The Questions to Ask Before a Reverse Mortgage

Why does counseling come first?

Because the federal government decided, correctly, that no one should take this loan without an independent expert walking them through it. A HECM, the FHA-insured reverse mortgage most people mean when they say reverse mortgage, requires a counseling session with a HUD-approved counselor before a lender can process your application. The counselor does not work for the lender and has nothing to sell you.

I tell every client to treat counseling as the beginning of the decision, not a box to check at the end of one. Go in with written questions. Bring your spouse and, if you are comfortable, an adult child or trusted advisor. A good counselor will walk through costs, alternatives, and obligations, and a good lender should welcome all of it. If anyone tries to rush you through counseling, that tells you something important about them.

What should I ask about the costs?

Reverse mortgages have real costs, and the honest way to evaluate them is to see every one in writing before you commit. Ask for the full list: origination charges, FHA mortgage insurance premiums on a HECM, third-party closing costs, and the ongoing servicing of the loan. Then ask the more important question: how does the loan balance grow over time?

Because you are not making monthly mortgage payments, interest and insurance accrue onto the balance. Ask the lender to show you a projection of the balance and your remaining equity at several points in the future, side by side. Ask what happens to the unused portion of a line of credit, which on a HECM grows over time, a feature many borrowers never hear explained. And ask how each cost changes if you take less money. The answers should be specific, printed, and consistent with what your counselor tells you.

What happens to my spouse if I die first?

This is the question that matters most and gets asked least. If both spouses are borrowers on the loan, the survivor simply continues living in the home under the same terms. The risk shows up when one spouse is not on the loan, often because they were younger than 62 when the HECM closed.

HUD rules protect an eligible non-borrowing spouse who is named at closing and continues occupying the home, allowing them to remain after the borrowing spouse dies, provided they keep up taxes, insurance, and the other loan obligations. But the protections have conditions, and a non-borrowing spouse generally cannot draw remaining loan funds. Before you sign anything, ask the lender to explain, in writing, exactly what your spouse's status will be, what they must do to stay, and what income the loan will and will not provide them. If the answer is vague, stop.

What do my heirs actually inherit?

The house, minus the loan balance. When the last borrower leaves the home, the loan becomes due. Your heirs then choose: repay the balance and keep the home, usually by refinancing or paying cash, or sell the home, repay the loan, and keep whatever equity remains.

A HECM is non-recourse, which is worth saying plainly: if the home is worth less than the balance when it is sold to repay the loan, neither your heirs nor your estate owes the difference. FHA insurance absorbs it. Heirs who want to keep a home worth less than the balance can typically settle for a set percentage of its appraised value. Talk to your children about this before you close, not after. In my experience the families who struggle are not the ones who chose a reverse mortgage, they are the ones who kept it a secret.

What are my obligations after closing?

A reverse mortgage removes the monthly principal and interest payment. It does not remove ownership responsibilities, and failing them is how borrowers get into trouble. You must keep property taxes current, keep homeowners insurance in force, maintain the home in reasonable condition, and occupy it as your primary residence. An extended move into assisted living can make the loan due, so understand the occupancy rules precisely.

Ask whether your loan will include a set-aside, an amount carved out of your proceeds to pay taxes and insurance automatically. For some borrowers a set-aside is required after the financial assessment. For many others it is optional and genuinely worth considering, because it converts the most common reverse mortgage failure, unpaid taxes and insurance, into a solved problem.

What alternatives should I compare before deciding?

A reverse mortgage is one tool for one job: staying in your home while converting some of its equity into cash flow or reserves. Before choosing it, price the alternatives honestly. A home equity line of credit costs far less to open but requires monthly payments and can be frozen or reduced. Refinancing to lower your payment keeps things simple if you can qualify and the math works. Selling and downsizing releases the most equity of all, if leaving the home is acceptable to you. And sometimes a family arrangement outperforms every loan product on this list.

The right comparison is not which product is cheapest in isolation. It is which one solves your actual problem for the least cost and risk, for you and for the people who share your finances. That is exactly the conversation counseling exists to force, and it is the one I will have with you directly, including the times the answer is that a reverse mortgage is not the fit.

Staying-in-place options compared