Reverse mortgages: what homeowners should know before signing

Reverse mortgages let eligible homeowners tap home equity without monthly loan payments. Here is how HECM loans work, what they cost, and what to watch for.

Robert Padilla, Mortgage Loan Officer

Nationwide Loans, Inc

Phone: (305) 215-0561

Email: [email protected]

NMLS# 1922601

Company NMLS# 1799965

Licensed in: FL

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Reverse mortgages: what homeowners should know before signing

October 30, 2026

A reverse mortgage sounds like a loan that grows every year, and in a way it does. For homeowners who are 62 and older and have built up real equity, it can turn a paid-off house into a source of cash without a monthly principal and interest payment. It also comes with rules that trip people up, so the mechanics are the place to start.

Most reverse mortgages in the United States are Home Equity Conversion Mortgages, known as HECMs, and they are insured by the Federal Housing Administration. The borrower keeps the title and continues to live in the home, while the lender advances funds that build into a balance secured by the property. Proceeds can arrive as a lump sum, fixed monthly payments, a line of credit, or some combination, and I see many clients appreciate the credit line because the unused portion can grow over time. The loan does not come due as long as the borrower lives in the home as a primary residence and keeps up with property taxes, homeowners insurance, and basic upkeep.

The loan becomes due when the last borrower moves out permanently, sells the home, or passes away, and heirs usually choose between paying off the balance and selling or refinancing the property. HECMs are non-recourse, so neither the borrower nor the heirs owe more than the home is worth when the loan is settled, even if the balance has grown past that value. Before closing, borrowers must complete counseling with a HUD-approved housing counselor, and that session is where I'd want every client to ask hard questions about fees, mortgage insurance premiums, and how the draw schedule fits their budget. Upfront costs can be higher than a traditional refinance, so the total cost needs to be weighed against what the money is actually for.

For a retiree with a paid-off home and a modest fixed income, a reverse mortgage can fill a gap that might otherwise force a move or a tough choice about medical care or necessary repairs. For someone who expects to sell within a few years or still carries a sizable mortgage balance, it usually makes less sense, and a cash-out refinance or a standard home equity line might fit better. Spouses need careful attention too, because who is named on the loan and who can stay in the home after a death can shape the outcome for the surviving partner. With rates still elevated compared with what many borrowers locked in earlier, a reverse mortgage deserves a side-by-side comparison with other options rather than a quick yes.

A reverse mortgage is a tool that works well for a specific job and poorly for others. Taking time with the counseling session, the full cost picture, and the plan for heirs will tell you more than any sales pitch will. Run the numbers with someone who handles these loans every week before you sign anything.