How a reverse mortgage really works, start to finish.
It's the loan with the most myths attached. This guide walks through how it actually works, who it suits and who it doesn't, what it costs you, and how to protect yourself, or a parent, from a bad offer.
- No monthly mortgage payment while you live in the home.
- The title stays in your name; the lender never takes ownership.
- Non-recourse: you and your heirs never owe more than the home is worth.
- No credit-score restriction: the equity does the qualifying.
- Your current balance must be under 50% of the home's value.
- An independent, HUD-approved counselor meets with you first.
Rather just talk? Call or text us at (949) 401-7593
By Arran Amorozo, NMLS #1491497 · West Capital Lending, Inc. · Content last reviewed:
The short answer
A reverse mortgage, usually a federally insured HECM, retires the mortgage you have now and lets you draw on the rest of your equity, with no monthly mortgage payment. The house stays in your name. Interest is added to what you owe rather than billed to you each month, and the loan comes due when you sell, move out for good or pass away.
The six stages, in order
Your payment goes away; your ownership doesn't
First it pays off the mortgage you already have; then part of your equity becomes money you can use. You stop making mortgage payments. The deed stays in your name, you keep living there, and the interest is simply added to the loan.
You decide how the money arrives
All at once, as a line of credit you tap when needed, as monthly payments, or some of each. Match it to the purpose: one big expense calls for the lump sum, a cushion for emergencies calls for the line, and steady retirement income calls for the monthly payments.
Who qualifies
Generally homeowners 62 and older, living in the home as their primary residence, with a current balance below 50% of its value and a home worth at least $50,000. Your equity is what qualifies you, which is why there's no credit-score cutoff.
Counseling happens first
Before you can apply for a HECM, you'll sit down with a counselor who is approved by HUD and doesn't work for any lender. Think of it as protection: the counselor is there so you go in with your eyes open. Your family is welcome to join.
What stays your responsibility
Property taxes, homeowners insurance and upkeep remain yours, and the home must stay your primary residence. If keeping those current would be a stretch, a reverse mortgage is the wrong tool.
How it wraps up
After the final borrower moves out or passes away, the home is usually sold and the loan is paid from the proceeds. Because it's non-recourse, nobody owes more than the home is worth: your heirs keep any equity left over, and if the loan is bigger than the home's value, they owe nothing on the difference.
How much is available?
It depends on the youngest borrower's age, the home's value and the program's own formula, not a flat percentage. A number quoted before anyone knows those three things is a guess.
Two of our lines are simple. Your current balance has to be under 50% of the home's value, and you can ask for any amount up to $5,000,000: your equity decides what's actually available.
The program in plain numbers
| Term | Reverse mortgage |
|---|---|
| Age | Generally 62 and older |
| Property | Your primary residence only; not rentals or second homes |
| Current balance | Under 50% of the home's value |
| Home value | At least $50,000 |
| Amount | Anything up to $5,000,000; your equity sets what's available |
| Credit score | No credit-score restriction |
| Monthly mortgage payment | None while you live in the home |
| How you take it | All at once, as a line of credit, as monthly payments, or a mix |
| What stays yours | Property taxes, homeowners insurance and upkeep; the home stays your primary residence |
| Counseling | Required first, with a HUD-approved counselor who is independent of the lender |
| Protection | Non-recourse: never more than the home is worth |
| Where | In all 35 states + D.C. where Arran is licensed |
What you gain, and what it costs
| What you gain | What it costs |
|---|---|
| No mortgage payment while the home is yours to live in | Interest is added each month, so the loan keeps growing |
| Money from your equity while you stay in your home | Your heirs inherit less equity |
| No credit-score cutoff | Real upfront costs, every one of which we explain before you sign |
| Title stays in your name, and non-recourse protects your family | Miss taxes or insurance, or move out, and the loan can come due |
| An independent counselor reviews it with you first | A poor fit if a move is likely in the next few years |
If the costs outweigh the benefits for you, a HELOC or a Home Equity Investment may be the better fit. We offer all three.
Myths worth clearing up
"The bank ends up owning my house."
It doesn't. Your name stays on the title. The lender has a lien, just like every mortgage you've had.
