What is a Reverse Mortgage? And Other Frequently Asked Questions
A HECM reverse mortgage is still a mortgage — just with one important difference.
With a traditional mortgage, you make monthly payments and your loan balance goes down over time. With a reverse mortgage, no monthly principal-and-interest payments are required as long as you live in the home as your primary residence and meet basic obligations like property taxes, insurance, and maintenance.
Instead of writing a check each month, the interest and any loan advances are added to the loan balance over time.
You continue to own your home, just like with any other mortgage. And if you sell the home in the future, the reverse mortgage is paid off first — any remaining equity belongs to you or your heirs.
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How Can a Reverse Mortgage Be Used?
One of the most misunderstood aspects of a reverse mortgage is that there’s only “one way” to use it. In reality, a HECM offers several options — and they can often be combined or adjusted over time.
Lump Sum (Typically at Closing)
Some homeowners choose to take a lump sum at closing. This is often used to:
Pay off an existing mortgage
Eliminate other debt
Cover medical expenses
The funds can be used for any purpose. Once taken, they become part of the loan balance.
Monthly Income Payments
A reverse mortgage can provide monthly loan advances that are generally not considered taxable income.
These payments can be structured to:
Continue for as long as both borrowers live in the home
Last for a specific period of time (for example, to delay Social Security benefits)
Cover a known expense, such as long-term care
The goal here isn’t “more income at any cost,” but predictable cash flow that supports a broader plan.
A Growing Line of Credit
Another option is establishing a line of credit that can remain available over time and may increase based on the loan’s terms, not the home’s market value.
This line of credit is highly flexible:
Funds can be accessed when needed
There are no penalties for taking money out
There are no penalties for repayment
When coordinated properly with a retirement plan, this approach can help provide income flexibility and security during market downturns, when other assets may be under pressure.
Purchasing a Home with a Reverse Mortgage
A reverse mortgage can also be used to buy a new primary residence.
With a HECM for Purchase, eligible buyers make a larger down payment (often around 45–55%, depending on age, interest rates, and other factors) and then purchase the home without a required monthly mortgage payment.
This option is often used by retirees who want to relocate, downsize, or move closer to family — without adding a new monthly obligation.
Don Graves: President of the HECM Institute for Housing Wealth Studies, and Professor of Retirement Income at The American College of Financial Services. He is considered one of the nation’s leading educators on HECM Reverse Mortgages in Retirement Income Planning.
Steve Savant: Syndicated financial columnist, Host of the consumer talk show Right on the Money, and News Anchor for On the Money News.
This video is a section of a broadcast of the consumer talk show Right on the Money.
Neither of the individuals in this video are representatives of Landmark Mortgage Planners in any capacity.
What Can a Reverse Mortgage Do For Me?
Knowledge is power and at Landmark Reverse Mortgage Planners we provide the knowledge for FREE. Take 2 minutes to answer just a few simple questions to determine if a reverse mortgage is right for you...
