A reverse mortgage allows homeowners aged 62 and older to borrow money using the equity in their home as collateral. The home equity for seniors remains with them, and the loan typically does not need to be paid back until the homeowner moves out, sells the home, or passes away. There are multiple types of reverse mortgages, with each having its pros and cons. Before signing up for one, reading this 2026 reverse mortgage guide can be helpful for interested homeowners.

Types of reverse mortgages

Single-purpose reverse mortgages

These mortgages are offered by local or state government agencies or non-profit organizations. Single-purpose reverse mortgages are the least expensive option, as they come with lower fees and interest rates than other reverse mortgage alternatives. At the same time, this option may not be available everywhere.

A key point about single-purpose reverse mortgages is that they must be used for a specific purpose, such as paying property taxes or making home repairs (as defined by the lender). As with other reverse mortgages, repayment is deferred until the client moves out, sells their home, or passes away (as mentioned earlier).

Home equity conversion mortgages (HECMs)

These are the most widely available types of reverse mortgages. One key HECM loan detail is that it is insured by the federal government. HECMs are backed by the Federal Housing Administration (FHA), and they can be used for any purpose. These mortgages come with higher upfront costs, but at the same time, offer several payment options, including lump-sum payments, monthly payments, a line of credit, or combinations.

Borrowers must receive counseling before applying to ensure they understand the costs, responsibilities, and alternatives. The amount available depends on age, home value, and interest rates.

Proprietary reverse mortgages

These mortgages are offered by private lenders, not associated with the federal government or any government at all. Because they are not subject to government rules on insurance (for senior home financing), private lenders let homeowners with higher-valued homes borrow more than HECMs do. These loans may not require mortgage insurance premiums, but they often come with higher interest rates and added terms and conditions.

Like other reverse mortgages, borrowers can repay their loan by selling their home or moving out. The loan can also be repaid by their relatives after they pass away. These reverse mortgages, also called jumbo reverse mortgages, are suitable for borrowers who need larger payouts.

Pros and cons of a reverse mortgage

Pros

No mortgage payments

Borrowers do not need to make mortgage payments as they would normally do with a traditional option. This aspect makes reverse mortgages different from a traditional loan, which often leaves borrowers concerned about repaying it. This is an affordable option for seniors on a fixed income. 

Can delay using retirement savings

A person saves money throughout their professional journey to have a comfortable post-retirement life without any financial issues. Here is when a reverse mortgage helps people avoid using their retirement savings. Using the money from a reverse mortgage to pay expenses keeps people from having to drum up cash by selling home equity, stocks, and other investments. In other words, a reverse mortgage gives a person’s other investments the time they need to grow.

Borrowers do not have to downsize after retirement 

A common concern people have about retirement is downsizing or cutting down on expenses. Instead of leaving one’s home, a reverse mortgage allows people to age in place. Additionally, while a reverse mortgage comes with fees and other costs, it tends to cost less in the long run compared to buying another home or renting in a new location.

Cons

Involvement of all homeowners is required

All the people listed on the title must be named on the reverse mortgage, and at least one among them must be aged 62 or older.

Burden of repayment on heirs

A borrower’s heirs are usually responsible for paying off the mortgage amount to the bank. This means that they need to shoulder the financial risk that the seniors in their family have incurred by signing up for a reverse mortgage.