By Tyler Plack
Tyler Plack is the Chief Executive Officer of South River Mortgage. He joined the company as a founding employee in 2017 and served as President before becoming CEO in 2026. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification.
Reviewed October 2026 by the South River Mortgage editorial team
The short answer: a reverse mortgage lets homeowners 62 and older turn home equity into cash with no monthly mortgage payment, and with the federally insured version (HECM) you or your heirs never owe more than the home is worth. The trade-offs: the loan balance grows every month, there are upfront costs and mortgage insurance, you must keep paying property taxes, insurance and upkeep, and less equity is left for your heirs. It tends to fit people who plan to stay in their home for many years and can comfortably cover those ongoing costs.
If you’re unfamiliar with how reverse mortgages work, start with our simple explanation of what a reverse mortgage is. Below we lay out both sides in plain English so you can decide with clarity and confidence.
In this article9 sections
Reverse Mortgage Pros and Cons at a Glance
| ✅ Pros | ⚠️ Cons |
|---|---|
| No monthly mortgage payment is required while you live in the home. | The loan balance grows each month as interest and mortgage insurance are added. |
| You keep ownership of your home and can stay as long as you meet the loan terms. | You must keep paying property taxes, homeowners insurance and upkeep, or the loan can come due. |
| You choose how to receive the money: lump sum, monthly payments, a line of credit or a mix. | Upfront costs (origination, FHA mortgage insurance, closing costs) are higher than many other loans. |
| With a HECM, neither you nor your heirs will owe more than the home’s value when the loan is repaid. | Less equity will usually be left for your heirs. |
| Any existing mortgage is paid off first, which can free up monthly cash flow. | It is a poor fit if you may move or sell within a few years. |
| You meet with an independent HUD-approved counselor before you apply, so you understand the loan first. | The home must stay your primary residence; a long move-out, such as more than 12 months in a care facility, can make the loan due. |
Program rules above are for the FHA-insured Home Equity Conversion Mortgage (HECM). Sources: HUD’s HECM program page and the CFPB’s reverse mortgage guide.
Pros of a Reverse Mortgage
There are several key advantages to consider when thinking about a reverse mortgage. These benefits can make a significant difference in how you manage your retirement finances:
✅ No Monthly Mortgage Payments
Instead of sending payments to a lender, the lender sends money to you. You stay in your home while converting equity into tax-free funds.
✅ Stay in the Home You Love
You don’t have to sell or downsize. As long as you meet the loan requirements (live in the home, pay taxes and insurance, maintain the property), you can stay put (CFPB).
✅ Flexible Cash Options
You can receive the money as a lump sum, monthly payments, a line of credit, or a combination. It’s your equity, your choice.
✅ Federally Insured Protection (HECMs)
The most common reverse mortgage — the Home Equity Conversion Mortgage — is insured by the FHA. That means you’ll never owe more than your home’s value when the loan is due (HUD).
✅ Can Help Cover Big Costs.
Many homeowners use reverse mortgages to help with: medical bills, long-term care, renovations for aging in place, paying off high-interest debt, or simply creating peace of mind in retirement.
Cons of a Reverse Mortgage
While reverse mortgages have many benefits, there are also important factors to keep in mind before making your decision:
⚠️ Your Loan Balance Grows
You’re not making payments, so interest is added to the loan each month. This means your equity decreases over time.
⚠️ You Still Have Obligations
You must live in the home as your primary residence, pay property taxes and homeowners insurance, and keep the home in good shape. Falling behind on these can make the loan due and lead to foreclosure (CFPB).
⚠️ Upfront Costs and Mortgage Insurance
HECMs carry an upfront and an annual FHA mortgage insurance premium (MIP) on top of origination and closing costs (HUD). Our MIP guide explains how it is calculated.
⚠️ Required Counseling Takes a Step
Every HECM borrower must first meet with an independent HUD-approved counselor (HUD). It adds a step, but it is also a safeguard. See what happens in HECM counseling.
⚠️ Less Inheritance for Heirs
Because the loan is paid back when the home is sold (typically after death or moving), there may be less equity left for your heirs.
⚠️ It’s Not Ideal If You Plan to Move
If you plan to relocate in a few years, a reverse mortgage might not be the best fit — especially since closing costs can be higher than traditional loans.
Who a Reverse Mortgage Works Best For
To qualify for a HECM you must be at least 62, live in the home as your primary residence and have enough equity (HUD); see how to qualify for a HECM. Beyond the rules, a reverse mortgage can be a strong fit if you:
- Plan to stay in your home long-term
- Want to get rid of your current mortgage payment
- Have enough equity built up in your home
- Need extra money for retirement expenses
- Want more financial freedom without moving
This step helps many retirees cover major needs like aging-in-place improvements, health care, and everyday costs — all while staying where they feel most comfortable.
Check your eligibility
A few details to help us understand your options.
