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Reverse mortgage guide
A reverse mortgage lets you borrow against your home's equity, and instead of you paying the lender each month, interest and mortgage insurance are added to the loan balance. How much you can get depends on the age of the youngest borrower or eligible non-borrowing spouse, the expected rate, and your home's value up to the HECM limit. You can take the money as a line of credit, monthly payouts, a lump sum, or a mix, within HUD's first-year limit. There are no required monthly mortgage payments, but you must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. The loan comes due when the last borrower dies, sells, or moves out for good, and it can't cost you or your heirs more than the home is worth when it's sold.
Most people understand a regular mortgage. You borrow, you make a payment every month, and the balance goes down until the house is paid off.
A reverse mortgage runs the other way. You borrow against the equity you've already built, nobody sends the lender a check each month, and the balance goes up instead of down. It's repaid later, usually when the home is sold.
That's the whole idea in two paragraphs. The rest of this page is the engine room: how the amount is figured, how you can take the money, how the balance grows, and exactly what makes the loan come due. If you'd rather start with the big picture and the process from first call to closing, read the Reverse Mortgage Guide first.
These rules are for the HECM, the FHA-insured reverse mortgage most people get. Proprietary (jumbo) reverse mortgages set their own rules.
The amount a HECM makes available is called the principal limit. It's the ceiling on everything you can borrow, including the costs paid at closing.
HUD figures it from three inputs.
The older the youngest borrower, the bigger the share of the home's value you can access. That's simple math on HUD's part: an older borrower will generally hold the loan for fewer years, so there's less time for the balance to grow.
If you're married and your spouse isn't on the loan, the age of an eligible non-borrowing spouse counts too, because HUD protects that spouse's right to stay. An ineligible non-borrowing spouse's age isn't used. See the Non-Borrowing Spouse guide.
On an adjustable HECM, the expected rate is the 10-year Constant Maturity Treasury rate plus your lender's margin, with a minimum HUD sets. It's not the rate you're charged. It's HUD's estimate of where rates will average over the life of the loan.
Here's the part most people miss: a higher expected rate means a smaller principal limit. So a lower margin generally means more money available to you. The expected rate can be locked when your FHA case number is assigned, for up to 120 days, and generally extended if closing runs long. See today's reverse mortgage rates.
HUD uses the maximum claim amount, which is the lesser of your home's appraised value or the national HECM lending limit (on a purchase, the sales price counts too). A home worth more than the limit still qualifies. The extra value just isn't counted. See HECM Lending Limits.
HUD publishes a table of principal limit factors, a percentage for each age and expected rate. Multiply the factor by the maximum claim amount and you have your principal limit.
Then subtract what has to be paid first: any mortgage or lien on the home, closing costs you're financing, and any set-asides. What's left is what you can actually use.
You don't have to do this math yourself. Get My Estimate runs it for you, and I'll walk you through every line.
HUD doesn't let you take everything on day one. In the first 12 months, you can take the greater of:
Mandatory obligations are the things that have to be paid at or near closing: your existing mortgage or other liens on the home, the upfront mortgage insurance and other closing costs, any delinquent federal debt, required repair set-asides, and the first year of any set-aside for taxes and insurance.
So if you have a large mortgage to pay off, you can use more than 60 percent at closing to pay it, plus a little more on top. If your home is paid off, you're limited to 60 percent in the first year.
After the first 12 months, the rest of your principal limit opens up on an adjustable loan. On a fixed-rate HECM, any amount you couldn't take at closing is generally gone for good. That's one of the biggest reasons I usually steer people toward adjustable. See Fixed-Rate Reverse Mortgages.
Why does HUD do this? Too many borrowers in the old days took everything at once and spent it. The first-year limit is a speed bump, and honestly, it's a good one.
On an adjustable HECM, you choose a payout plan:
You draw what you need, when you need it. You pay interest only on what you've drawn. The unused part of the line grows over time (more on that below). This is the most popular choice I see, and it's the heart of the standby line of credit strategy.
Equal monthly payouts for as long as at least one borrower lives in the home as a primary residence and the loan terms are met, even if the balance eventually passes the home's value. Think of it as a paycheck from your house. HUD figures tenure payments as if the youngest borrower will live to at least 100.
Equal monthly payouts for a set number of months you choose. Bigger checks than tenure, but they stop when the term ends. Term payments can work well as a bridge, for example while you delay Social Security. See the Social Security bridge strategy.
Monthly payouts plus a line of credit set aside for emergencies. A lot of people like this mix.
On a fixed-rate HECM, you take a single lump sum at closing, and that's the only option. On an adjustable HECM, you can take a large draw at closing from the line of credit, within the first-year limit.
On an adjustable HECM, you can generally change your payout plan later, as long as you haven't used up your principal limit. HUD lets the servicer charge a small fee for the change, capped at $20. On a fixed-rate HECM, you can't change plans.
