The short answer
A reverse mortgage lets a homeowner 62 or older borrow against their home's equity and receive cash, without making monthly loan payments. The balance grows over time and is repaid when you sell, move out or die, usually from the sale of the home.
Most reverse mortgages in the U.S. are Home Equity Conversion Mortgages (HECMs), the only kind insured by the federal government (FHA). This guide is about HECMs.
The part most people miss: you still have to pay property taxes, homeowners insurance and HOA fees, forever. If you don't, the lender can call the loan due and foreclose. When the federal consumer bureau studied the program in 2012, nearly one in ten borrowers were in default over unpaid property taxes or insurance. The rules have been tightened since, but the risk hasn't gone away. That's why rising property taxes deserve as much attention as the interest rate.
Who qualifies
- At least one borrower is 62 or older.
- The home is your principal residence, and you have substantial equity (paying off any existing mortgage comes first, out of the loan).
- You complete a session with a HUD-approved counselor before applying. It typically costs about $125 and can be paid from the loan. Find one at (800) 569-4287.
- You pass a financial assessment: since 2015, the lender checks your credit, your history of paying property taxes and insurance, and whether your income covers your living costs.
How much you can borrow depends on the age of the youngest borrower (or an eligible non-borrowing spouse), current interest rates and your home's value up to the FHA limit. For loans assigned FHA case numbers from January 1, 2026, that limit is $1,249,125, up from $1,209,750 in 2025. The limit caps the home value used in the formula, not the cash you get. You can only borrow a portion of your home's value, and the younger you are, the smaller that portion.
What a reverse mortgage costs
| Cost | Amount | On a $400,000 home |
|---|---|---|
| Upfront mortgage insurance premium | 2% of the home value (up to the FHA limit) | $8,000 |
| Annual mortgage insurance premium | 0.5% of the loan balance per year | grows with the balance |
| Origination fee | Greater of $2,500 or 2% of the first $200,000 + 1% above; capped at $6,000 | $6,000 |
| Interest | Fixed or adjustable; added to the balance | compounds monthly |
| Third-party closing costs | Appraisal, title, recording, counseling | varies |
Most of these costs are financed into the loan, so they don't come out of your pocket at closing. They do come out of your equity. Because interest and insurance compound on a growing balance, a reverse mortgage taken at 62 can consume a large share of a home's value by the time the borrower is in their 80s.
You have three business days after closing to cancel for a full refund.
How you can take the money
- Line of credit. Draw what you need when you need it. The unused portion grows over time, which makes it useful as a backstop for future bills, including property taxes.
- Tenure payments. Equal monthly payments for as long as you live in the home.
- Term payments. Equal monthly payments for a fixed number of months.
- Modified tenure or term. Monthly payments plus a line of credit.
- Lump sum. Only with a fixed-rate HECM, and only at closing.
In the first 12 months you can generally take no more than 60% of your available amount, unless you need more to pay off an existing mortgage or other required obligations.
The property tax rule that can cost you the house
Under federal rules, the loan becomes due if you don't pay your property charges: property taxes (including special assessments), hazard and flood insurance, ground rent and condo or HOA fees. The other triggers are the last borrower dying, selling the home, or moving out, including being away for more than 12 months in a row for health reasons.
If you fall behind, here's what typically happens:
- The servicer pays the tax bill to protect the lien and adds the amount to your loan balance.
- If you still have room in your line of credit, the servicer can draw on it. If you don't, you're in default.
- You'll be offered a repayment plan: the arrears split into monthly installments over up to 60 months, sized so each payment is no more than 25% of your monthly surplus income. HUD's own example: a $5,000 arrearage repaid at $208 a month over two years.
- Servicers may hold off calling the loan due if you owe less than $2,000 and are trying to repay. Above that, or if you refuse or stop living in the home, they have to start the process.
- Borrowers 80 or older with a terminal illness, long-term disability or similar critical circumstance can get foreclosure timelines extended.
If you get a default notice, call the servicer and a HUD-approved housing counselor right away. Don't ignore it. Our guide to what happens if you don't pay property taxes covers the separate county side of the process.
