What Is a Reverse Mortgage?

The most common type is the Home Equity Conversion Mortgage (HECM), insured by the FHA and backed by HUD. This provides strong borrower protections. Proprietary (jumbo) reverse mortgages exist for higher-value homes but lack federal insurance.

The loan becomes due when you sell the home, move out permanently, or pass away—typically repaid by selling the home. Thanks to non-recourse features, you or your heirs never owe more than the home’s value.

Key Eligibility Requirements in 2025

• Youngest borrower must be at least 62 years old.
• The home must serve as your primary residence (single-family, 2-4 unit, FHA-approved condo, or certain manufactured homes).
• You must own the home outright or have a low remaining mortgage balance payable with loan proceeds.
• Complete mandatory HUD-approved counseling (in-person or remote).
• Pass a financial assessment to ensure you can cover ongoing taxes, insurance, and maintenance.
• No delinquent federal debt.

In 2025, the HECM lending limit is $1,209,750—the maximum home value considered for calculations (up from previous years).

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How Funds Are Disbursed

You can receive money in several ways:

OptionDescriptionBest ForLump SumOne-time payment (often fixed rate)Paying off existing mortgage or large expensesLine of CreditDraw as needed; unused portion grows over timeFlexible access, emergency fundMonthly PaymentsFixed amount for life (tenure) or set termSupplementing incomeCombinationMix of above optionsCustomized needs

The line of credit is popular because growth can increase available funds over time.

Pros and Cons

  ProsCons

No monthly mortgage payments Upfront fees and closing costs can be high Stay in your home for life Reduces equity for heirsFunds are tax-freeInterest accrues, increasing loan balanceNon-recourse protectionMust maintain home/taxes/insuranceFlexible payout optionsNot ideal if planning short-term stayStronger 2025 protections for spouses/heirsRates higher than traditional mortgages

Costs and Rates in 2025

Expect these costs:

• Origination fees — Capped by HUD.
• Mortgage insurance premiums — Upfront (around 2%) and annual (0.5%).
• Closing costs — Appraisal, title, etc.
• Interest rates — Adjustable HECMs typically mid-5% to low-6%; fixed rates higher.

Rates vary by lender—shop around.