Reverse Mortgage Pros and Cons: What Retirees Should Weigh

Short answer: The main reverse mortgage pros and cons come down to a trade: you get cash from your home equity without monthly loan payments, but the loan balance grows every month and leaves less equity for you or your heirs. A reverse mortgage is a home loan for homeowners 62 and older. You must keep paying property taxes, insurance and upkeep, and the loan comes due when the last borrower or eligible spouse sells, moves out or dies. The CFPB suggests seeing a HUD-approved counselor before you decide.

What Is a Reverse Mortgage, and How Does It Work?

The Consumer Financial Protection Bureau (CFPB) describes a reverse mortgage as "a special type of home loan for homeowners aged 62 and older." With a regular mortgage, you make payments to the lender. With a reverse mortgage, the lender pays you, drawing on the equity in your home.

Interest is added to your loan balance every month. That means the amount you owe goes up over time, and the equity left in your home goes down.

Most reverse mortgages are Home Equity Conversion Mortgages (HECMs). HECMs are federally insured through the Federal Housing Administration (FHA), and HUD says they're available only through FHA-approved lenders. To get a HECM, you must first receive counseling from a HUD-approved reverse mortgage counseling agency.

What Are the Pros and Cons of a Reverse Mortgage?

Pros	Cons
Turns home equity into cash without selling your home	The loan balance grows every month as interest is added
No monthly loan payments while you or an eligible spouse live in the home	Less equity is left for you or your heirs
Several ways to take the money, including a line of credit	Expensive if you only need short-term cash or may move soon
A co-borrower or eligible spouse can stay in the home after the borrower dies	You must keep paying property taxes, insurance and upkeep, or risk foreclosure
You and your heirs won't owe more than the home is worth	Most people need to sell the home to pay off the loan
Federal insurance and required counseling for HECMs	Borrowing too young can leave you with less to draw on later

The Pros of a Reverse Mortgage

You can tap your equity and stay in your home. A reverse mortgage lets you draw on your home equity without selling the home.

There are no monthly loan payments while you live there. The CFPB says you don't have to repay the loan while you or an eligible spouse live in the home. That can free up monthly cash flow.

You can choose how to receive the money. The CFPB lists these options:

1. Line of credit. You pay interest only on the money you use, and the amount available to you grows over time.
2. Monthly payout. Regular payments that can work like extra retirement income. You can combine this with a line of credit.
3. Single disbursement. A one-time lump sum. This typically gives you less money than other options, and you pay interest on the full amount even if you don't spend it.
4. HECM for Purchase. Uses a reverse mortgage to buy a new home, but requires a relatively large down payment.

Whichever option you choose, there are limits on how much you can access in the first year.

Your spouse can be protected. A co-borrower or eligible spouse can stay in the home after the borrower dies or moves out, as long as they keep up with taxes, insurance and maintenance. The CFPB says that if you live with a spouse or partner, it usually makes sense to apply as co-borrowers.

You won't owe more than the home is worth. According to the CFPB, neither the borrower nor the heirs have to repay more than the home is worth.

The Cons of a Reverse Mortgage

The balance grows, and your equity shrinks. Because interest is added every month, the longer the loan runs, the more you owe. That leaves less equity for you, for a future move or for your heirs.

It's costly for short-term needs. The CFPB calls a reverse mortgage an expensive way to cover short-term cash needs if you might move soon. Ask your counselor and lender about the upfront and ongoing costs and fees before you sign.

You can still lose the home. You must keep paying property taxes and homeowners insurance and keep the house in good repair. If you run out of money for those costs, you could face foreclosure. That makes a reverse mortgage a poor fit if your budget is already stretched.

Borrowing too young can backfire. Older borrowers can generally borrow more. Taking a reverse mortgage early in retirement can leave you with fewer resources later, when you may need them more.

Other people in the home may have to leave. Anyone living in the home who isn't a co-borrower or eligible spouse, such as an adult child, must move out or repay the loan when it comes due.

How Much Can You Borrow With a HECM?

