For 2026 the federally insured reverse mortgage (HECM) counts home value only up to $1,249,125 (HUD FHA Mortgage Limits, effective January 1, 2026), and the borrower pays a 2% upfront insurance premium on that value plus 0.5% a year on the balance (HUD Mortgagee Letter 2017-12, August 29, 2017).
How a reverse mortgage works, in plain words
A reverse mortgage lets a homeowner borrow against the home without making monthly loan payments. Title stays in your name. Interest and fees are added to the balance each month, so what you owe goes up, not down, and the loan is repaid when the borrower no longer lives in the home, usually by selling it (Consumer Financial Protection Bureau (CFPB), What is a reverse mortgage?, last reviewed August 28, 2026). The CFPB's own words: "A reverse mortgage loan is not free money" (same source).
Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD). Some lenders also offer proprietary reverse mortgages that are not FHA-insured, and some state and local governments offer single-purpose loans (CFPB, Are there different types of reverse mortgages?, last reviewed July 11, 2022). This page is about the HECM; for homes worth more than the federal limit, see jumbo reverse mortgages.
Who qualifies and what you must keep doing
The youngest borrower must be 62 or older at closing (24 CFR 206.33, 24 CFR Part 206, checked October 14, 2026). The home must be your principal residence, any existing mortgage must be paid off at closing with your own money or loan money, and you must meet with a HUD-approved counselor first (CFPB, Can anyone take out a reverse mortgage loan?, last reviewed August 28, 2026). The borrower, any non-borrowing spouse and any non-borrowing owner must all receive counseling (24 CFR 206.41).
After closing you must still pay property taxes and homeowners insurance, live in the home as your principal residence, and keep the house in good condition (CFPB, What is a reverse mortgage?, last reviewed August 28, 2026). A stay in a health care facility still counts as living at home only up to twelve consecutive months (24 CFR 206.3 and 206.27). Details: reverse mortgage requirements.
How much you can borrow, and the ways to take it
The amount is the principal limit: the lower of the appraised value or the 2026 national limit of $1,249,125 (HUD, FHA Mortgage Limits, checked October 14, 2026), times a HUD factor based on the youngest borrower's age and the expected interest rate (HUD, Principal Limit Factor Tables, effective October 2, 2017). Older borrowers and lower rates mean a higher factor. Try the reverse mortgage calculator.
Payout choices are monthly payments for a set term, monthly payments for as long as you live in the home (tenure), a line of credit, a mix, or a single lump sum, and the lump sum comes only with a fixed rate (24 CFR 206.19, checked October 14, 2026). In the first 12 months you can draw the greater of 60% of the principal limit, or your mandatory obligations plus 10% (HUD, Mortgagee Letter 2014-21, November 10, 2014). How the rate affects all this is on reverse mortgage rates.
What it costs
Upfront: a mortgage insurance premium of 2% of the home's value up to the limit, and an annual premium of 0.5% of the balance (HUD, Mortgagee Letter 2017-12, August 29, 2017); an origination fee capped at the greater of $2,500 or 2% of the first $200,000 plus 1% of the rest, never more than $6,000 (24 CFR 206.31); and third-party closing costs. The CFPB says a reverse mortgage is typically more expensive than other home loans (CFPB, How much does a reverse mortgage loan cost?, last reviewed May 28, 2024). Every line, with examples: reverse mortgage costs.
When the loan ends, and what heirs owe
The loan comes due when the last borrower dies or moves out, unless an eligible non-borrowing spouse qualifies to stay. Because of FHA insurance, a HECM is non-recourse: if the balance is larger than the home's value, heirs will not have to pay more than 95% of the appraised value, and mortgage insurance covers the rest of the balance (CFPB, What happens if my reverse mortgage loan balance grows larger than the value of my home?, last reviewed July 11, 2022). See what happens to a reverse mortgage when the owner dies.