The set-aside (LESA), and why it's running out
If your financial assessment shows a shaky record with taxes or insurance, the lender will require a Life Expectancy Set-Aside (LESA): part of your loan amount is reserved, and the servicer pays your taxes and insurance from it. You can also choose one voluntarily. It's sized at 120% of your current tax and insurance bill, projected over your life expectancy.
That 120% cushion hasn't kept up. In May 2026, HUD's Inspector General found that 72 of 80 set-asides it sampled from loans closed in 2018–2022 had already run out or were on track to run out about six years early. About 1,237 borrowers are expected to have to start paying taxes and insurance themselves. The steepest increases were in California, Florida, Colorado, Texas and Arizona. One Florida borrower's taxes and insurance went from $1,658 in 2020 to $6,112. One in California went from $2,103 to $12,262.
If you have a set-aside, check how much is left every year, and budget for the day it runs out.
Keep your property tax exemptions
With a reverse mortgage you keep the title, and the home stays your residence, so your homestead exemption and senior exemptions should normally continue. Confirm with your county assessor, especially if you refinance or add a borrower. Those exemptions are worth more to a reverse mortgage borrower than to almost anyone, because every dollar saved is a dollar that doesn't compound on the loan.
Before you borrow, check whether your state offers any of these:
- Senior exemptions and freezes that cap or reduce the bill. See property tax exemptions for seniors and senior freezes by state.
- Property tax deferral, where the state pays your taxes and is repaid when the home is sold, often at a much lower interest rate than a reverse mortgage. See senior deferral programs. One catch: some states won't let you defer if you have a reverse mortgage, because both want to be the first lien.
- Single-purpose reverse mortgages from state or local agencies and nonprofits, which can only be used for something like property taxes or repairs. They're much cheaper, but usually limited to low- and moderate-income owners.
- Rebates and circuit breakers. See rebate programs by state and help for low-income seniors.
If your only problem is the property tax bill, one of these is usually a better fix than a reverse mortgage.
Spouses and heirs
- A spouse who isn't on the loan can stay in the home after the borrower dies (on loans from August 4, 2014 on), as long as they were married at closing, stay in the home and keep paying the taxes and insurance. They can't draw any more money.
- Heirs can keep the house by paying off the lesser of the loan balance or 95% of the appraised value. If they sell, they keep anything above the balance. If the house is worth less than the loan, they owe nothing: the FHA insurance covers the shortfall. They generally get 30 days to respond and up to six months, sometimes more with extensions, to sell or pay off.
Our guide to property taxes on an inherited house covers what happens to the tax bill while that's sorted out.
Other kinds of reverse mortgages
- Proprietary ("jumbo") reverse mortgages are private loans for homes worth more than the FHA limit. They aren't federally insured and counseling isn't legally required.
- HECM for Purchase lets you buy a new home with a reverse mortgage covering part of the price. You pay the rest, usually a large down payment, from savings or the sale of your old home.
Warning signs
- Anyone who says you "can't lose your home" or will have "no payments." You can lose it if you don't pay taxes and insurance. In 2016 the CFPB fined three lenders a combined $790,000 for ads like that.
- Pressure to use the money to buy an annuity, investment or insurance. A reverse mortgage never requires it.
- Contractors who pitch a reverse mortgage to pay for repairs, especially after a storm.
- Claims of VA or government "approval." The VA doesn't offer reverse mortgages.
Report problems to the CFPB, the FTC at ReportFraud.ftc.gov or your state attorney general.
Sources
Loan rules are from HUD's HECM regulations (24 CFR Part 206) and HUD Mortgagee Letters 2017-12 (insurance premiums), 2015-11 and 2016-07 (property charge defaults), 2021-11 (non-borrowing spouses) and 2025-22 (the 2026 limit). The set-aside findings are from HUD Office of Inspector General report 2026-KC-0003 (May 2026). Consumer guidance and the 2012 default figure are from the Consumer Financial Protection Bureau and the Federal Trade Commission. This is general information, not financial advice. Talk to a HUD-approved counselor before you decide.