Reverse Mortgages: Weighing the Pros and Cons for Your Retirement Plans
If you’re looking at your retirement years and wondering how to get more out of your home’s value, you’re not alone. A reverse mortgage is a loan that allows homeowners aged 62 or older to convert a portion of their home equity into cash, without having to sell or make monthly mortgage payments. In this guide, I’ll break down how reverse mortgages work, who they might be a good fit for, what to watch out for, and how to start the conversation here on Cape Cod or beyond.
Key Takeaways
- Purpose: Unlock some of your home’s equity as cash, line of credit, or monthly income during retirement—without selling your house.
- Eligibility: Homeowners aged 62+ residing in the property, with enough equity and the ability to cover taxes, insurance, and upkeep.
- Repayment: The loan is repaid when you sell, move out, or pass away; no monthly mortgage payments are required while you live there.
- Best For: Those who want to supplement retirement income, pay off an existing mortgage, or cover expenses while staying in their own home.
Quick Answers: Reverse Mortgages
- Do I give up ownership of my home? No, you stay on the title and retain ownership as long as you meet the terms of the loan.
- Will my heirs lose the house? No, your heirs can choose to sell the home or pay off the reverse mortgage (usually by refinancing or selling).
- Can I leave the home to my children? Yes, but they’ll need to pay off the reverse mortgage balance in order to keep the property.
- Are reverse mortgages safe? Reverse mortgages are heavily regulated, but like any financial tool, they’re not for everyone—there are pros and cons.
What Is a Reverse Mortgage?
A reverse mortgage is a way to access some of the value you’ve built up in your home without having to leave it. With a reverse mortgage, you can receive the funds as a lump sum, a line of credit, or in monthly payments, and you’re not required to make monthly mortgage payments. Interest and fees are added to the loan balance over time, and repayment typically doesn’t happen until you move out, sell, or pass away.
The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM), but there are also proprietary options for higher home values. At Mike Burton (NMLS# 3373), I specialize in helping people across Cape Cod and Massachusetts figure out which type, if any, makes sense for them.
Who Can Qualify for a Reverse Mortgage?
Here are the core requirements for a reverse mortgage as of 2026:
- You (and any co-borrower) must be at least 62 years old.
- Your home must be your primary residence—vacation homes and investment properties aren’t eligible.
- You must have significant equity—usually at least about 50% paid off, but it varies by age and program.
- You need to show you can keep up with taxes, insurance, HOA dues, and property maintenance.
Ok, here is how the program works. The amount you can borrow depends on your age, current market rates, the value of your home, and the type of reverse mortgage. It’s based on a loan amount calculated using current guidelines.
Types of Reverse Mortgages
There are two main types you’ll run across:
1. Home Equity Conversion Mortgage (HECM)
- Backed by the federal government (FHA).
- Works for most single-family homes, some condos, and select multi-units where you live in one.
- Includes mandatory consumer counseling before you can finalize—not a sales pitch, just education.
2. Proprietary (Jumbo) Reverse Mortgages
- Available for higher-valued homes that exceed HECM limits.
- Offered by private lenders (terms, fees, and features vary).
If you have specific needs or a unique property, this is 1 example, we have many options to choose from beyond just the standard HECM.
How Does a Reverse Mortgage Pay Out?
You decide how to access your funds:
- Lump sum: Get a portion of cash up front (good for major expenses, paying off an existing mortgage).
- Line of credit: Access funds as needed; unused funds can grow over time.
- Monthly payments: For ongoing income support during retirement.
- Combination: Some choose a mix—maybe a little up front, some as a line of credit.
You will have a payment of principal and/or interest only due when the loan becomes due—typically once the home is no longer your primary residence.
What Are the Costs and Fees?
Reverse mortgages include various fees and closing costs—think origination, servicing, mortgage insurance (for HECM), and traditional third-party fees. These are typically financed into the loan itself, though some costs may be paid up front. Interest charges and fees increase the loan balance over time.
It’s important to understand how this impacts your remaining equity. While you don’t make ongoing mortgage payments, the balance grows—meaning your heirs or estate will settle it by paying off the balance, usually with proceeds from selling the home or refinancing.
Pros and Cons of a Reverse Mortgage
Key Benefits
- Stay in your home without making monthly payments.
- Flexible funds for health care, home renovations, consolidating debts, or simply improving cash flow.
