Reverse Mortgage 101
What is a reverse mortgage?
The whole program in plain English: how it works, who qualifies, how much you can get, what it costs, and what happens to your family afterward. No pitch, no pressure.
The one-paragraph answer
A reverse mortgage is a home loan for homeowners 62 and older that turns part of your home equity into cash, without selling the home and without a required monthly mortgage payment. The formal name is a Home Equity Conversion Mortgage, or HECM, and it is insured by the federal government through FHA. You keep the title. You keep living in the house. The balance grows instead of shrinking, and the loan is repaid when the last borrower sells, moves out permanently, or passes away, almost always from the sale of the home.
That's it. Everything else, the counseling, the set-asides, the payout options, exists to make sure the program is used well rather than badly.
How is it different from a regular mortgage?
A traditional mortgage runs one direction: you make payments, the balance falls, your equity rises. A reverse mortgage runs the other direction. There's no required monthly payment, interest and insurance are added to the balance, and your equity declines over time while the loan balance climbs.
The practical trade is cash flow now in exchange for equity later. That's a genuinely good trade for some households and a poor one for others, and the honest way to decide is to look at how long you plan to stay in the home.
What determines how much you can get
| Youngest borrower's age | Older borrower = more available. Age is the single biggest input. |
|---|---|
| Home value (up to the FHA limit) | $1,249,125 in 2026. Value above that is not counted by an FHA HECM. |
| Expected interest rate | Lower rates increase your principal limit; higher rates reduce it. |
| Existing mortgage balance | Paid off first from proceeds. What remains is what you can access. |
| Required set-asides | Underwriting may reserve funds for taxes and insurance, reducing available cash. |
As a rough guide, borrowers access somewhere between 30% and 60% of their home's value. A 62-year-old lands near the bottom of that range and an 80-year-old near the top. The reverse mortgage calculator will put a real number on your situation in about 30 seconds.
The four ways to receive the money
Lump sum
One fixed-rate draw at closing. Best when there's a defined need, most often paying off an existing mortgage. Interest starts accruing on the full amount immediately, so it's the most expensive option over time if you don't need all of it.
Line of credit
The most flexible and, for planning purposes, the most powerful. You draw only what you need, interest accrues only on what you've drawn, and the unused portion grows at the loan rate plus the mortgage insurance rate. Opening one early and leaving it alone builds a larger safety net.
Monthly payments (tenure)
A fixed monthly amount for as long as you live in the home, however long that is. It functions like a private annuity funded by your own equity, useful when Social Security alone doesn't cover the monthly gap.
Term payments or a combination
A larger monthly amount for a set number of years, often used to bridge to age 70 so Social Security can grow. Most borrowers end up with a hybrid: pay off the mortgage, take a modest monthly amount, keep the rest as a line of credit.
Who qualifies
Five requirements, and none of them involve a credit score minimum: you're 62 or older, the home is your primary residence, you have meaningful equity, you complete independent HUD-approved counseling, and you pass FHA's financial assessment showing you can keep up with property taxes, homeowners insurance and basic maintenance. The full breakdown, including eligible property types and non-borrowing spouse rules, is on the reverse mortgage requirements page.
What it costs
Expect an upfront FHA mortgage insurance premium of 2% of the home's value, an origination fee, standard third-party closing costs, and counseling. An annual mortgage insurance premium of 0.5% accrues on the balance. Most of it can be financed into the loan rather than paid out of pocket, which is convenient but not free. The itemized version is on the reverse mortgage costs page.
What happens to your heirs and your home
When the last borrower leaves the home permanently, the loan becomes due. Heirs generally get 6 to 12 months to act, and they have three choices: sell and keep whatever equity remains, refinance into a traditional mortgage and keep the home, or sign a deed in lieu and walk away owing nothing.
Because HECMs are non-recourse and FHA-insured, your heirs can never owe more than the home is worth at the time of sale. If the balance exceeds the value, FHA insurance covers the shortfall. That protection is what the mortgage insurance premium buys.
When it's a bad idea
If you're likely to move within three to five years, the upfront costs rarely justify the benefit. If leaving the home to your children debt-free is a firm priority, a reverse mortgage works against that. If you're already struggling to pay property taxes and insurance, a HECM can delay the problem rather than solve it, and FHA may require a set-aside that shrinks what you actually receive. And if someone is presenting a reverse mortgage alongside an annuity or investment product, walk away, that's prohibited under Minnesota law.
See your own numbers first
Estimate proceeds in 30 seconds, then decide whether a conversation is worth your time.
FAQ
Reverse mortgage questions, answered
The ten questions Brian is asked most often, in the order they usually come up.
Let's explore your options
A conversation with Brian is educational, unhurried, and never salesy.
Whether you're planning retirement, buying your next home in Bloomington, or helping aging parents, start with a conversation, not a pitch.
"Brian didn't try to sell us anything. He drew a diagram on a napkin and answered every question we had. Two months later we called back."