Reverse Loan

A reverse mortgage is a loan that allows homeowners aged 62 or older to convert a portion of their home equity into cash without making monthly payments — funds can be disbursed as a lump sum, a consistent monthly income, or according to a preferred schedule. Repayment of the loan and its accumulated interest is deferred until the homeowner sells the home, moves out permanently, or passes away.

To qualify, homeowners generally must be at least 62 years old and live in the home as their primary residence. Rather than the homeowner making payments to a lender, the lender makes payments to the homeowner — as a lump sum, regular payments, or a line of credit. The loan is typically repaid when the homeowner sells the home, moves out, or passes away, at which point the balance plus accumulated interest and fees comes due; if the home sale proceeds fall short, the lender absorbs the remaining amount. Homeowners can use the funds for a range of purposes, such as paying off debts, covering medical expenses, or supplementing retirement income.

It can be. Interest accrues over time since no monthly payments are made, so a substantial amount can be added to the loan balance over the years. Reverse mortgages also typically come with upfront fees and closing costs — origination fees, mortgage insurance premiums, appraisal fees, and other administrative expenses — plus ongoing mortgage insurance premiums to protect the lender. As interest and fees accumulate, the homeowner's equity decreases over time, which can leave less inheritance for heirs or fewer options for future borrowing.

The amount depends on several factors: your home's appraised value (generally, a higher value means a larger loan), the age of the youngest homeowner on the title (older homeowners typically access a larger percentage of their home's value), prevailing interest rates at the time of application (lower rates typically mean a higher loan amount), the type of reverse mortgage — such as an FHA-insured Home Equity Conversion Mortgage (HECM) versus a proprietary reverse mortgage from a private lender — and government- or lender-set loan limits that can vary by location. An online reverse mortgage calculator or a conversation with a reverse mortgage lender can give you a more precise estimate based on your specific situation.