reverse mortgage

A reverse mortgage allows homeowners, usually those 62 or older and maintaining their home as their primary residence, to borrow money using their home as security for the loan. The title for the home remains in the name of the person taking out the reverse mortgage. Even if the value of a house does not exceed the loan, its owner has no obligation to repay the difference when the home is being sold, which is covered by the Federal Housing Administration’s (FHA) insurance under the Home Equity Conversion Mortgage (HECM) program. There are also non-HECM loans.

The reverse mortgage is repaid when the person taking it out vacates the residence of the home, such as the death of the person. Homeowners taking out this kind of mortgage must pay property taxes and insurance, use the house as their principal residence, and keep the house in good condition. (See: What is a reverse mortgage?)

Under a reverse mortgage, the amount of money the homeowner owes to the lender goes up over time. Interest and fees are added to the loan balance each month.

With most reverse mortgages, the homeowner has a three day right to cancel the reverse mortgage for any reason and without penalty after the deal’s completion. This is known as the right of rescission.

[Last reviewed in March of 2025 by the Wex Definitions Team]

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