HUD says the amount you can borrow depends on:

• The age of the youngest borrower or eligible non-borrowing spouse
• The current interest rate
• The lesser of the home's appraised value, the sales price (if you're buying) or the FHA's HECM limit

For FHA case numbers assigned on or after January 1, 2026, the HECM limit is $1,249,125, up from $1,209,750 in 2025. HUD bases the amount on the lesser of the appraised value, the sales price or this limit.

What Happens to the Home When You Die or Move Out?

The loan must be repaid when the last borrower, co-borrower or eligible spouse sells the home, moves out or dies. According to the CFPB, most people need to sell their home to pay off the loan. If the home sells for less than the loan balance, neither you nor your heirs owe the difference.

Ask your counselor what would happen to your home when you pass away.

What Are the Alternatives to a Reverse Mortgage?

The CFPB suggests comparing a reverse mortgage with these options:

• Waiting until you're older, when you may be able to borrow more
• A home equity loan or home equity line of credit (HELOC), which usually requires monthly payments and depends on your income and credit
• Refinancing to a traditional mortgage to lower your monthly payments
• State or local programs that may defer property taxes or help with utilities and home repairs
• Selling and moving to a more affordable home

It's also worth looking at your whole retirement income plan. Our guide to when to claim Social Security covers another big retirement income decision, and our mortgage payment calculator can estimate the monthly payment on a traditional mortgage if you're weighing a refinance.

Questions to Ask a HUD-Approved Counselor

Counseling is required for a HECM, and it's a chance to ask questions before you commit. The CFPB suggests asking:

• What are the upfront costs and fees?
• What are the ongoing costs and fees?
• What are my ongoing responsibilities once I have the loan?
• What happens to my home when I pass away?
• How would the loan affect my spouse or others who live with me?
• What happens if I move into a nursing home?

The CFPB also suggests telling your counselor what lenders have said to you, including whether a lender tried to sell you anything in addition to the reverse mortgage. You can find a HUD-approved counselor by calling HUD at 800-569-4287.

The Bottom Line

A reverse mortgage can turn home equity into retirement cash without monthly loan payments, and federal rules protect eligible spouses and cap what you or your heirs owe at the home's value. The trade-offs are real: a growing balance, less equity for your heirs, ongoing costs and the risk of foreclosure if you can't keep up with taxes, insurance and upkeep. Talk with a HUD-approved counselor, compare the alternatives and consider getting a second opinion from a fee-only fiduciary adviser; our guide to what a financial adviser costs explains how they're paid. Our home and mortgage guides cover other ways to manage housing costs in retirement.

Frequently asked questions

What is a reverse mortgage?

A reverse mortgage is a special type of home loan for homeowners aged 62 and older. Instead of making monthly payments to a lender, you receive money drawn from your home equity. Interest is added to the loan balance each month, so the amount you owe grows over time. Most are Home Equity Conversion Mortgages (HECMs), which are federally insured.

What are the biggest disadvantages of a reverse mortgage?

The balance grows over time, so less equity is left for you or your heirs. It's an expensive way to meet short-term cash needs if you might move soon. And if you fall behind on property taxes, homeowners insurance or upkeep, you could lose the home to foreclosure.

Do my heirs have to pay back a reverse mortgage?

The loan must be repaid when the last borrower or eligible spouse sells the home, moves out or dies. According to the CFPB, most people need to sell their home to pay off the loan, and neither the borrower nor the heirs have to repay more than the home is worth.

Can my spouse stay in the house if I die?

A co-borrower or an eligible non-borrowing spouse can stay in the home after the borrower dies or moves out, as long as they keep paying property taxes and insurance and maintain the home. Anyone else living there would need to move out or repay the loan.

How much can I borrow with a reverse mortgage?

For a HECM, HUD says the amount depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the home's appraised value, the sales price or the FHA limit. For FHA case numbers assigned on or after January 1, 2026, the HECM limit is $1,249,125.

Sources

1. CFPB: Considering a Reverse Mortgage? (consumer guide)
2. CFPB: What Should I Think About Before Applying for a Reverse Mortgage?
3. HUD: FHA Reverse Mortgage for Seniors (HECM)
4. HUD: FHA Announces 2026 Loan Limits (HUD No. 25-145)

This guide is general information, not personal advice. Your situation may differ, so consider talking with a qualified professional, such as a fiduciary financial adviser, CPA or licensed agent, before making a decision.