- No mortgage payments required while you live in and maintain the home.
- FHA HECM program is non-recourse—neither you nor your heirs will owe more than the home is worth, even if the loan balance exceeds property value.
Potential Drawbacks
- Total loan balance increases over time (equity is used up), so there may be less remaining for your heirs.
- You’re still responsible for taxes, insurance, HOA dues, and home upkeep—falling behind can trigger default.
- Fees and interest rates are generally higher than traditional mortgage options.
- If you move out (for health or other reasons) the loan becomes due, so consider future plans carefully.
Is a Reverse Mortgage Right for You?
Reverse mortgages aren’t a fit for everyone. They’re worth considering if:
- You want to stay in your home and need to boost your finances in retirement.
- You have enough equity and plan to stay put for several years.
- You’re comfortable with your heirs receiving less inheritance from the home’s equity.
- You understand the requirements for maintaining the loan and can keep up with taxes and insurance.
If you think you might want to relocate in the near future, or if you want to preserve as much equity as possible for your loved ones, it’s probably worth looking into alternatives. We can review other options like a home equity line of credit or a traditional fixed rate mortgage too.
Alternatives to Reverse Mortgages
A reverse mortgage is one path—there are others worth comparing, like:
- A traditional refinance to lower payments or access cash if your income qualifies.
- A HELOC (Home Equity Line of Credit) if you have strong credit and income.
- Downsizing—selling and moving to a more affordable home and using remaining cash to fund retirement.
- Other creative options, depending on your scenario. We can go through them together, no rush.
Steps to Get a Reverse Mortgage on Cape Cod, the Islands, or Greater Boston
Here’s how it generally works:
- Set up an initial call – We talk through your goals and finances. I explain all your options and answer your questions.
- Counseling session – HUD-approved counseling is required; it’s education, not a sales pitch.
- Application and review – Once you’re comfortable, we process your application and verify your eligibility/finances.
- Appraisal and closing – Independent home appraisal and paperwork to finalize terms (this takes a few weeks typically).
- Receive funds – Choose your payout option; funds are usually available shortly after closing.
Clients often tell me that what made the process easier was having clear information and a step-by-step plan. That’s something I take pride in—seeing the relief and comfort people feel as we walk through the unknown together.
Next Steps – Let’s Review Your Options
If this is all a lot to take in, don’t worry—it’s normal. Sometimes these details take a while to settle in, and I am always happy to repeat or clarify any part of it. If you’d like to chat through your retirement plans and reverse mortgage options, whether you’re on Cape Cod, the South Shore, or anywhere in Massachusetts or Florida, just reach out. We can go at your pace, talk through your numbers, and see which direction feels right.
Call, text, or email any time if you’d like to review your scenario, compare different options, or just understand the next steps. I’m also happy to help you with pre-approval planning if you’re considering a move or another mortgage solution.
Frequently Asked Questions
Can I lose my home with a reverse mortgage?
You keep ownership of your home, but you must continue paying property taxes, insurance, HOA dues, and maintain the property. Falling behind on these obligations can lead to foreclosure, so always discuss your ability to handle ongoing costs before moving forward.
How does interest work on a reverse mortgage?
Interest accrues on your loan balance each month. You don't pay interest out of pocket while you live in the home—the total owed increases over time and is paid off (usually by selling the home) when the loan ends.
What fees are included in a reverse mortgage?
Fees typically include origination and closing costs, mortgage insurance (for HECM loans), and servicing fees. Most fees are rolled into the loan but should be reviewed carefully with your loan advisor.
Do I need good credit for a reverse mortgage?
Reverse mortgages do not require traditional credit qualifications, but lenders will review your finances to ensure you can handle taxes, insurance, and upkeep. Significant recent credit issues may affect your options or require some loan funds be set aside.
Can I move out or sell my home after getting a reverse mortgage?
Yes, but the loan becomes due and payable when you no longer use the home as your primary residence. This usually means selling the property and using the proceeds to pay off the loan balance. Any remaining equity is yours or your heirs’ to keep.
This is educational and not financial advice. Loan programs and guidelines can change. Talk with a licensed mortgage professional about your specific scenario.
Mike Burton
Mike has over 33 years in the mortgage industry as a top originator for each institution he was employed with. Mike started Slade Mortgage Group in 1997 and formed a team of professionals to service clients by beating the banks.
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