What Is a Reverse Mortgage?

With a traditional “forward” mortgage, you borrow money and pay it back over time. With a HECM, the flow reverses: the lender disburses funds to you (or holds them in a line of credit you can draw from), and you are generally not required to make monthly mortgage payments.

You remain the owner of your home and keep the title. You are still responsible for property taxes, homeowner’s insurance, HOA fees if applicable, and maintaining the property. As long as you meet these obligations and live in the home as your primary residence, the loan stays in good standing.

The amount you may access — called the Principal Limit— depends on factors including the age of the youngest borrower, your home’s appraised value (up to the FHA lending limit), and current interest rates. Older borrowers and homes with more equity generally qualify for a higher principal limit.

The funds you receive are loan proceeds, not income — you are borrowing against your own equity, and the money is generally not taxable. Any unused line of credit remains available to draw later, subject to program rules current at the time you draw.

After closing, your loan servicer conducts an annual review. You will be asked to certify that the home remains your primary residence — typically by returning a short occupancy certification form. Servicers also track whether property taxes and homeowner’s insurance are current. If a Life Expectancy Set-Aside (LESA) was established at closing, the servicer draws on it to pay those charges directly on your behalf.

Missing an occupancy certification or falling behind on taxes and insurance can put your loan into default, so responding promptly to servicer requests matters even though no monthly mortgage payment is due.

HECM borrowers can choose how to receive proceeds, subject to program rules:

• ✓Line of credit — draw funds as needed; unused portions may grow over time
• ✓Lump sum — available on fixed-rate HECM loans, subject to first-year draw limits
• ✓Monthly payments — for a set term or for as long as you live in the home (tenure)
• ✓Combination — mix line of credit with monthly payments or lump sum

The right structure depends on your goals — whether you need funds immediately, want a growing safety net for future expenses, or prefer steady monthly supplements. A licensed loan officer can walk through options using your specific numbers.

Not every reverse mortgage is a HECM. Jumbo (proprietary) reverse mortgages are private loan products designed for higher-value homes that exceed the FHA lending limit. They are not FHA-insured, may be available to borrowers as young as 55, and typically have different terms and disbursement options.

For most homeowners whose property value is within FHA limits, the HECM remains the standard choice because of its federal insurance, flexible disbursement options, and established consumer protections. Learn more on our HECM program page.