Reverse Mortgages: How They Actually Work

A reverse mortgage lets homeowners 55 and older borrow against their home equity without selling or making regular payments — instead, interest accrues and compounds onto the loan balance over time, typically repaid when the home is eventually sold or the owner passes away or moves out permanently.

Because no payments are required, the loan balance grows over time as interest compounds — this can meaningfully erode the equity that would otherwise pass to your estate or be available if you need to move later, which is the central tradeoff to weigh against the immediate cash flow benefit.

Reverse mortgage interest rates are typically higher than a standard mortgage or HELOC, reflecting the lender's higher risk from an open-ended repayment timeline. Amounts available depend on your age, home value, and location — older borrowers with more valuable homes generally qualify for more.

Because the tradeoffs are significant and hard to reverse, independent legal advice is typically required (and a genuinely good idea) before proceeding with a reverse mortgage — treat this as a decision to make carefully, not to rush into for quick access to cash.