Updated: Sep 12, 2026
Key Takeaways
- HECMs and proprietary reverse mortgages have different program rules.
- Taxes, insurance, occupancy, and upkeep obligations remain.
- Check surviving-spouse protections and inheritance plans before borrowing.
Know which product is being compared
A Home Equity Conversion Mortgage, or HECM, is an FHA-insured reverse mortgage with federal program requirements. Proprietary products are different contracts and may have different ages, costs, and protections. This comparison focuses on HECMs; ask the lender to identify the product clearly.
| Potential benefit | Corresponding tradeoff |
|---|---|
| Access to equity without required monthly principal-and-interest payments while meeting the loan terms | Interest and applicable charges increase the balance |
| Ability to remain in the home | Taxes, insurance, occupancy, and property maintenance remain obligations |
| Different ways to receive available funds | Borrowing limits and payment options depend on the loan |
| HECM nonrecourse protection | Equity available for heirs or a later move can still shrink |
Failure to meet loan obligations can put the home at risk. Loss of housing may be more important to a borrower than the reduction in inheritance alone.
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Put the costs in dollars
Illustration only: assume $100,000 of cash is advanced and $8,000 of closing costs are financed. The starting balance would be $108,000. If that balance grew at an assumed 6% annually with no payments, further draws, or additional charges, it would reach about $144,528 after five years.
Actual loans may compound differently and include mortgage insurance, servicing costs, or variable rates. This example is not a lender quote. Request disclosures showing the initial costs, expected balance over time, and remaining funds after any existing mortgage payoff.
Compare alternatives against the same objective
If the need is small or temporary, compare available savings, assistance programs, or a conventional equity loan that you can afford to repay. If the home is expensive or unsuitable, compare moving costs and the budget after downsizing. A HELOC is not guaranteed future access to cash and can involve variable payments.
A reverse mortgage may be a poor fit if you expect to move soon, cannot afford ongoing property costs, or need another household member to retain rights the proposed loan does not provide.
Discuss the household and heirs
A surviving co-borrower can generally remain under the loan terms. An eligible non-borrowing spouse may qualify for repayment deferral subject to conditions, but does not have the same right to ongoing proceeds as a borrower.
When repayment is required, HECM heirs generally may retain the home by satisfying the lower of the loan balance or 95% of appraised value, under the applicable process and deadlines. Review CFPB's explanation and notify the servicer promptly.
If a HELOC is also under consideration, review our reverse mortgage vs. HELOC comparison before choosing how to use home equity.
Use the qualification checklist and the mechanics guide before committing.
Frequently Asked Questions
Will my spouse automatically receive the same protection?
What is the biggest risk?
ARTICLE SOURCES
Retire Companion requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
- Consumer Financial Protection Bureau. Who can take out a reverse mortgage?
- Consumer Financial Protection Bureau. Reverse mortgage key terms
- Consumer Financial Protection Bureau. What happens to a reverse mortgage when I die?
- Consumer Financial Protection Bureau. Can heirs keep or sell the home?
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