Quick overview

Reverse mortgages let qualifying homeowners convert home equity into cash without monthly principal-and-interest payments. The most common U.S. product is the FHA-insured Home Equity Conversion Mortgage (HECM). Despite widespread coverage, myths about who can qualify and what happens to the home persist. Below I debunk the most common eligibility myths, explain the actual rules, and offer practical steps you can take to verify eligibility. (Sources: HUD, CFPB, AARP.)

Common myths and the facts

I’ve worked with dozens of older homeowners who arrived at the counselor’s office convinced they were ineligible because of one of these myths. In each case, a careful review of HUD rules and the borrower’s home equity corrected their assumptions.

  • Myth: You must be debt-free to qualify.

  • Truth: You can have an existing mortgage. A reverse mortgage proceeds are often used to pay off an outstanding mortgage when the reverse loan closes. Lenders evaluate existing liens and subtract what’s owed from the available principal limit; having a mortgage does not automatically disqualify you (HUD guidance on HECMs).

  • Myth: Only low-income seniors qualify.

  • Truth: Income is not a primary eligibility test for HECMs. Lenders focus on age, property type, equity, and the borrower’s ability to meet ongoing obligations (property taxes, insurance, and maintenance). There are screening steps to ensure the borrower can maintain the property, but social security or pension size by itself is not a blocker (CFPB).

  • Myth: You will lose ownership of your home.

  • Truth: With a reverse mortgage you retain title to the home while you live there and comply with loan obligations. The loan becomes due if you sell, permanently move out, or fail to meet obligations; at that time the home is typically sold to repay the loan and any remaining equity passes to heirs (HUD).

  • Myth: Reverse mortgage proceeds are taxable income.

  • Truth: Loan proceeds are loan disbursements, not earned income; they’re generally not taxable. However, tax treatment can vary if funds are used to purchase an income-producing asset. Always confirm with a tax professional (IRS and CFPB summaries).

  • Myth: Heirs are personally on the hook for the debt.

  • Truth: HECMs are non-recourse loans. The borrower’s estate (usually via sale of the home) repays the loan up to the home’s value. Heirs are not generally personally liable beyond the property value, although they may choose to keep the property by repaying the loan balance or the principal limit (HUD non-recourse policy).

  • Myth: A non-borrowing spouse is not protected.

  • Truth: Protections for a non-borrowing spouse exist under current HECM rules if certain conditions are met, but the rules have changed over time and documentation matters. If you have or expect a non-borrowing spouse, document the marriage and speak with a counselor so HUD-required protections can apply (HUD guidance; see our guide on the non-borrowing spouse rule).

Who actually qualifies: the eligibility checklist

To qualify for a HECM (the most common reverse mortgage), the borrower must generally meet these requirements (summary of HUD rules as of 2025):

  1. Age: At least one borrower must be 62 years or older.
  2. Occupancy: The home must be the borrower’s primary residence.
  3. Property type: Eligible properties usually include single-family homes, FHA-approved condominiums, and certain manufactured homes that meet FHA requirements.
  4. Equity: Sufficient home equity to generate the loan proceeds (the amount available depends on age, the lesser of appraised value or FHA lending limit, and current interest rates).
  5. Counseling: Mandatory counseling from a HUD-approved counselor before closing on a HECM (HUD counseling requirement).
  6. Ability to meet ongoing obligations: Borrowers must demonstrate they can pay property taxes, homeowner’s insurance, and maintain the home. Lenders review the borrower’s financial capacity to avoid future default on these obligations.

If a proposed property or borrower situation is unusual, lenders will request extra documentation. In my practice, preparing documents on property taxes, insurance, and recent mortgage statements up front speeds the process.

Practical steps to verify eligibility and avoid pitfalls

  1. Get HUD-approved counseling first. Counseling is required for HECM loans and is the best starting point to debunk myths. Counselors walk through alternatives, obligations, and how the loan affects benefits and estate planning (see our summary on the counseling requirement).
  2. Order a professional appraisal only after an initial eligibility conversation. The home value is a key input to the principal limit—appraisals vary, so choose a local appraiser familiar with your market.
  3. Gather paperwork: proof of age (birth certificate or passport), mortgage statements, property tax and insurance bills, and title documentation. Lenders rely on these to underwrite the loan.
  4. Ask for a written good-faith estimate of closing costs and mortgage insurance premiums. HECMs carry an upfront and annual mortgage insurance premium; private reverse mortgages have different fee structures.
  5. Compare HECM and proprietary products. HECMs are FHA-insured; private products may allow higher principal limits for newer, higher-value homes. Read our comparison of HECM vs private reverse mortgages for differences in costs and protections.

Costs, growth of loan balance, and effects on estate

  • Interest and fees: Reverse mortgage interest compounds and the loan balance grows over time. HECMs charge an upfront mortgage insurance premium (MIP) and annual MIP, which increase the loan balance. Pay attention to the initial interest rate and how interest is calculated.
  • Closing costs: Appraisal, origination fees, title work, recording fees, and mortgage insurance add to upfront expenses.
  • Estate impact: The loan is typically repaid when the homeowner dies or permanently moves out. Heirs can keep the home by repaying the loan or selling the property; if the sale yields remaining equity, heirs inherit it. Because the loan balance can grow, it can reduce the estate’s net equity — plan accordingly with heirs and an estate attorney.

How reverse mortgage proceeds affect benefits

  • Social Security and Medicare: Proceeds from a reverse mortgage are generally not counted as income and do not change Social Security or Medicare benefits. That said, how you use the funds could matter for means-tested programs.
  • Medicaid and Supplemental Security Income (SSI): Reverse mortgage proceeds retained as countable assets may affect eligibility for Medicaid or SSI. If proceeds are spent quickly on exempt items (medical bills, home improvements) they may not affect eligibility, but if they remain in an account they could be counted as assets. Always consult a benefits specialist or elder law attorney before using proceeds if you receive means-tested assistance (CFPB, state Medicaid guidance).

My practical tips from working with clients

  • Start with counseling. I’ve seen clients walk away from a loan because they didn’t understand tax or Medicaid implications; counseling and a benefits check avoided surprises.
  • Don’t assume announcements or ads are comprehensive. Advertising often highlights the positive cash flow without showing the long-term balance growth or costs.
  • Consider alternatives: a downsizing sale, a traditional refinance, a home equity line of credit (HELOC), or a partial sale may fit better depending on goals. See our comparison of home equity options for context.
  • Inform heirs early. Discuss your plans with your family and include them in counseling sessions if appropriate so they understand repayment mechanics and options for keeping the property.

Where to learn more and next steps

Quick FAQ (short answers)

  • Is there an age minimum? Yes — at least one borrower must be 62 for a HECM (HUD).
  • Do I lose title to my home? No — you retain ownership if you meet loan obligations.
  • Are proceeds taxable? Generally no, but consult a tax professional for complex uses.
  • Can my heirs be forced to pay beyond the home’s value? No — HECMs are non-recourse (HUD).

Disclaimer

This article is educational and not personalized financial, tax, or legal advice. Rules and program details change; consult a HUD-approved reverse mortgage counselor, a tax advisor, or an elder-law attorney before making decisions.

References