How Reverse Mortgages Work
The Complete 2026 Guide

The short version

A reverse mortgage flips a regular mortgage on its head. Instead of you paying the bank every month, the bank pays you. You tap into the equity you've built in your home — and you don't make any monthly mortgage payments on that money.

You can get the money as a lump sum, monthly payments, a line of credit you use when you need it, or a mix of these. The loan balance grows over time because interest is adding up instead of being paid off. You don't owe anything back until you sell the home, move out for good, or pass away.

The most common type is the HECM — Home Equity Conversion Mortgage — which is insured by FHA. That federal backing guarantees you'll always get your money (even if the lender goes under) and that you can never owe more than the home is worth.

How it works, step by step

You qualify and get counseling

To get a HECM, you need to be at least 62, own an eligible home as your primary residence, and complete a session with a HUD-approved counselor. You can find one through the CFPB's housing counselor directory. There's no minimum credit score and no income requirement like a regular mortgage. The lender does a financial assessment to make sure you can keep up with property taxes and insurance — that's it.

For the full rundown, see our requirements guide.

Your home is appraised

An FHA-approved appraiser determines your home's current market value. That number, combined with your age and current interest rates, determines how much you can borrow. For 2026, the maximum value FHA uses in the calculation is $1,249,125 — even if your home is worth more.

Your loan amount is calculated

Most borrowers qualify for roughly 40% to 60% of their home's value. The older you are, the more you qualify for — because the loan is expected to run for a shorter time. If you still have a mortgage, it gets paid off first from your reverse mortgage proceeds. Whatever is left over is yours.

Want to see your numbers? Try our HECM calculator.

You choose how to get your money

This is one of the most flexible parts. You pick how the money comes to you:

With an adjustable-rate HECM, you can change your payment plan later for about $20. See our payment options guide for the full breakdown.

No monthly mortgage payments — ever

Once your reverse mortgage is in place, you don't make mortgage payments. Interest gets added to your balance each month instead. That's the core difference from a regular mortgage.

You do still need to pay property taxes, keep your homeowner's insurance, and maintain the home. If you want to make voluntary payments to slow the balance growth, you can — there are no penalties for paying early.

The loan is repaid when you leave

A reverse mortgage comes due when the last borrower (or eligible non-borrowing spouse) permanently leaves the home — by selling, moving to a different home, entering long-term care for more than 12 months, or passing away.

The home is sold, and the loan gets paid off from the proceeds. If there's equity left over, it belongs to you or your heirs. If the loan balance is higher than the home's value, the non-recourse protection kicks in — nobody owes the difference. FHA insurance covers the gap.

What it costs

You should understand every dollar, so here's the honest picture. Most costs get rolled into the loan — they come out of your proceeds, not your pocket.

On a $400,000 home, total upfront costs usually run $14,000–$19,000. The only cost you typically pay out of pocket is the ~$125 counseling fee. For the full breakdown, see our costs and fees guide.

Who it's a good fit for

It's probably not the best fit if you're planning to move within 2–3 years, can't afford property taxes and insurance, or need to preserve full home equity for your heirs. For a balanced look, see our pros and cons guide.

What happens to your family's inheritance

This is the question families ask most. When the last borrower passes away or permanently leaves the home, your heirs have choices: sell the home and keep whatever equity is left above the loan balance, refinance into their own mortgage and keep it, or walk away owing nothing.

A reverse mortgage reduces your heirs' inheritance — it doesn't eliminate it. And the non-recourse protection means they can never owe more than the home is worth. For the full picture, see our inheritance guide.

How it compares to other options

A reverse mortgage is one of several ways to tap your home equity. Here's the quick version — see our full comparison guide for details:

HECM vs. HELOC: A HELOC is cheaper upfront but requires monthly payments and can be frozen by the lender anytime. A HECM has no payments and can't be frozen.

HECM vs. cash-out refinance: A refi costs less overall but requires full income qualification and monthly payments. Many retirees on Social Security alone can't qualify.

HECM vs. selling: Selling gives you full equity but means leaving your home. A reverse mortgage lets you stay. If you're ready to downsize, consider selling and using a HECM for Purchase on the new home.

Your next step

A reverse mortgage is a real financial tool with real costs and real protections. It's been refined over decades with FHA oversight, mandatory counseling, and non-recourse guarantees. It's not free money — it's a loan. But for the right person, it provides financial freedom that isn't available any other way. The CFPB's reverse mortgage guide is another good independent resource.

The key is education, and you're doing that right now. When you're ready to see specific numbers, try our HECM calculator — no personal information required. When you want to talk through the details, schedule a no-pressure conversation.