How Reverse Mortgages Work - Homeowners Guide

What is a reverse mortgage, and how is it different than a regular one?

— Maria
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If you’re a homeowner age 62 or older, a Home Equity Conversion Mortgage (HECM)—also known as a reverse mortgage—lets you access a portion of the equity in your home to use as another source of funds in retirement.

Unlike a traditional forward mortgage—where the borrower must begin repaying the loan right away—you don’t have to repay funds received through a HECM until after the final borrower no longer lives in the home. There are no monthly mortgage payments required.

Watch this short video to learn more about
How it works

Now you can eliminate monthly mortgage payments.

It’s true: if there’s a mortgage on your home, the money from the HECM is first used to pay off that loan—and since no monthly mortgage payments are required on the HECM, you can eliminate that monthly expense and keep more cash to use as you see fit.

A HECM can help improve your income and monthly cash flow.

Once any existing mortgage is paid, you can choose to take the remaining equity as:

  • A one-time payment, income tax-free*
  • Steady, tax-free monthly payments*
  • A line of credit, as a “safety net” for later use if needed
  • A combination of these methods

You can use the money in any way you like.

  • Keep more money on hand to pay for everyday bills and expenses
  • Eliminate or reduce credit card balances or other debts
  • Help with healthcare expenses, making it easier to “age in place”
  • Set aside funds to help pay for long-term care in the future
  • Make updates, repairs, or modifications to your home to live more comfortably
  • Lower your taxable income: avoid making taxable withdrawals from 401(k) or other retirement plans by replacing the money with tax-free reverse mortgage income*
  • Establish a line of credit for emergencies or occasional expenses
  • Help a child or grandchild with major expenses, like college tuition or a down payment on a home

“Using a reverse mortgage to tap home equity is one of the most powerful options available to retirees today.”

— Alicia Munnell, Director, Center for Retirement Research at Boston College

If I get a reverse mortgage, will I still own my home?

— Maria

Yes. A reverse mortgage does NOT mean giving up your home.
The title stays in your name, and no one can take your home or your HECM away from you, as long as at least one borrower:

  • Lives in the home as their primary residence
  • Continues to pay required property taxes and homeowners insurance
  • Maintains the home in good repair according to Federal Housing Administration requirements
Call 855-523-4326 to speak with a Longbridge Specialist Questions? Consult with
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Your heirs can keep or sell the home.

Once the home passes to your heirs, the money to repay the HECM loan most often comes from the sale of the home itself. Your heirs also have the option—if they choose—to arrange their own financing, pay off the loan and keep the house.

And in the unlikely event that the amount of the loan repayment is more than the home is worth, neither you nor heirs would be responsible for repaying the difference. FHA insurance is a part of every HECM, so that would make up for any shortfall.

How a reverse mortgage compares to traditional mortgages:


  • Homeowner maintains title and ownership
  • Homeowner is responsible for taxes, insurance and maintenance
  • Loans are secured by notes and deeds
  • Closing costs are similar for a HECM & traditional mortgage


  • No monthly mortgage payments are required with a reverse mortgage
  • A HECM credit line can never be reduced; it’s guaranteed to increase over time, regardless of loan balance or home value
  • Borrower can never be required to repay more than the home is worth (non-recourse loan), and pays a modest FHA insurance premium to gain these benefits
  • Borrowers must be 62 in order to apply for a reverse mortgage

More than a half million Americans have already made a reverse mortgage part of their financial plan, and according to a study, 94% of reverse mortgage borrowers enjoy improved peace of mind as a result of the loan.**

* Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.
** Source: 2010 NRMLA study.