Reverse mortgages and the house: what to know before using home equity for care

What a reverse mortgage is

A reverse mortgage is a loan for homeowners 62 and older, secured by the home, that pays the homeowner instead of the other way around. The most common type is the federally insured Home Equity Conversion Mortgage (HECM). No monthly mortgage payment is due, but the balance grows over time, and the loan generally must be repaid when the last borrower sells, moves out, or dies. The Consumer Financial Protection Bureau's guide is the plain-English source.

The obligations that do not go away

The borrower must keep paying property taxes and homeowner's insurance, keep the house in repair, and live in it as their main home. Falling behind on any of these can make the loan due. Families who take over a parent's bills need to know these are not optional.

The rule that matters for care

If the borrower is away from the home for more than 12 consecutive months in a hospital, rehab, nursing home, or assisted living, and no co-borrower or eligible non-borrowing spouse lives there, the home is no longer the principal residence and the loan becomes due, usually by selling the house. A spouse who is a co-borrower can stay. A spouse who is not on the loan may or may not qualify to stay under HUD's rules for eligible non-borrowing spouses; the CFPB says qualifying can be difficult and suggests an attorney or a HUD-approved housing counselor.

Counseling is required, and useful

A HECM requires a session with a HUD-approved housing counselor before closing. Treat it as a real meeting, not a formality: ask what the loan would cost over ten years, what happens if your parent needs a nursing home, and what the heirs' options are at the end.

Other ways to use the house

• Sell and use the proceeds. Simple, and often the right answer when nobody will live in the house again.
• Rent it. Income each month, and the house stays in the family, but someone has to manage it.
• A home equity loan or line of credit. Requires monthly payments and income to qualify.
• Keep it and plan around Medicaid. The home is often exempt while a spouse or certain relatives live in it, but Medicaid has an equity limit ($1,130,000 in New York for 2026) and can seek repayment from the estate later. This is squarely an elder law attorney question.

Questions before signing anything

• Is my parent likely to need a facility in the next few years? If so, what happens to the loan?
• Is the spouse on the loan as a co-borrower?
• What are the total fees and the interest rate, and how fast does the balance grow?
• Would this affect Medicaid or SSI eligibility later?
• Who is the HUD-approved counselor, and can a family member attend?