Barbara and Don Hecht drove forty minutes from Appleton on a cold Tuesday in March to sit across from me and ask about a reverse mortgage. He’s seventy-three. She’s seventy-one. They own their house free and clear, a colonial on the west side of town they’ve been in since 1994, now worth somewhere around $310,000. Their income is $3,200 a month: Social Security for both of them, plus a small pension from Don’s years at a paper mill that had been acquired twice and renamed once since he left it.
They’d seen the commercials. The ones with recognizable TV personalities sitting in comfortable kitchens, explaining that you could access your home’s equity without making a monthly payment. Barbara’s sister had called it a scam. A neighbor said it was the best financial decision he’d ever made.
Don wanted the honest version.
The honest version is that it’s neither a scam nor the best decision most people ever make. It’s a financial product with a specific use case, real costs, and real consequences. Whether it makes sense depends entirely on your situation. Here’s what the commercial doesn’t explain.
A reverse mortgage, in the form most people are looking at, is a Home Equity Conversion Mortgage. HECM, pronounced “heck-um.” It’s backed by the Federal Housing Administration, which matters because FHA backing means standardized consumer protections, including mandatory counseling from an HUD-approved housing counselor before you can even apply. The commercials skip this detail, but you have to complete that counseling. It costs around $125 to $175 and takes about an hour, and I’d argue it’s worth several times that.
The basic structure works like this. You borrow against the equity in your home. The lender pays you, rather than the reverse. You don’t make monthly loan payments. Instead, the loan balance grows over time as interest accrues. The loan becomes due when you die, sell the home, or stop living in it as your primary residence. At that point, you or your heirs sell the home, pay off the balance, and keep whatever equity remains.
To qualify, you need to be at least sixty-two. The home must be your primary residence. You need to own it outright or have enough equity to pay off any existing mortgage with the proceeds. And you need to keep paying property taxes, homeowner’s insurance, and basic maintenance. Fall behind on those and the lender can call the loan due.
The cost of a reverse mortgage is the part of the conversation that goes missing most often, so let me put numbers on the table.
On a $310,000 home like the Hechts’, the upfront costs look roughly like this. There’s a mortgage insurance premium charged by FHA: two percent of the appraised value, which is $6,200. There’s an origination fee: lenders can charge up to two percent of the first $200,000 of your home’s value, plus one percent of anything above $200,000, with the total capped by FHA at $6,000. On a $310,000 home, that comes to $5,100 before hitting the cap. Then you have standard closing costs: title search, appraisal, recording fees, and related items, typically $2,000 to $4,000 depending on your state and lender.
Add those together and you’re looking at somewhere between $13,000 and $16,000 in upfront costs before you’ve received a dollar. On top of that, you pay an ongoing annual mortgage insurance premium of 0.5 percent of your outstanding loan balance, plus a monthly servicing fee of up to $35.
I’m not telling you this to frighten you. I’m telling you because when people hear the TV pitch, they imagine free money. There’s no such thing. You’re paying to access your equity. The question is whether that cost makes sense for your situation.
How much can you actually borrow? That depends on your age, current interest rates, and your home’s appraised value. The calculation uses what’s called a principal limit factor, a percentage determined by the youngest eligible borrower’s age and prevailing rates. Older borrowers generally access a higher percentage of their equity; lower interest rates also improve the number.
As a rough guide: for a couple where the youngest borrower is seventy-one, in a rate environment like mid-2026, you might access somewhere between forty-five and fifty-five percent of your home’s appraised value. On a $310,000 home, that’s roughly $140,000 to $170,000.
You can take those funds as a lump sum, as fixed monthly payments for as long as you live in the home, as a line of credit, or some combination of the three. The line of credit option has one feature worth understanding: the unused portion grows over time at the same rate as your loan balance. If you’re treating the HECM as a safety net rather than a regular income source, that growth can give you access to more money later if you wait.
There’s a feature of HECM loans that the commercials actually get right, and it deserves a clear explanation. It’s called the non-recourse clause.
You and your heirs can never owe more than the home is worth at the time of sale. If your loan balance has grown to $280,000 but the house sells for $220,000, the FHA insurance covers the $60,000 difference. The lender gets what the house is worth. Nobody pursues your children for a shortfall. This is a genuine protection and an important one, because you can’t predict how long you’ll live in the home or what the housing market will do in the years ahead.
What the non-recourse clause doesn’t change is the impact on your heirs’ equity. If your home is worth $310,000 and you’ve borrowed $170,000 against it, and then interest accrues for fifteen or twenty years, the loan balance may consume most or all of the remaining equity by the time the house is sold. Your heirs may inherit a house with little equity left over. If leaving the property to your children is part of your estate plan, a reverse mortgage works against that goal unless the home appreciates significantly. It’s worth thinking through how a HECM fits into your broader estate picture before you sign anything.