Every month, two things are added to your balance:
Because next month's interest is figured on a slightly larger balance, it compounds. That's the cost side of a reverse mortgage, and I'll never pretend it isn't real. You can see the details on Reverse Mortgage Costs.
ZYNG doesn't charge a monthly servicing fee on our HECMs, so you won't see one added to your balance. HUD does allow one, and some proprietary programs charge one.
Here's the flip side. On an adjustable HECM, your principal limit grows every month at the same rate as the balance: the note rate plus the annual mortgage insurance rate. Your unused line of credit grows right along with it.
So the money you haven't touched becomes more money available later. It isn't interest you earn, and it isn't cash in a bank. It's more borrowing power. And it can't be frozen, reduced, or canceled by the lender as long as you meet the loan terms. That's a big difference from a bank HELOC. See HECM vs. HELOC.
When rates rise, both your balance and your unused line grow faster. When rates fall, both grow slower. Rate caps limit how far an adjustable rate can move. See Comparing Fixed and Adjustable Reverse Mortgages.
You can pay down your balance any time, with no prepayment penalty on a HECM. On an adjustable line of credit, money you pay back generally becomes available to draw again, and it keeps growing. See Can reverse mortgages be paid off at any time?
There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. That includes any flood insurance and HOA dues.
If the financial assessment showed you might struggle with taxes and insurance, part of your loan may be set aside to pay them for you (a LESA). See Reverse Mortgage Financial Assessment.
Your servicer sends you statements that generally show your balance, the interest and mortgage insurance added, any draws, and your remaining line of credit. Read it. It's the simplest way to see exactly where you stand.
Once a year, your servicer will ask you to confirm you still live in the home as your primary residence. If you have an eligible non-borrowing spouse, you'll also confirm each year that they still qualify, and after you're gone, they'll confirm it themselves. Don't ignore it. A missed certification can start a process you don't want. See Why did I get an occupancy certification?
Under HUD's rules, a HECM becomes due and payable when:
Some of these require HUD's approval before the servicer can call the loan due. And servicers have to work with borrowers who fall behind on taxes or insurance before it gets that far. If you ever get behind, call your servicer right away.
When the borrower dies, or has been in a health care facility for more than 12 consecutive months, an eligible non-borrowing spouse can generally stay in the home under a deferral period, as long as they keep living there and meet the loan terms. No more money is paid out during the deferral period. See How does an eligible non-borrowing spouse qualify for the deferral period?
When the loan comes due, the servicer sends a notice to the borrower or the estate and heirs. Here's how it generally plays out:
Full details are in Reverse Mortgages and Heirs.
A HECM is a non-recourse loan. Only the home secures it. If the home sells for less than the balance, neither you nor your heirs pay the difference. FHA's mortgage insurance covers it. That protection is a big part of what your mortgage insurance pays for.
As the balance grows, it may eventually reach 98 percent of the maximum claim amount. At that point, the lender may choose to assign the loan to HUD, as long as the loan meets HUD's conditions. After that, HUD holds the loan and makes any future advances due to you. Nothing changes in your terms. Separately, adjustable-rate HECMs also have a second note in HUD's favor, which secures any payments HUD makes to you if a lender ever can't. See Why Reverse Mortgages Have 2 Notes and 2 Deeds of Trust.
Let me walk through a simple example. No real rates or limits here, just the logic.
Meet a couple, ages 72 and 70, with a home appraised below the HECM limit and a small mortgage left to pay off.
There are no required monthly mortgage payments along the way. They must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. That's the deal.
To see this with your real numbers, get your estimate.
Two things happen before you can close a HECM:
Yes. You keep the title. The lender holds a lien, like any mortgage. See Do I still own my home if I get a reverse mortgage?
It depends on your age, the expected rate, and your home's value. See How Much Money Would I Be Eligible For? or get your estimate.
On an adjustable HECM, yes, the unused portion grows at the note rate plus the annual mortgage insurance rate. See Does my line of credit grow?
On an adjustable HECM, generally yes, for a small fee. On a fixed-rate HECM, no.
You can stay as long as the home is your primary residence and you meet the loan terms. Tenure payments keep coming too. See If I outlive my life expectancy, can I be evicted?
If you're away more than 12 consecutive months for health reasons and no other borrower lives there, the loan can come due. An eligible non-borrowing spouse can generally stay.
Yes, any time. The loan is paid off from the sale, and you keep what's left.
Loan money generally isn't taxable income, and it generally doesn't affect Social Security or Medicare. Money you keep in the bank can count for Medicaid or SSI. See Will a reverse mortgage affect my Social Security or Medicare benefits?
If you've read this far, you understand reverse mortgages better than most people who have one. The next step is real numbers. Get My Estimate, start your reverse mortgage review, or call us at 530-888-6000.
Related reading: Reverse Mortgage Pros and Cons, HECM Reverse Mortgage, and the Reverse Mortgage Glossary.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