Who a Reverse Mortgage Is Not For
A reverse mortgage is usually the wrong tool if you:
- Expect to move, downsize or sell within the next few years, because upfront costs are spread over too short a time
- Would struggle to keep paying property taxes, homeowners insurance and upkeep
- Want to leave the house to your heirs free and clear
- Share the home with someone who is not on the loan and would need to stay after you leave (ask about non-borrowing spouse rules first)
- Need only a small amount of money that savings or a cheaper loan could cover
Alternatives Worth Comparing
One alternative is a Home Equity Line of Credit (HELOC). Like a reverse mortgage, a HELOC taps into your home equity, but it works more like a credit card secured by your house. You borrow as needed and pay back what you use. This can be a good choice if you have steady income and don’t mind monthly payments.
Another option is a cash-out refinance, which replaces your current mortgage with a larger loan and gives you the difference in cash. This might suit homeowners with strong credit and the ability to keep up with regular payments.
For those considering downsizing, selling the home and moving to a smaller, more affordable property can free up significant equity. This also reduces expenses such as taxes, insurance, and maintenance—stretching your retirement income further.
Finally, some retirees look at local or federal assistance programs for housing, healthcare, or utility costs. These programs may help reduce financial pressure without tapping into your home equity at all.
Questions to Ask Your Family Before You Decide
A reverse mortgage affects the people who may inherit or help care for the home, so talk it through with them first:
- Do we expect to stay in this home for at least the next several years?
- Does anyone in the family hope to keep the house, and could they pay off the loan when it comes due? (With a HECM, heirs who keep the home pay the balance or 95% of the appraised value, whichever is less.)
- Who else lives here, and what happens to them if the borrower moves into care or passes away?
- Can we comfortably cover property taxes, insurance and repairs for as long as we stay?
- What would we use the money for, and is there a cheaper way to meet that need?
- Would a family member like to join the HUD counseling session or the advisor call?
Not sure how to start the conversation? Read how to tell your kids you’re getting a reverse mortgage and whether you can still leave the house to your kids.
Quick Self-Check
You may be a good fit for a reverse mortgage if you can answer “yes” to most of these:
- Do I want to stay in my home for many years?
- Am I comfortable using my home equity to support my retirement?
- Can I keep up with property taxes, insurance, and basic upkeep?
- Would extra money each month help me retire more comfortably?
- Do I have a plan for how my heirs will handle the home later?
If you are unsure about any of these questions, a licensed advisor can walk you through your options so you can make the best choice for your situation.
Talk to a Trusted Reverse Mortgage Advisor
At South River Mortgage, we’ve helped thousands of seniors understand how reverse mortgages work — without pressure or sales talk.
Our team is here to answer your questions and help you explore your options based on your goals, your finances, and your home.
Ready to learn more? Contact South River Mortgage to schedule a free consultation with a trusted advisor.
How the Process Works
You talk with a licensed advisor, complete the required HUD-approved counseling session, then apply and get an appraisal.
An underwriter reviews your file, including your ability to keep up with taxes and insurance.
At closing you choose how to receive the funds. Read the full walkthrough in how to get a reverse mortgage.
Reverse Mortgage FAQs
What is the biggest problem with a reverse mortgage?
The most common challenge is that your loan balance grows over time since you’re not making monthly payments. This reduces the equity left in your home and may mean less inheritance for your heirs. For retirees who prioritize leaving the home debt-free, this can feel like a drawback.
What is the 95% rule on a reverse mortgage?
The 95% rule allows heirs to repay the loan by purchasing the home for 95% of its current appraised value, even if the loan balance is higher. This protects families from being stuck with a debt larger than the home is worth.
Who benefits the most from a reverse mortgage?
Retirees who want to stay in their homes long-term, have significant equity, and need extra cash flow often benefit the most. It’s especially useful for those looking to supplement retirement income, cover medical expenses, or eliminate an existing mortgage payment.
What happens if you live too long on a reverse mortgage?
You cannot outlive a reverse mortgage. As long as you live in the home, pay property taxes and insurance, and maintain the property, you can continue receiving benefits. The loan only becomes due when you move, sell, or pass away.
Who should not do a reverse mortgage?
A reverse mortgage may not be ideal for people planning to move soon, those unable to keep up with property obligations, or homeowners who want to leave the house free and clear to their heirs. In these cases, alternatives might make more sense.
What is the current interest rate on a reverse mortgage?
Reverse mortgage interest rates change regularly and vary based on factors like the loan type and market conditions. On average, rates are often similar to or slightly higher than traditional mortgage rates. To get an accurate, up-to-date rate, it’s best to request a personalized quote from a licensed lender.
📘 Want to Learn More About Reverse Mortgages?
Download our Free Ebook and get a complete, easy-to-understand guide to reverse mortgages — including how they work, who qualifies, and how they can support your retirement goals.
Whether you’re just starting your research or ready to take the next step, this resource is designed to give you clarity and confidence.
No strings attached — just helpful insights from the experts at South River Mortgage.
Use our reverse mortgage calculator to explore your options, or call 844-230-6679. No pressure. No obligation.
