Quick answer
A reverse mortgage lets homeowners borrow against home equity without monthly mortgage payments; the loan is usually repaid when the borrower moves out or dies. For the most common type, a federally insured Home Equity Conversion Mortgage (HECM), the youngest borrower must be at least 62, the home must be the principal residence, and counseling from an independent HUD-approved counselor is required first. If your parent will soon move to assisted living, it's often not a good fit, because the loan generally comes due after moving out. Talk to a HUD-approved counselor and a trusted advisor.
How a HECM works
- Borrow against home equity as a lump sum, monthly payments or a line of credit.
- No monthly mortgage payment, but taxes, insurance and upkeep must continue.
- Interest and fees are added to the balance over time.
- The loan is usually repaid by selling the home.
Who qualifies
- Youngest borrower at least 62.
- The home is the principal residence.
- Counseling from an independent HUD-approved HECM counselor before closing.
If your parent moves to assisted living or a nursing home
According to the CFPB, reverse mortgages typically must be repaid when the borrower moves out or dies. If your parent is in a health care facility for more than 12 consecutive months, the loan may come due unless a co-borrower, or in some cases an eligible non-borrowing spouse, still lives in the home.
When it may make sense
- Your parent plans to stay home for years and needs money for in-home care or home changes.
- A spouse will keep living in the home.
When to look elsewhere
- A move to assisted living is likely soon. Selling the home or a bridge loan may fit better.
- The home needs major repairs, or taxes and insurance are hard to keep up.
Weighing how to use the house?
We'll help you think through selling, staying and care options near Kansas City. Free.
Questions families ask
Can a reverse mortgage pay for assisted living?
It can provide cash, but the loan generally comes due once the borrower moves out, so it usually works better for staying home.
What is the age requirement for a reverse mortgage?
For a HECM, the youngest borrower must be at least 62.
Is counseling required?
Yes. HECM borrowers must get counseling from an independent HUD-approved counselor.
What happens if my parent goes into a nursing home?
If away more than 12 consecutive months in a health care facility, the loan may come due unless a co-borrower or eligible spouse lives there.