years?
- What happens to my spouse if only one of us is on the loan?
- What happens if I move into a care facility for a long stay?
- What will you need from me each year to show I still live here and have paid taxes and insurance?
- What will my heirs need to do, and how long will they have?
- Can I have this in writing to review with my family, my counselor or my attorney?
Red Flags to Walk Away From
The FTC warns about several patterns. If you see one of these, slow down or walk away.
- Pressure to sign now. The FTC says if you feel pressured to finish urgently, walk away.
- A pitch to buy something with the money. Salespeople may push annuities, long-term care insurance or other investments paid for with your loan. You do not have to buy anything to get a reverse mortgage.
- A contractor who suggests one. Home repair salespeople may bring up a reverse mortgage to pay for their work.
- Look-alike government branding. Ads may be dressed up to look tied to a government program. A HECM is a loan you repay.
- Anyone asking you to sign over your deed. A reverse mortgage does not require you to give up ownership.
The FTC also notes that with most reverse mortgages you have at least three business days after closing to cancel for any reason, in writing, without penalty.
Your Next Step
If a reverse mortgage might be part of your plan, the next step is a conversation, not an application. We can walk through how a HECM compares with selling, right-sizing, a regular loan or making no change at all. We will show you written numbers and leave the decision with you and your family. Get a quote from us and compare it with any other lender.
Ask us a question or call (916) 549-3131.
Maggie B. Hopkins, NMLS #349517. Surroundings NMLS #2528307.
This is general information, not a loan offer or commitment to lend. Loans are subject to eligibility, counseling and underwriting. This is not legal or tax advice.
Frequently Asked Questions
Am I giving up my home if I get a reverse mortgage?
No. You still own the home and keep living there. You must keep paying property taxes, insurance and upkeep, and the loan generally comes due when the last borrower dies or moves out.
How old do you have to be for a reverse mortgage?
For a HECM, the most common kind, borrowers must be 62 or older, according to the Consumer Financial Protection Bureau.
Will my children owe money if the loan is more than the house is worth?
Generally, they will not. The FTC says most reverse mortgages are non-recourse, so the estate cannot owe more than the home's worth. The CFPB says heirs can pay off a HECM by selling for at least 95 percent of the appraisal.
Can I use a reverse mortgage to buy a home?
Yes. HUD's HECM for Purchase program lets a borrower 62 or older buy a new principal residence with a down payment plus a reverse mortgage, closing both in one transaction.
Do I have to talk to a counselor first?
Yes, for a HECM. You must meet with a counselor from a HUD-approved housing counseling agency before you receive the loan.
Can I cancel a reverse mortgage after closing?
With most reverse mortgages, you can. The FTC says you have at least three business days after closing to cancel for any reason, in writing, without penalty.
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