What are the benefits of a reverse mortgage?

You do not have to make any monthly mortgage payments with a reverse mortgage. One of the ways to access the funds is through a line of credit that grows in availability over time. A reverse mortgage loan is a non-recourse loan, meaning you will not have to pay more than the property’s value to pay the loan off, no matter how long you have the loan in place. Your social security is unaffected by obtaining a reverse mortgage.

Do you need good credit score to get a reverse mortgage?

No. A reverse mortgage loan does have credit guidelines, as all loans do, and having good credit improves your chances of getting the loan at the best terms. However, a reverse mortgage can still be obtained even with less-than-perfect credit. Sometimes, the guidelines permit extenuating circumstances and a Life Expectancy Set Aside to overcome derogatory credit.

Reverse Mortgage Pros and Cons (2025 Guide): Benefits, Risks & Expert Insights

Q: What are the drawbacks of a reverse mortgage?

A reverse mortgage will have higher closing costs than a traditional loan. The property must be your primary residence, so you can only move out or rent the property if you pay off the loan. Your heir cannot assume a reverse mortgage loan, which will become due and payable upon the passing of the last surviving borrower or when the property is no longer occupied. A reverse mortgage can impact your ability to qualify for or keep certain needs-based products like Medicaid and SSI. With no mortgage payments, the balance increases over time.

Q: When is a home equity loan better than a reverse mortgage?

A home equity loan is better if you need short-term financing. An example would be if someone wanted to borrow a small amount of money to fix up or renovate their property to sell it. A reverse mortgage is unsuited for short-term financing. It is designed to provide long-term solutions for remaining in your home.

Q: Does the bank own the house if I get a reverse mortgage?

No. A reverse mortgage is just a loan; therefore, you retain property ownership upon entering a reverse mortgage agreement.

August 24, 2025

Michael G. Branson Edited by

Cliff Auerswald

15 comments

Welcome to our comprehensive guide on the pros and cons of reverse mortgages. When used correctly, a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), can add stability to your retirement years.

However, as with any financial product, reverse mortgages are not always the best program for everyone. This guide will help homeowners evaluate financial options, understand potential risks and benefits, and make informed decisions about reverse mortgages.

Table of Contents

• Introduction to the Downsides

• Higher Initial Costs

• Can Impact Eligibility for Needs-Based Assistance Programs

• Risk of Exploitation: Safeguarding Seniors in Reverse Mortgage Transactions

• Older Versions Lacked Spousal Protections

• Exploring the Benefits

• Eliminating Monthly Mortgage Payments

• Unrestricted Use of Tax-Free Funds

• Lifetime Security: Reverse Mortgage Line of Credit

• Using a Reverse Mortgage to Buy a New Home

• 2025 Reverse Mortgage: Pros vs. Cons at a Glance

• Frequently Asked Questions

• Ready to Explore if a Reverse Mortgage is Right for You?

Introduction to the Downsides

Before exploring the benefits, it’s important to understand the potential drawbacks of reverse mortgages. Here are four key downsides to consider when deciding if a reverse mortgage is right for you.

Higher Initial Costs

Reverse mortgages, particularly the Home Equity Conversion Mortgage (HECM), often incur higher costs than traditional loans.
One major expense is the FHA mortgage insurance:
- 2% upfront fee
- 0.50% yearly mortgage insurance premium (MIP)
This insurance protects both borrowers and lenders, ensuring that neither borrowers nor their heirs will owe more than the home’s value, even if property values decline.
These costs can be a significant burden, especially for homeowners who are sensitive to closing costs. Lender credits can help, but they’ve become less common since the 2022–2023 rate hikes and inflation.
If you own a high-value property, consider a proprietary or jumbo reverse mortgage. These don’t require government insurance, saving the large upfront FHA MIP (often with higher rates).

Can Impact Eligibility for Needs-Based Assistance Programs

Funds from a reverse mortgage are not considered income but may affect eligibility for needs-based programs, such as Medicaid or Supplemental Security Income (SSI).
Borrowers should withdraw only what is necessary and ensure that funds are spent or transferred before the end of the month to avoid eligibility issues.
A reverse mortgage does not affect regular Social Security and Medicare benefits, but planning is essential for those relying on other assistance programs.

Risk of Exploitation: Safeguarding Seniors in Reverse Mortgage Transactions

Older homeowners can be targets for exploitation (bad investments, pressured “loans” to family, or dishonest caretakers).
The risk is often misuse or mismanagement of proceeds.
Seek advice from trusted, independent financial professionals to protect funds and intentions.