You also have a three-business-day right to cancel most reverse mortgages after closing, in writing (CFPB, What is a reverse mortgage?, last reviewed August 28, 2026).
Pros and cons, honestly
What it does well. No required monthly loan payment. You keep title and can stay in the home while you meet the terms. On an adjustable loan, the unused part of a line of credit grows (24 CFR 206.3). You or your heirs never owe more than the home is worth, under the rules above. For someone who plans to stay put for many years and needs income or a standby reserve, that can be a real fit.
What it costs you. High upfront costs. A balance that compounds, leaving less equity for you or your heirs. A duty to keep paying taxes and insurance and to keep up the home; failing to can make the loan due and payable (24 CFR 206.27, checked October 14, 2026). Less flexibility if you later need to move to care. Weigh it against the alternatives on reverse mortgage vs a home equity line of credit, buying a smaller home with a HECM for purchase, or selling (see selling a home with a large gain). Watch for the pressure tactics on reverse mortgage scams.
Go deeper
Reverse Mortgage Calculator: How Much Could a HECM Give You?
Free reverse mortgage calculator using HUD's formula and the 2026 HECM limit of $1,249,125. See costs, mortgage payoff, net amount and the first-year limit.
Reverse Mortgage Costs: What You Pay Up Front and Every Year
Reverse mortgage costs, line by line. HECM upfront insurance is 2% of home value up to the 2026 limit of $1,249,125, plus 0.5% a year and an origination fee.
Reverse Mortgage Rates: How They Are Set and Why One Point Matters
How reverse mortgage rates work: index plus margin. The 10-year Treasury was 5.19% on October 14, 2026. See how a 1-point change moves what you can borrow.
Reverse Mortgage Requirements: What You Must Meet, and Keep Meeting
Reverse mortgage requirements: the youngest borrower must be 62 at closing (24 CFR 206.33, checked October 14, 2026), plus counseling, equity and upkeep.
What Happens to a Reverse Mortgage When the Owner Dies
When the last borrower dies, heirs can pay off a reverse mortgage or sell for at least 95% of appraised value (24 CFR 206.125, checked October 14, 2026).
Reverse Mortgage vs HELOC: Which Way to Use Your Home Equity
Reverse mortgage vs HELOC: a HELOC needs monthly payments and can be frozen if your home value falls (12 CFR 1026.40, checked October 14, 2026). Compare.
HECM for Purchase: How a Reverse Mortgage Can Help You Buy Your Next Home
HECM for Purchase lets buyers 62 and older buy a home with a reverse mortgage. HUD requires move-in within 60 days. How the down payment is figured.
Jumbo Reverse Mortgages: What Changes When the Loan Is Not FHA-Insured
A jumbo reverse mortgage is a private loan for homes above the 2026 HECM limit of $1,249,125 (HUD). What changes without FHA insurance, and what to ask.
Reverse Mortgage Scams: The Real Frauds, and the Legal Pitches to Slow Down On
Reverse mortgage scams and hard sells. The CFPB found ads that left older owners thinking the loan was a risk-free government benefit (June 2015).
A plain example: fixed rate vs adjustable for the same homeowner
Hypothetical: one borrower, age 70, home appraised at $600,000, $50,000 still owed on a mortgage. Expected rate 7.19%: the 10-year Treasury rate of 5.19% on October 14, 2026 (U.S. Treasury, Daily Treasury Par Yield Curve Rates) plus a hypothetical 2.00% margin. Upfront costs of $21,000: $12,000 premium, $6,000 origination at the cap, and a hypothetical $3,000 of third-party costs. For the fixed loan we assume a hypothetical fixed note rate of 7.19%. For the adjustable loan, a hypothetical note rate of 6.53% (the 1-year Treasury rate of 4.53% on October 14, 2026, plus the 2.00% margin), held level.
