Reverse Mortgages: How They Work and Who They Fit
October 9, 2026
A reverse mortgage lets homeowners age 62 and older turn part of their home equity into cash without making a monthly mortgage payment. With borrowing costs still elevated, many retirees are weighing whether to tap equity through a traditional refinance or a home equity loan. Those options require monthly payments, which is exactly what a reverse mortgage avoids. It is a useful tool for the right household, and a poor fit for others.
The loan is repaid when the last borrower sells the home, moves out permanently, or passes away. Until then, the homeowner keeps title and remains responsible for property taxes, homeowners insurance, and upkeep. Funds can arrive as a lump sum, a monthly payment, a line of credit, or a mix of these. The line of credit option draws the most interest because the unused portion can be a flexible reserve for later years.
The most common product is the federally insured Home Equity Conversion Mortgage, or HECM, which comes with borrowing limits and required counseling from an independent, approved counselor. Proprietary reverse mortgages are a second path. These are offered by private lenders and can work for owners of higher-value homes whose equity exceeds the HECM limit. They carry different terms and fewer standardized protections, so comparing them side by side matters. Interest accrues on the balance over time, which means the amount owed grows while the equity left in the home typically shrinks.
For older homeowners, a reverse mortgage can cover home repairs, pay off an existing mortgage, or fill gaps in retirement income. It tends to work best for someone who plans to stay in the home for many years and has the cash flow to keep up with taxes and insurance. It is a weaker fit for someone who expects to move soon, since upfront costs are significant and are spread over a short time. Heirs should also be part of the conversation early. They can repay the balance, refinance, or sell the home and keep any remaining equity.
A reverse mortgage is neither a last resort nor a cure-all. It is a financial tool that rewards careful planning, honest math, and a clear view of long-term goals. Talking through the numbers with a qualified professional before deciding is the smartest first step.