How Reverse Mortgages Work
A reverse mortgage allows homeowners aged 62 and older to convert a portion of their home equity into cash without selling their home or making monthly mortgage payments. Instead of paying a lender, the lender pays you. The loan balance grows over time and becomes due when you permanently leave the home.
The HECM Program
The Home Equity Conversion Mortgage (HECM) is federally insured by the FHA. The 2026 lending limit is $1,249,125. Borrowers typically access 36–71% of their home equity depending on age and rates. Mandatory HUD-approved counseling is required before application. Non-recourse protection means you or your heirs can never owe more than the home's value.
How You Receive Funds
Lump sum (full amount at closing), line of credit (draw as needed — unused portion grows over time), tenure payments (monthly for life), term payments (monthly for a set period), or a combination of these options.
Eligibility Requirements
You must be at least 62, the home must be your primary residence, you generally need 50% or more equity, and you must demonstrate ability to continue paying property taxes, insurance, and maintenance. A financial assessment reviews your payment history and residual income.
Costs to Understand
Upfront costs include a 2% Mortgage Insurance Premium, origination fees up to $6,000, appraisal ($400–$600+), and closing costs. Ongoing costs include 0.5% annual MIP, possible servicing fees, plus your continued responsibility for taxes, insurance, and maintenance.
How It Affects Your Heirs
When the last borrower leaves, heirs have 6 months (with extensions) to sell the home and keep equity above the loan balance, refinance to keep the home, or walk away with zero liability if the balance exceeds value. The home is NOT "taken by the bank."
Important: Reverse mortgage proceeds are tax-free (it's a loan, not income) and do not affect Social Security or Medicare eligibility. However, high upfront costs mean a reverse mortgage makes less sense if you plan to move within a few years.
NC-Specific Protections
North Carolina's Reverse Mortgage Act (Chapter 53, Article 21) requires lenders to post a $100,000 surety bond and provides 90 days' notice before foreclosure proceedings. Both federal and NC law mandate counseling before closing.
When Selling Makes More Sense
Selling and downsizing is often the better choice when maintenance is burdensome, the home is too large, you want to relocate closer to family, preserving inheritance is important, you need more cash than a reverse mortgage provides, or you're considering assisted living.
We can provide a free Comparative Market Analysis to show you exactly what your home is worth — so you can compare the numbers side by side.