| Hypothetical, age 70, $600,000 home, $50,000 mortgage | Fixed rate | Adjustable rate |
|---|---|---|
| Principal limit (factor 0.365 at 7.19% expected rate) | $219,000 | $219,000 |
| Upfront costs plus mortgage payoff | $71,000 | $71,000 |
| Cash available in the first 12 months | $60,400 (one lump sum at closing) | $60,400 (any time in year one) |
| Available after the first year | $0 (no later draws) | $87,600, plus growth |
| Balance after 10 years if year-one cash is all taken at closing | $282,815 | $264,858 |
Arithmetic: $600,000 x 0.365 = $219,000. The first-year limit is the greater of 60% ($131,400) or $71,000 + 10% ($21,900) = $92,900, so $131,400; minus the $71,000 of costs and payoff leaves $60,400 of cash. The 10-year balances start at $131,400 and grow monthly at the note rate plus the 0.5% annual premium: 7.69% fixed, 7.03% adjustable. Under the adjustable rules, the other $87,600 stays available after year one and grows, but any draw from it adds to the balance.
Red flags
- Calling a reverse mortgage "free money" or "a government benefit".
- Suggesting you use the proceeds to buy an annuity or other insurance product.
- Pressure to sign before you finish HUD counseling or compare offers.
- A contractor who brings up a reverse mortgage to pay for repairs.
- Telling you to leave a spouse off the loan or the title without explaining the risks.
- Showing the principal limit as cash in hand, before costs and payoffs.
- Pushing a fixed-rate lump sum when you only need a little cash over time.
- Saying you can stop paying property taxes or insurance once you have the loan.
- Promising the home will be worth more than the balance when the loan ends.
- Dismissing questions about moving to care in the next few years.
Questions to ask before you sign
- How much of the principal limit will I actually get after costs and my mortgage payoff?
- Is this a HECM insured by FHA, or a proprietary loan?
- What are my upfront costs, line by line, in dollars?
- What is the margin, and is the rate fixed or adjustable?
- What would I owe after 5 and 10 years if I draw what I plan to?
- What happens if I move into assisted living or a nursing home?
- If my spouse is not on the loan, can they stay in the home after I die?
- What must I keep paying each year to avoid the loan coming due?
- What will my heirs need to do, and how long will they have?
- Would selling and moving, or a smaller home, leave me better off?
Long-Term Care and Your Home: Read This Before You Sign
A one-page checklist: what Medicare will and will not pay, the Medicaid look-back and estate recovery basics, the questions to ask before you buy long-term care coverage or take a reverse mortgage, and the tax rules if the house is sold. Reverse mortgage costs, the terms that can make the loan due, and the questions to ask before you sign. We’ll email it to you.
The Retirement Literacy Foundation is a 501(c)(3) public charity (EIN 41-5062266). General education, not tax, legal or investment advice. Nothing is sold here. Unsubscribe any time.
Sources
- CFPB: What is a reverse mortgage? (last reviewed August 28, 2026)
- CFPB: Are there different types of reverse mortgages? (last reviewed July 11, 2022)
- CFPB: Can anyone take out a reverse mortgage loan? (last reviewed August 28, 2026)
- CFPB: What happens if my reverse mortgage loan balance grows larger than the value of my home? (last reviewed July 11, 2022)
- CFPB: How much does a reverse mortgage loan cost? (last reviewed May 28, 2024)
- HUD: FHA Mortgage Limits, HECM limit for calendar year 2026 (checked October 14, 2026)
- HUD: Mortgagee Letter 2017-12, HECM Mortgage Insurance Premium Rates and Principal Limit Factors (August 29, 2017)
- HUD: Mortgagee Letter 2014-21, Revised Changes to the HECM Program Requirements (November 10, 2014)
- eCFR: 24 CFR Part 206, Home Equity Conversion Mortgage Insurance (checked October 14, 2026)
- U.S. Treasury: Daily Treasury Par Yield Curve Rates, 2026 (October 14, 2026)
The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.