A reverse mortgage is one way families can pay for long-term care expenses without selling a loved one’s home. However, it isn’t the right solution for every situation. Whether a reverse mortgage makes sense depends on factors such as your loved one’s care needs, plans for the home, available home equity, and other ways to pay for care. This guide explains how reverse mortgages work, when they may be worth considering, and what families should consider before deciding whether to move forward.
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A reverse mortgage is a loan that allows eligible homeowners age 62 and older to borrow against the equity in their home to help pay for expenses, including some long-term care costs.
“Reverse mortgages are a way to help seniors age in place at home or have extra funds for needed expenses,” says Ellen Skaggs, a certified reverse mortgage specialist.
Instead of making monthly mortgage payments, borrowers receive funds from their home equity while continuing to own and live in the home. Depending on the loan, the money can be received as a lump sum, monthly payments, a line of credit, or a combination. The loan is generally repaid when the borrower permanently moves out, sells the home, or dies.[01]
There are three main types of reverse mortgages:
The amount a homeowner can borrow depends on several factors, including age, home equity, current interest rates, and the type of reverse mortgage they choose.[01]
Most reverse mortgages are available only to homeowners age 62 and older. Lenders also evaluate whether borrowers can continue paying property taxes, homeowners insurance, and other required housing costs throughout the life of the loan.
Lenders also consider a homeowner’s income. However, many seniors are eligible based on their Social Security income, says Rick Rodriguez, a certified reverse mortgage specialist in Las Vegas.
“Qualifying for a reverse mortgage is not as stringent or precise as a traditional mortgage,” Rodriguez explains, “It’s not based on a minimum FICO, or credit, score. It’s based on payment history and how responsible the applicant has been in regard to making payments over the last 24 months.”
Home equity is the difference between a home’s current value and the amount still owed on the mortgage.[02] For example, if a home is worth $500,000 and the remaining mortgage balance is $200,000, the homeowner has $300,000 in equity.
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| Potential benefits | Potential drawbacks |
|---|---|
| May provide funds to help pay for ongoing home care or home modifications that support aging in place. | May not be the best option if your loved one is likely to move to assisted living, memory care, or a nursing home soon. |
| Can help pay for one spouse’s senior care while the other continues living in the home. | The loan balance grows over time, reducing the home’s available equity. |
| May allow families to delay selling the home while paying for care. | Borrowers must continue to pay property taxes, homeowners insurance, and maintain the home. |
| Can provide another source of funds when savings alone aren’t enough to cover care costs. | Using home equity today may leave fewer financial resources available later. |
| May complement other payment strategies, such as long-term care insurance or personal savings. | Depending on your family’s goals, other payment options may better preserve the home’s value for a spouse or heirs. |
“It’s important to review all financial options to determine which is best for the borrower’s specific situation and finances. One opportunity doesn’t always fit all,” explains Jennifer Fraser, director of stakeholder engagement at GreenPath Financial Wellness, a HUD-approved nonprofit financial counseling group.
Use the table below to compare common caregiving situations and see when a reverse mortgage may be worth exploring, as well as other payment options that may better fit your family’s needs.
| If this sounds like your family’s situation | A reverse mortgage may be | Consider these payment options first |
|---|---|---|
| Your loved one wants to remain at home and needs ongoing care. | A good option to explore | Home equity line of credit (if appropriate), long-term care insurance benefits, private-pay home care planning |
| Your loved one is likely to move to assisted living or memory care within the next year. | Less likely to be the best fit | Selling the home, bridge financing, private pay, VA benefits, long-term care insurance |
| One spouse will continue living in the home while the other needs senior care. | Worth considering | Review survivor protections and compare other funding options before deciding. |
| Your loved one may need Medicaid to help pay for care soon. | Less likely to be the best fit | Elder law planning, Medicaid coverage, and local assistance programs |
| Preserving the home’s value for your family is an important priority. | Less likely to be the best fit | Long-term care insurance, VA benefits, downsizing, or other payment strategies |
| Your loved one has substantial home equity but limited savings to pay for care. | Worth exploring | Compare a reverse mortgage with selling the home or other financing options before deciding. |
Before applying for a reverse mortgage, confirm that your loved one meets the basic eligibility requirements and has enough home equity to make borrowing worthwhile. Lenders consider factors such as the borrower’s age, home equity, and ability to continue paying property taxes, homeowners insurance, and other required housing expenses.
Not all reverse mortgages work the same way. Comparing the available options can help your family choose the loan that best fits your loved one’s financial needs and long-term care plans.
“Reverse mortgage funds can be received as a lump sum, monthly payments, a line of credit, or a combination of payment options,” says Skaggs. Unlike a lump sum or monthly payments, a line of credit doesn’t accrue interest unless the money is withdrawn.
Reverse mortgage funds can generally be used for any purpose once any existing mortgages have been paid off. Families often use the money to pay for home care, home safety modifications that support aging in place, medical expenses, or a spouse’s assisted living or memory care costs. Creating a plan for how the funds will be used can help ensure they support both your loved one’s immediate care needs and longer-term financial goals.
Borrowers must continue living in the home as their primary residence, maintain the property, and stay current on property taxes, homeowners insurance, and any other loan requirements. Failing to meet these obligations can cause the loan to become due sooner than expected.
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Experts recommend seeking professional advice about long-term care and payment options before deciding on a reverse mortgage.
A reverse mortgage is just one way to pay for long-term care. A Place for Mom’s Senior Living Advisors can help you compare care options, understand typical costs, and explore ways to pay for care based on your loved one’s needs. The service is available at no cost to families.
The homeowner keeps the title and ownership of the home throughout the loan. As long as the homeowner lives in the home, maintains it, and pays required property taxes and homeowners insurance, the loan doesn’t become due. Failure to meet these requirements may lead to foreclosure.
Yes. Families sometimes use reverse mortgage funds to pay for home care, home modifications, or other expenses that help a loved one remain at home. Whether it’s a good option depends on the borrower’s financial situation, care needs, and plans for the home.
Other options may include long-term care insurance, VA benefits, Medicaid, personal savings, selling the home, or other home equity solutions. The right choice depends on your loved one’s care needs, finances, and long-term goals.
Consumer Financial Protection Bureau. (2024, September 11) When do I have to pay back a reverse mortgage loan?
Consumer Financial Protection Bureau. (2024, May 14). Can anyone take out a reverse mortgage loan?
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