For many older homeowners, the bulk of their net worth is tied up in their home — an asset they can see and touch but can’t easily spend. A reverse mortgage is one way to change that. It allows eligible homeowners to convert a portion of their home equity into tax-free cash, without selling the home or making monthly mortgage payments. But it’s not the right fit for everyone, and the details matter. Here’s what you need to know.
What Is a Reverse Mortgage?
A reverse mortgage is a loan for homeowners aged 62 or older — and as young as 55 with some proprietary programs. It lets you borrow against the equity in your primary residence. Unlike a traditional mortgage, where you make monthly payments to the lender, a reverse mortgage works in reverse. The lender pays you — or provides a lump sum or line of credit to draw from as needed.
The loan doesn’t come due until one of the following triggering events occurs:
- The borrower sells the home
- The borrower moves out or no longer uses the home as a primary residence
- The borrower passes away
- The borrower fails to meet loan obligations (taxes, insurance, maintenance)
At that point, the loan becomes due. The balance — principal plus accrued interest — is typically settled through the sale of the home. If the home sells for more than the loan balance, the remaining equity goes to the homeowner or their heirs. If the home sells for less, the FHA insurance (on HECM loans) covers the shortfall — meaning heirs are never personally responsible for a balance exceeding the home’s value.
Types of Reverse Mortgages
HECM — Home Equity Conversion Mortgage
The most common type, accounting for the vast majority of reverse mortgages in the U.S. HECMs are insured by the Federal Housing Administration (FHA) and regulated by HUD. They come with borrowing limits — the 2025 HECM lending limit is $1,209,750. Additionally, you must complete counseling with a HUD-approved counselor before you can proceed.
Proprietary Reverse Mortgages
Select private lenders offer these products, which carry no federal government backing. They work well for homeowners with higher-value properties who want to access more equity than the HECM limit allows. They also accommodate borrowers as young as 55.
Single-Purpose Reverse Mortgages
State and local government agencies and non-profits offer these loans. They are the lowest-cost option; however, they cover only one specific, lender-approved purpose — such as home repairs or property tax payments.
How Much Can You Borrow?
The amount you can access depends on four factors: your age, current interest rates, your home’s appraised value, and any outstanding mortgage balance. Older borrowers qualify for a larger share. As a general guideline, borrowers in their early 60s may access 40%–50% of their home’s value. Those in their mid-to-late 70s or 80s typically qualify for 55%–65% or more.
Ways to Receive Your Funds
- Lump sum: All available proceeds at once — ideal for paying off an existing mortgage or a large one-time expense (fixed-rate HECMs only)
- Monthly payments (tenure): Equal payments for as long as you live in the home — a reliable retirement income supplement
- Monthly payments (term): Equal payments for a fixed period you choose
- Line of credit: Draw funds as needed; unused funds in the line grow over time at the loan’s interest rate — a powerful and often overlooked benefit
- Combination: Any mix of the above for maximum flexibility
Costs and Fees
Reverse mortgages come with upfront and ongoing costs that reduce the equity remaining in the home over time. Key costs include:
- Origination fee: Capped by HUD at 2% of the first $200,000 of home value plus 1% above that, maximum $6,000
- Upfront MIP: 2% of the home’s appraised value (or HECM lending limit, whichever is less) at closing
- Annual MIP: 0.5% of the outstanding loan balance each year
- Third-party closing costs: Appraisal, title, recording fees, and standard closing costs
- Ongoing interest: Accrues on the outstanding balance and compounds over time — the longer the loan is outstanding, the more the balance grows
You can roll most costs into the loan, meaning no out-of-pocket expense at closing. However, doing so reduces your available equity over time.
Ongoing Obligations — What Borrowers Must Continue to Do
A reverse mortgage doesn’t eliminate all housing responsibilities. To keep the loan in good standing, borrowers must meet three key obligations. First, pay property taxes and homeowner’s insurance on time. Second, maintain the property in good condition. Third, use the home as your primary residence — typically defined as living there at least 6 months per year. Failing to meet these requirements can trigger default and force repayment.
Who Is a Reverse Mortgage Right For?
- You plan to stay in the home long-term with no intention of selling or moving
- You need to supplement retirement income or cover healthcare costs and have significant home equity
- You want to eliminate an existing mortgage payment to reduce monthly cash flow pressure
- You want to establish a growing line of credit as a financial safety net
- Your heirs have agreed that your quality of life now takes priority over preserving every dollar of equity
When a Reverse Mortgage May Not Be the Best Choice
- You plan to move within the next few years — upfront costs may not be worth it for a short horizon
- Preserving the home’s full equity for your heirs is a top priority
- You have difficulty keeping up with property taxes or insurance
- A HELOC or home equity loan could meet your needs at a lower overall cost
Reverse Mortgages and South Florida Homeowners
For homeowners in Cooper City, Davie, Pembroke Pines, Weston, and throughout Broward County, the South Florida real estate appreciation over the past decade has created substantial home equity — often the largest single asset in a retiree’s portfolio. A reverse mortgage can be a powerful way to unlock that equity without disrupting the lifestyle, community, or home you’ve built.
At Royal Capital Solutions, we’re licensed to originate reverse mortgages in Florida and work with multiple lenders to find the most competitive terms for your situation. Omar Abdel and his team take the time to walk through all your options — including whether a reverse mortgage, HELOC, or cash-out refinance better fits your goals — so you can make a confident, informed decision.
Ready to Explore Your Options?
Call or text Omar Abdel at (954) 625-5736, or visit royalcapitalsolution.com/contact to schedule a no-obligation reverse mortgage consultation today.