Older Versions Lacked Spousal Protections

Earlier reverse mortgages lacked protections for spouses under 62.
Since 2015, HUD safeguards “eligible non-borrowing spouses.”
Non-borrowing spouses must maintain the home, pay property taxes/insurance on time, and occupy it as a primary residence.
These protections prevent immediate loan repayment at the borrowing spouse’s death, but non-borrowing spouses cannot access a remaining line of credit.

Exploring the Benefits

Now that we’ve covered the potential drawbacks, let’s examine the advantages of reverse mortgages. Here are four key benefits that can make a reverse mortgage a valuable option for financial planning:

Eliminating Monthly Mortgage Payments

Reverse mortgages eliminate monthly mortgage payments for eligible borrowers.
They allow homeowners to remain in their homes without the burden of regular mortgage payments.
Borrowers must still maintain the property and pay ongoing expenses, such as taxes and insurance.

Unrestricted Use of Tax-Free Funds

Reverse mortgage proceeds are typically tax-free, offering an efficient way to access home equity.
Disbursement options include lump sum, line of credit, monthly payments, or a combination.
Tip: Consult a tax professional for guidance on your situation.

Lifetime Security: Reverse Mortgage Line of Credit

A reverse mortgage line of credit provides long-term access to funds.
Funds remain available as long as you have remaining credit and meet your loan obligations.
Unlike traditional HELOCs, banks cannot arbitrarily freeze or cancel this line.

Using a Reverse Mortgage to Buy a New Home

Reverse mortgages can refinance an existing loan or help purchase a new home without monthly mortgage payments.
Suitable for 55+ communities or moves that better align with changing needs.

2025 Reverse Mortgage: Pros vs. Cons at a Glance

Aspect	Pro	Con
Home Equity	Use your home’s value now	Equity may shrink over time
Payments	No monthly payments needed	Due when you leave or sell
Retirement Cash	Steady income boost	Loan balance grows with interest
Interest Rates	Fixed or variable options	Interest adds up over years
Home Ownership	You keep the title	Must pay taxes and upkeep
For Heirs	They can keep home by paying off	Less inheritance possible
Flexibility	Choose lump sum, credit, or payments	May affect Medicaid/SSI eligibility

Ready to Weigh Your Pros and Cons? Get expert insights with a free quote from All Reverse Mortgage—America’s #1 with a 4.99/5-star rating! Call (800) 565-1722 or click here for your free quote — simple, trusted, 100% secure!

Frequently Asked Questions

What are the key benefits of a reverse mortgage?

What are the drawbacks of a reverse mortgage?

When is a home equity loan better than a reverse mortgage?

Does the bank own the house if I get a reverse mortgage?

Do you need a good credit score to get a reverse mortgage?

Important Considerations on Reverse Mortgages

Ready to Explore if a Reverse Mortgage is Right for You?

Ready to explore if a reverse mortgage is right for you? Use our reverse mortgage calculator to get instant quotes and see various Home Equity Conversion Mortgage (HECM) loan options tailored to your needs.

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Have a Question About Reverse Mortgages?

Look no further. Michael G. Branson, our CEO, brings a wealth of knowledge directly to you. With a robust 45-year tenure in mortgage banking and 20 years dedicated solely to reverse mortgages, he's the expert you want on your side.

Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

15 Comments on this Article

Scott P.
July 28th, 2025

I am wondering why, if this is simply taking money out of my equity, why am I being charged interest? And how much is this interest per month? Per year?
Reply to Scott
- Michael Branson
  July 29th, 2025
  
  Hi Scott,
  
  A reverse mortgage is a loan in which you are borrowing money - using your home as collateral. While it's true that you are pledging your home to secure the loan, that's the case with many types of borrowing. Whether it's a home loan, a car loan, a credit card, or any other form of credit, there is always a cost associated with using someone else's money - regardless of whether collateral is involved.
  
  Interest accrues for as long as you hold the loan balance. For example, if you repay the loan after two years, the interest stops accruing at that point. If you only draw a small portion of your available line of credit, you'll accrue less interest than if you borrow the maximum amount upfront.
  
  To determine how much interest may accrue, you first need to calculate how much is available to you using the reverse mortgage calculator, which factors in your age and your home's value. Then, based on how much of your available proceeds you plan to borrow, you can review a personalized amortization schedule. This will show how interest accrues based on your loan amount and current interest rate.
  
