How Does a Reverse Mortgage Work?

A plain-English overview of reverse mortgage mechanics, repayment events, proceeds, and borrower responsibilities.

How Does a Reverse Mortgage Work?
Direct Answer
A reverse mortgage lets an eligible homeowner borrow against home equity while continuing to live in the home. The loan is usually repaid when the borrower sells the home, moves out, dies, or fails to meet loan terms.
What Makes It Different
With a traditional mortgage, the borrower makes monthly principal-and-interest payments and the loan balance generally goes down over time. With a reverse mortgage, the borrower receives proceeds or access to proceeds, and the loan balance can grow as interest and fees are added.
Borrower Responsibilities
Borrowers must keep meeting loan obligations. These can include:
- Living in the home as the principal residence.
- Paying property taxes.
- Keeping homeowners insurance.
- Maintaining the property.
- Paying HOA dues or other property charges when applicable.
- Meeting loan documents and servicing requirements.
Common Proceeds Options
Depending on program, eligibility, and loan structure, proceeds may be available as:
- Lump sum.
- Monthly payments.
- Line of credit.

Reviewed by Nick Cunningham, NMLS #907393. Educational content only, not personal financial, legal, tax, or benefits advice.