What a Reverse Mortgage Is
A reverse mortgage is a loan secured by a home that, instead of requiring monthly payments, lets the homeowner draw cash from their equity. Interest accrues on the balance. The loan comes due when the borrower sells, moves out permanently, or passes away.
The most common product is the federally insured Home Equity Conversion Mortgage (HECM), available through HUD-approved lenders. Eligibility: borrower is 62 or older, lives in the home as primary residence, and has substantial equity (typically at least 50%).
How Much You Can Access
The available proceeds depend on the borrower's age, current interest rates, and the home's appraised value (up to a federal lending limit, around $1.15M in 2024).
As a rough rule, you can access 40% to 60% of the home's value. A 75-year-old with a $700,000 paid-off Seattle home might draw $300,000–$400,000.
You can take it as a lump sum, a monthly draw, a line of credit, or a combination. The line-of-credit option is often the most flexible for care funding because the unused portion grows over time.
Using Proceeds for AFH Costs
If one spouse stays in the home and the other moves to an AFH, a reverse mortgage can fund AFH costs — typically $4,000–$8,000/month in Washington — without depleting savings or forcing a home sale.
It can also bridge the time between when care is needed and when other resources (LTC insurance triggers, Medicaid approval, sale of other assets) become available.
What Happens to the Home When the Borrower Leaves
Here's the part families need to understand clearly. If the borrower moves out of the home permanently — including moving to an AFH long-term — the loan becomes due within 12 months. The home must be sold (or the loan refinanced or paid off by heirs) within that window.
If only one spouse is the borrower and the other was a non-borrowing spouse, recent rules allow the non-borrowing spouse to remain in the home. But if both move out, the clock starts. A single person who moves to an AFH cannot keep the reverse mortgage open.
When It Makes Sense — and When It Doesn't
Makes sense: the borrower plans to remain in the home or expects to return; the family wants bridge funding while waiting for other resources; heirs aren't expecting the home as inheritance; or one spouse stays home while the other moves to care.
Doesn't make sense: the borrower is likely to move permanently within a year or two; the family expects to keep the home for heirs; other liquid assets are available; or the borrower struggles with property taxes, insurance, or maintenance (the loan can come due if those aren't paid).
Risks and the Mandatory Counseling Step
HUD requires every HECM borrower to complete independent counseling with a HUD-approved housing counseling agency before closing. This isn't a formality. The counselor walks through alternatives, costs, and risks.
Real risks: interest accumulates over time, eating away at the remaining equity; if heirs want to keep the home they must pay off the loan; the home must remain primary residence (long hospital stays or AFH moves can trigger the loan); and reverse mortgages have higher upfront costs than typical mortgages. AFH cost reference →
Frequently Asked Questions
Q: Will my parents lose the house? A: Not while they live there as a primary residence and stay current on taxes, insurance, and maintenance.
Q: Does the loan affect Medicaid eligibility? A: Loan proceeds can count as assets once received — talk to an elder law attorney before drawing large lump sums.
Q: What if my parent dies with a balance? A: Heirs can sell the home and keep any equity above the loan balance, or refinance to keep the house.
Q: How do I find a reputable lender? A: Start with the HUD list of approved HECM counselors and lenders. Avoid TV-ad mortgage outfits.