"My children will be stuck with the debt."
They won't. The loan is non-recourse, so at repayment no one owes more than the home is worth. Your heirs can pay off the balance and keep the house, or sell it and keep whatever is left.
"They can make me leave."
Only if you sell, move out for good, or stop keeping up with taxes, insurance, upkeep and living there. Stay current on those and you can stay as long as you want.
"It's free money."
It isn't. It's a loan, with interest added to a growing balance. You're trading some future equity for cash flow today, which suits some families well and others not at all.
Warning signs of a reverse mortgage scam
Older homeowners are a common target, and the scams tend to look alike. Be wary of anyone who:
- Rushes you. A legitimate HECM can't skip counseling, so pressure to sign quickly is a giveaway.
- Tries to keep your family out of it, or talks you out of counseling.
- Comes bundled with another sale: a contractor pitching repairs, or an adviser who wants the proceeds placed in a product that pays them a commission.
- Wants a fee before telling you anything.
- Names an amount without asking your age, the home's value and what you owe.
Already holding an offer? We'll look it over with you and tell you straight what we see.
Seven questions to put to us, or to anyone else offering you one
- Will I stay on the title? (The only right answer is yes.)
- What protects my spouse if they aren't on the loan, or if I pass first?
- What will I still pay every year? (Taxes, insurance and upkeep, said plainly.)
- What will my family owe when the loan ends? (Never more than the home is worth.)
- What are the upfront costs, line by line?
- What other options would you consider for me, like a HELOC or a Home Equity Investment?
- Who will do my counseling, and is that counselor independent of you?
Make it a family conversation
If you're an adult child researching this for a parent, you're not alone, and you're welcome on the call. Nothing should be signed until everyone's questions are answered.
Common questions
What's the simplest way to explain a reverse mortgage?
Your equity pays off today's mortgage and then pays you, as a lump sum, a line of credit or monthly payments, and you stop making a mortgage payment. Interest is added to what you owe, and the whole thing is settled when you sell, move out for good or pass away. The title stays yours throughout.
Is a reverse mortgage a good fit for me?
Likely yes if you're 62+, intend to stay in the home, owe less than 50% of its value and can keep paying the taxes and insurance. Likely no if a move is coming soon, if those costs would stretch you, or if maximizing what your heirs receive matters most; a HELOC or a Home Equity Investment may serve those goals better.
What does it cost?
There are genuine upfront costs, and the interest keeps adding to the balance. It's never free money. The actual numbers depend on your situation, and you'll see every one of them from us before you sign.
Do I really have to go to counseling?
Yes. A HECM application comes after a session with a HUD-approved counselor who doesn't work for any lender. We'll give you a list to choose from, and bringing family is encouraged.
Does bad credit rule out a reverse mortgage?
No. There's no credit-score cutoff, because your equity is what qualifies you. You need to be 62+, living in the home as your primary residence, with a balance under 50% of its value. Lenders do check that you can keep up with taxes and insurance.
How does it compare with a HELOC or an HEI?
Each one turns home equity into cash while you keep the house. With the HELOC you get a line you repay monthly, available from 620 credit at any age. The HEI asks for no payments and starts at 500 credit, but the investor takes a share of the home's future value. The reverse mortgage asks for no mortgage payment and has no credit-score cutoff, but you must be 62+, live in the home and owe less than 50% of its value.
Will my kids inherit a debt?
No. Because it's non-recourse, your heirs never owe more than the home is worth when the loan is repaid. If the balance is higher, FHA insurance covers the gap, not your estate.
How long does the process take?
Longer than most loans, because counseling comes first and then the appraisal and the review. You'll get a specific timeline from us once we've seen your situation.
Does checking my options affect my credit score?
No. We look at your options with a soft credit check, which has no effect on your score. A hard check only happens later, with your OK, if you decide to apply.
See your real numbers in 60 seconds.
The quiz on our reverse mortgage page checks your scenario against our lending rules in about a minute. No hard credit pull, and your information is never sold.
Check my reverse mortgage options →Rather just talk? Call or text us at (949) 401-7593
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This material is not from HUD or FHA and has not been approved by HUD or any government agency.