  Keep in mind that future draws or changes in the interest rate will affect those results. Also, while no payments are required with a reverse mortgage, you have the option to make voluntary payments at any time. Doing so can reduce the principal balance and limit the amount of interest that accrues over time.
  Reply to Michael
Rose
March 17th, 2025

Hello,
My question is almost related to the last article. My husband and I travel to Nevada for family visit almost every month between 5 to 12 days and possibly future international travel once a year. Are we allowed to rent a room just to have someone in the house when we're not home?

Also, if the housing market goes underwater and the last surviving spouse dies, can the heirs opt to buy the property based on the loan balance or home value?

Thank you.
Reply to Rose
Myra R.
September 14th, 2024

If the reverse mortgage is for 30 years and the borrower lives longer than 30 years more, what happens?
Reply to Myra
- Michael Branson
  September 17th, 2024
  
  Hello Myra,
  There is no end date on the loan itself. If you choose a program with payments that last for only a certain period, the payments may stop once you've exhausted your available funds, but you can still remain in the home. You won't receive any additional payments after that time, but you or your heirs won't have to begin repaying the loan until you no longer live in the home as your primary residence or trigger a repayment event (such as stopping payments for taxes and insurance).
  Reply to Michael
Glenda N.
February 15th, 2024

I have an elderly friend who took a reverse mortgage on her home. Now, after several years and some health issues, she has decided she wants to move to her hometown and be closer to her children. What are her options with the house? Does she have to return the money? Can she sell it, or does it revert to the loan company? She needs some clarification.
Reply to Glenda
- Michael Branson
  February 15th, 2024
  
  Hi Glenda,
  Your friend has all the same rights of home ownership she always had. The terms of the reverse mortgage are that there are never any payments due if she lives in the home. If she chooses to move or sell the home, the loan would become due at that time, but she also has that right.
  
  Like any loan, she does have to pay the loan back when she sells the property, but any equity she has in the home still belongs to her. She should contact a local real estate professional to determine the home's probable value and compare that to the current statement to determine her equity position (remember, there will be costs incurred in the sale).
  
  If she wants to continue, the next step would be to decide what to do. If selling is her choice, the payoff would be handled through the closing, just like any other transaction.
  Reply to Michael
Roselyn V.
February 9th, 2024

I am 73 years old and considering a reverse mortgage. I own a home with a recent property value of $825,000. My present mortgage is $325,000 (first mortgage) and $152,000 (equity line of credit). I am now on a fixed income totaling $3,758. A reverse mortgage would help me pay my other monthly expenses. With this reverse mortgage, my taxes and insurance would also be paid by the reverse mortgage.

I presently have a credit rating of 810. Would you advise me to do a reverse mortgage?
Reply to Roselyn
- Michael Branson
  February 10th, 2024
  
  Hello Roselyn,
  This may sound funny coming from a company that originates reverse mortgages, but we don't recommend that you get the loan or choose not to. We believe that it is our job to help you understand how the reverse mortgage works and what it would do in your circumstances and give you the information you need to make the decision if it is right for you.
  You may be comfortable with the amount of debt that you have and the monthly payments you carry. They may be crippling your savings even though you've done a fantastic job of keeping your credit rating and your payments all current thus far. Only you can say if the debt load has been uncomfortable even though you've obviously kept up with it.
  And then, your goals and your plans come into play. With a reverse mortgage, you accrue interest like any other loan but make no monthly payments. This allows you to use your income for any purpose you choose, but you need to realize that your loan balance will rise instead of falling as you make monthly payments of principal and interest.
  Depending on your goals, that may or may not be an issue. If your biggest goal is to leave a family home to heirs, a reverse mortgage will make it harder for them to keep the home as the balance they will need to repay will be higher. If you have no heirs or if your heirs already have their own homes and are not reliant on your home for their future needs and, therefore, heirs do not play a role in your planning, you may think much differently about letting your home's equity make you more comfortable now.
  The bottom line is that we are a reverse mortgage lender, and we really believe in our product, but we also realize that the loan is not right for everyone. There are a lot of reasons that make it right and a lot that make it wrong for any particular individual. That's why we would not recommend that the loan is good or bad; in the end, only you can make that decision based on your goals and circumstances. We would love the opportunity to give you the facts about the loan and the numbers and let you decide if it's right for you.
  Reply to Michael
Rhonda N.
October 26th, 2020

After reading these pros and cons, many questions ask about glitches or hiccups to the reverse mortgage terms for the person, spouse, or couple involved.

Now, I see why there's counseling required. Under the current rules/guidelines, what is the best case or ideal scenario for a married couple in Florida to complete a reverse mortgage successfully?

