You typically do not make monthly payments on a reverse mortgage — the lender pays you instead

A reverse mortgage lets you borrow against your home's equity, but the loan works backward from a traditional mortgage. Instead of you paying the lender each month, the lender sends money to you. You do not owe monthly payments while you live in the home. The debt grows over time as interest and fees accumulate, and you repay the full amount — principal, interest, and costs — when you sell the house, move out permanently, or pass away.

However, you still have real costs during the life of the loan. These are not monthly payments to the lender, but they are money that leaves your pocket or reduces the equity you will eventually receive. Understanding what you actually pay, and when, prevents surprises later.

Key Takeaways

  • Reverse mortgages do not require monthly payments to the lender while you live in your home — the opposite of a standard mortgage.
  • You must still pay property taxes, homeowners insurance, and home maintenance costs out of your own funds, or the loan can be called due when ready.
  • The lender charges an upfront origination fee (typically 0% to 2% of your home value) and an ongoing mortgage insurance premium that gets added to your loan balance each month.
  • Interest accrues monthly on the total amount you have borrowed, compounding over time and reducing the equity your heirs will inherit.
  • The full loan balance becomes due when you sell, move out for more than 12 months, or pass away — at that point your home is usually sold to repay it.

What costs are added to your reverse mortgage balance each month

Even though you do not write a check to the lender each month, costs still accumulate. The most significant is interest, which accrues daily on whatever amount you have borrowed so far. If you take out $100,000 in the first year, interest begins accruing on that $100,000 when ready. If you draw another $50,000 in year two, interest then accrues on $150,000. Over 10 or 15 years, this compounds substantially.

The lender also charges a mortgage insurance premium (MIP), which is added to your loan balance monthly rather than paid out of pocket. For a Home Equity Conversion Mortgage (HECM), the most common type, this premium is typically 0.55% of your loan balance per year for most borrowers, though it can be higher depending on how much you borrow relative to your home's value. This insurance protects the lender if the home sells for less than the loan balance — but you or your heirs pay for it through a larger debt.

You may also have paid an origination fee upfront when the loan closed, usually between 0% and 2% of your home's value. This was either deducted from your first draw or added to your loan balance. Some lenders charge a flat fee instead; amounts vary widely.

Property taxes, insurance, and maintenance are your responsibility

The lender does not pay these, and you cannot skip them. You must continue paying your property taxes and homeowners insurance out of your own money for as long as you own the home. If you fall behind on either, the lender can declare the loan in default and demand when ready repayment — which usually forces a home sale.

You are also responsible for maintaining the home in reasonable condition. The lender may require an inspection and can demand repairs if the property deteriorates significantly. Again, failure to maintain can trigger default. These are not optional costs; they are conditions of keeping the loan in good standing.

Some borrowers use part of the money they receive from the reverse mortgage to cover these ongoing costs, which is a common strategy. However, that money still comes from your home's equity and still accrues interest, so it is not free.

When the full loan balance becomes due

The reverse mortgage does not stay open indefinitely. The loan matures — meaning the full balance is due — when one of three things happens: you sell the home, you move out permanently (typically defined as being away for more than 12 consecutive months), or you pass away.

When the loan matures, the home is usually sold to repay the lender. The lender takes the full loan balance (principal plus all accrued interest and insurance premiums), and any remaining equity goes to you or your heirs. If the home sells for less than the loan balance, the HECM insurance covers the difference, and your heirs owe nothing more. If it sells for more, your heirs receive the surplus.

This is why the timing of a reverse mortgage matters. If you take one out at 65 and live to 95, the debt will have grown substantially. If you move into assisted living or a nursing home for more than a year, the loan becomes due even if you have not sold the house.

How to estimate your total cost over time

The lender must provide you with a Closing Disclosure before you sign, which shows the origination fee, the initial interest rate, and the mortgage insurance premium. However, this document does not project your total cost, because that depends on how much you borrow, how long you keep the loan, and what interest rates do.

A rough way to think about it: if you borrow $100,000 at 6% interest with a 0.55% annual insurance premium, your loan balance grows by roughly 6.55% per year before you draw any additional funds. After 10 years, that $100,000 could grow to around $190,000 if you do not draw more. After 20 years, it could approach $360,000. These are approximations — actual numbers depend on the specific rate, the insurance premium, and your draw schedule.

The Financial Assessment Tool on the HUD website (the Department of Housing and Urban Development oversees reverse mortgages) can help you model different scenarios. You enter your age, home value, and expected draw amount, and it shows you projected balances at different time horizons.

The difference between a reverse mortgage and a home equity line of credit

A home equity line of credit (HELOC) is sometimes confused with a reverse mortgage, but they work very differently. With a HELOC, you borrow against your home's equity and make monthly payments on what you owe, just like a traditional mortgage. You pay interest on the balance, and the debt decreases as you pay it down. A HELOC is available to borrowers of any age.

A reverse mortgage requires you to be at least 62 years old and does not require monthly payments. The debt grows instead of shrinking. A HELOC is better if you can afford monthly payments and want to pay down the debt over time. A reverse mortgage is better if you need ongoing income and cannot afford monthly payments, but you are willing to reduce your home equity and your heirs' inheritance.

What happens if you cannot pay property taxes or insurance

If you fall behind on property taxes or homeowners insurance, the lender will likely declare the loan in default. This does not mean you have to repay the entire balance when ready in all cases, but it puts you at serious risk. Some lenders will pay the overdue taxes or insurance on your behalf and add that amount to your loan balance, but they are not required to do this.

The safest approach is to set aside money from your reverse mortgage draws specifically for these costs, or to arrange automatic payments from your bank account. Some borrowers use a set-aside account — the lender holds back a portion of the loan proceeds to cover future taxes and insurance — though this reduces the amount available to you upfront.

Frequently Asked Questions

Can I pay down a reverse mortgage early to reduce interest?

Yes. You can make voluntary payments toward the principal at any time without penalty. However, most borrowers do not, because the money they received from the reverse mortgage is often their primary income source. Paying it back defeats the purpose of taking it out. If you have other funds available and want to reduce the debt, your lender can show you how to do it.

What if I want to stay in my home after the loan matures?

If you reach the point where the loan is due — usually because you have moved out or passed away — you or your heirs can refinance the reverse mortgage into a new one, or repay it with other funds. However, if the home has declined in value or you have borrowed heavily, refinancing may not be possible. Planning for this scenario early is important.

Does a reverse mortgage affect my Social Security or Medicare?

Reverse mortgage funds are considered loan proceeds, not income, so they do not affect Social Security payments. However, they can affect Medicaid and Supplemental Security Income (SSI) if you receive those benefits. Consult with a benefits counselor before taking out a reverse mortgage if you rely on means-tested programs.

Who should I contact if I have questions about my reverse mortgage costs?

Your lender's loan servicer handles day-to-day questions and can explain your current balance, interest rate, and insurance premium. For independent guidance, contact the National Foundation for Credit Counseling (NFCC) or a HUD-approved reverse mortgage counselor — HUD requires counseling before you close, and you can ask the counselor to review your specific loan terms.