Now for the part I think is most useful: when this product actually makes sense versus when it doesn’t.
There are situations where a reverse mortgage serves people well. The first is aging in place with significant home equity and limited monthly income. This is the classic case. You have a paid-off house worth $350,000 and a monthly income of $2,400 from Social Security and a small pension. The roof needs replacing. The furnace died. You need a hearing aid and the out-of-pocket cost is $5,800. You have $22,000 in savings you’re afraid to draw down. A reverse mortgage line of credit lets you access the house’s value for exactly these moments, without liquidating investments or disrupting cash flow. It’s a legitimate solution for a real problem.
The second situation involves Social Security timing. Many people retire in their early sixties before they’ve claimed Social Security, or claim early at a reduced benefit. If you’re thinking through what your first years of retirement will actually require financially and haven’t yet claimed, a reverse mortgage line of credit can serve as a bridge. Each year you delay claiming past your full retirement age adds roughly eight percent to your eventual monthly benefit, and delaying from sixty-two to sixty-seven alone closes a significant gap. If the proceeds from a reverse mortgage allow you to wait two or three additional years to claim, the increased lifetime Social Security income might more than offset the HECM fees, particularly if you’re in good health and have reason to think about longevity.
The third situation: home modifications that make staying in place possible. A first-floor bedroom conversion. A roll-in shower. A wheelchair ramp. Grab bars and a stair lift. These modifications can cost $15,000 to $80,000 depending on scope, and they’re often the difference between staying in a home you’ve lived in for thirty years and moving to assisted living much sooner. Using home equity to fund those modifications, rather than liquidating investments or going without, can be a sound exchange for your specific circumstances.
There are also situations where a reverse mortgage is the wrong tool.
You shouldn’t do it if you’re planning to move in the next five to seven years. The upfront costs are substantial and you need time in the home for them to make sense. If you move three years in, you’ve paid $13,000 or more to access equity you could have gotten by selling. The math almost never works on a short time horizon.
You shouldn’t do it if you have qualifying income and can get a home equity line of credit instead. A HELOC is cheaper to set up and you only pay interest on what you draw. The catch is that you must qualify based on income and credit, and you have to make monthly interest payments during the draw period. If your income supports that, a HELOC is usually the better tool. A reverse mortgage exists specifically for people who can’t sustain those monthly payments, not as a preference over the HELOC.
And you shouldn’t do it if leaving the house to your heirs is the primary goal. If the reason you’re staying in the home is so your children can inherit it, and keeping that equity intact is the point, then a product that consumes equity over time is working against your objective. Talk to an estate attorney about the full picture before you talk to any mortgage lender. There may be tools better suited to what you’re actually trying to accomplish.
I want to say one other thing, because the TV commercials have created a category of suspicion that isn’t entirely deserved.
A HECM is an FHA-insured product with standardized rules, mandatory counseling, and real consumer protections. It’s not a scam. The program was misused by lenders in its early years, and there were genuinely predatory practices before HUD strengthened the rules in the 2013 and 2014 reforms. But the HECM as it exists today is substantially better regulated than it was fifteen years ago. The non-recourse protection is real. The counseling requirement is real. The FHA backing is real.
What it isn’t is simple. It isn’t cheap. It isn’t always the right solution. And the people marketing it on television are not fee-only fiduciaries with a legal obligation to put your interests first. They’re marketing it because it generates origination fees. That doesn’t make the product wrong for everyone. It makes the sales channel something you need to factor into how you evaluate what you’re being told.
Before you sign anything, get the HUD counseling. Get a Loan Estimate in writing from at least two lenders. And if the numbers are complicated, sit down with a fee-only planner who has no financial relationship with any mortgage product and let them look at whether this actually fits your situation.
The Hechts thought about it for six weeks. When they came back, Barbara said something I’ve heard in different forms many times: “We’ve decided we don’t want to do it, but we’re not sure we can say exactly why.”
I told her that uncertainty usually has a reason worth finding. When we worked through it, the picture was cleaner than it looked. They had enough in savings. Their income covered their needs, if they were careful. The roof could wait one more season. Barbara’s knee surgery was going to get done because their son had offered to help with the out-of-pocket, and she’d decided to let him. They didn’t need to access the equity in their house to get through the next several years, and leaving that equity untouched gave them more options later, not fewer.
“We’d rather leave it alone,” Don said.
That’s a legitimate financial decision. It was also the right one for the situation they were actually in. The reverse mortgage exists for a different situation, and knowing which situation you’re in is the whole job.
Glenn Suttner is a CFP and the Money and Retirement columnist for the Sunday Evening Review. He has worked in fee-only financial planning for thirty years and holds no financial interest in any fund company, brokerage, advisory firm, or mortgage lender. Questions can be sent to the Sunday Evening Review editorial desk.