Please include a scenario of the passing of one or the other spouse so I can get a realistic picture.

My husband and I are over 62 and consider this an option.
Reply to Rhonda
- Michael Branson
  October 26th, 2020
  
  Hello Rhonda,
  
  There is no glitch if both spouses are over 62 and on the title and the loan. You can live in the home for life if you continue to pay the taxes, insurance, and any other assessments (i.e., HOA dues) on the home when they become due. Like any loan on real estate, there are terms in the loan that if you fail to pay these items, the lender could ultimately call the loan due and payable and require you to pay the loan off since that would endanger the lender's security in the property. But as I said, that is true with all loans, not just reverse mortgages. Other than that, if at least one person from the original loan lives in the home and is still on the title, the loan will remain open, even if you have used all your proceeds. There would be no changes if one spouse passes before the other.
  Reply to Michael
Pam F.
August 15th, 2019

Thank you for providing insight on both the advantages as well as disadvantages, it is very helpful. I have a friend in Florida who owns two homes. He lives in one and has retained the other four investment purposes, i.e., allowing someone to rent it. He's currently living on what his family left him with no other income source. I told him to pick a house, live there, and sell the other. This way, he would generate enough resources to be stable until he passes. He is 68 years old. If he chooses not to do that, can he take a reverse mortgage on either one or both properties? He is not married and has no children. He has squandered a lot of what was left to him by his family on extraneous things. I'm a little concerned about whether he will have what he needs to make it without some regular monthly income. Does this type of circumstance generally qualify someone for a reverse mortgage? If so, what is best?
Reply to Pam
- Michael Branson
  August 15th, 2019
  
  Hello Pam,
  He can only take one reverse mortgage, and it can only be on the property where he lives as his primary residence. If he were to try to use the property that he did not occupy as his primary home and the lender completed an occupancy inspection or otherwise became aware of the situation, they would call the loan due and payable, and he would run the risk of losing the home to foreclosure if he could not afford to repay the obligation.
  If the rental income from the rental property combined with the reverse mortgage on his primary residence is inadequate to meet his needs, I would not recommend the loan for him under the circumstances. A financial advisor may greatly benefit him, and he may have to consider the sale of one or both properties and then a lifestyle that would fit within his means.
  A reverse mortgage may or may not be part of the plan, but if he is not living comfortably even with the reverse mortgage, living off the equity for a while only to still find yourself in financial difficulty later when you have even less equity to work with is not the answer.
  Reply to Michael
Wanda
July 21st, 2019

We are interested in doing a reverse mortgage and want to know if it's possible to be in the house for 7 to 8 months to travel the other months, and if so, can we rent it out so it's not vacant?
Reply to Wanda
- Michael Branson
  July 21st, 2019
  
  Hello Wanda,
  
  If you are out traveling 4 to 5 months out of each year, you meet the definition of the home being your primary residence because it is your residence for over half the year.
  However, if that 4 -5 month stretch is all at one time, then you would want to be sure to communicate with your lender so that they are aware that you are not vacating the home and that the travel is temporary and within the terms of your loan.
  However, when you say that you want to rent the home out, this begins to get a little touchy. If you have a person who lives in the home with you (i.e. rents a room from you), that is perfectly acceptable as HUD allows this arrangement. However, transient use of the property is not allowed.
  If you are talking about renting the home out for short periods of time when you travel only, that becomes more like an Airbnb type of arrangement and that is not allowed by HUD. That's more of a commercial use of the property and is not allowed pursuant to the loan documents.
  Reply to Michael

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Reverse Mortgage Pros and Cons (2025 Guide): Benefits, Risks & Expert Insights

Introduction to the Downsides

Higher Initial Costs

Can Impact Eligibility for Needs-Based Assistance Programs

Risk of Exploitation: Safeguarding Seniors in Reverse Mortgage Transactions

Older Versions Lacked Spousal Protections

Exploring the Benefits

Eliminating Monthly Mortgage Payments

Unrestricted Use of Tax-Free Funds

Lifetime Security: Reverse Mortgage Line of Credit

Using a Reverse Mortgage to Buy a New Home

2025 Reverse Mortgage: Pros vs. Cons at a Glance

Frequently Asked Questions

What are the key benefits of a reverse mortgage?

What are the drawbacks of a reverse mortgage?

When is a home equity loan better than a reverse mortgage?

Does the bank own the house if I get a reverse mortgage?

Do you need a good credit score to get a reverse mortgage?

Ready to Explore if a Reverse Mortgage is Right for You?

Have a Question About Reverse Mortgages?

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