Language:English · Español →
Reverse Mortgages: The Good and the Bad — 2026 Guide for Rhode Island Homeowners
TL;DR
A reverse mortgage lets a homeowner age 62 or older turn part of their home equity into cash without a monthly mortgage payment, while keeping the title and living in the home. The upside is real: no required monthly payment, generally tax-free proceeds, and federal protections so you never owe more than the home is worth. The trade-offs are just as real: the balance grows over time, upfront costs are meaningful, and it reduces the equity you or your heirs keep. It is a good fit for some homeowners and the wrong move for others. Below is the honest picture. (I am a REALTOR®, not a mortgage lender — always confirm numbers with a HUD-approved counselor and a licensed reverse mortgage lender.)
Prefer to listen? Play the audio guide:
What a reverse mortgage actually is
A reverse mortgage is a loan that lets you borrow against the equity in your home. Instead of you paying the lender each month, the lender pays you — as a lump sum, a line of credit, monthly payments, or a mix. You keep the title and continue living in the home. The balance is repaid later, when the last borrower sells, moves out permanently, or passes away.
The most common type in the United States is the Home Equity Conversion Mortgage, or HECM. It is insured by the Federal Housing Administration (FHA) and comes with consumer protections that private loans may not. When people say "reverse mortgage," they usually mean a HECM.
You still own the home. You are still responsible for property taxes, homeowner’s insurance, any HOA dues, and basic upkeep. Falling behind on those can put the loan into default, so a reverse mortgage does not remove every housing cost — it removes the monthly principal-and-interest payment.
The Good
No required monthly mortgage payment. This is the headline benefit. For a homeowner on a fixed income, freeing up cash flow each month can be the difference between staying comfortably in the home and feeling squeezed.
The money is generally tax-free. Proceeds are loan advances, not income, so they typically are not taxed. Confirm your situation with a tax professional.
You keep the title and stay in your home. You are not signing your house over to a bank. You remain the owner as long as it stays your primary residence and you keep up taxes, insurance, and maintenance.
Flexible ways to receive the money. With an adjustable-rate HECM you can take a lump sum, a line of credit, monthly payments for life, payments for a set period, or a combination. The unused line of credit grows over time.
It is a non-recourse loan. Neither you nor your heirs will ever owe more than the home is worth. If the balance ends up higher than the sale price, FHA insurance covers the difference; heirs repay the lesser of the balance or 95% of the current appraised value.
Protection for a younger spouse. A spouse under 62 can be listed as an eligible non-borrowing spouse and, under HUD rules, may stay in the home for life even if the borrowing spouse passes away first.
It can be used to buy a home, too. A HECM for Purchase lets a qualifying buyer 62 or older purchase a new primary residence and take on a reverse mortgage in one transaction — useful for downsizing without a monthly payment. This is where I can help directly on the real estate side.
The Bad
The loan balance grows instead of shrinks. Because you are not making payments, interest and fees are added to the balance every month. Over time you owe more, and the equity left in the home shrinks. This is the single most important trade-off to understand.
Upfront costs are significant. A HECM carries an initial FHA mortgage insurance premium of 2% of the home’s value, an origination fee (2% of the first $200,000 plus 1% above that, floor $2,500, ceiling $6,000), plus appraisal, title, and closing costs, and an annual 0.5% mortgage insurance premium. These can be financed, but they still reduce your net proceeds.
It reduces what you leave behind. Less remaining equity means less for heirs. Families who plan to keep the home need a plan to repay the balance — usually by refinancing or selling.
You still have to pay taxes, insurance, and upkeep. Falling behind on those is a default trigger and, in a worst case, can lead to foreclosure.
It can affect need-based benefits. Proceeds generally do not affect Social Security or Medicare, but can affect Medicaid or SSI if you hold the cash rather than spend it in the same month.
It is not ideal if you plan to move soon. Because of the upfront costs, a reverse mortgage rarely makes sense if you expect to sell or relocate within a few years.
Who it tends to fit — and who it does not
It tends to fit a homeowner 62 or older with substantial equity who wants to stay in their home long-term and needs steadier monthly cash flow. It tends not to fit someone who plans to move within a few years, wants to preserve maximum equity for heirs, or is already struggling to keep up with taxes and insurance.
There is no single right answer. The honest test is your timeline, your equity, your cash-flow needs, and your plans for the home. That is exactly the kind of trade-off conversation I have with clients every week.
Where I fit in
I am a REALTOR®, not a reverse mortgage lender, so I do not originate these loans — but I can help you think through whether keeping the home, selling, or a HECM for Purchase makes the most sense for your situation, and I can connect you with HUD-approved counselors and licensed reverse mortgage lenders I trust. If the math points toward selling or buying instead, that is the part I handle directly. For the step-by-step on qualifying, how much you can borrow, age rules, and the process, see the companion post: Reverse Mortgage for Seniors — A Real-World Case Scenario.
Frequently Asked Questions
What is the minimum age for a reverse mortgage?
For a HECM, the youngest borrower must be at least 62. Some private "jumbo" reverse mortgage programs start at 55, but those are not FHA-insured and carry different terms.
Do I still own my home with a reverse mortgage?
Yes. You keep the title and live in the home. You remain responsible for property taxes, insurance, HOA dues, and maintenance, and the loan is repaid when the last borrower sells, moves out permanently, or passes away.
Will my heirs owe money if the loan balance is higher than the home value?
No. A HECM is non-recourse. Your heirs will never owe more than the home is worth — they repay the lesser of the full balance or 95% of the current appraised value, and FHA insurance covers any shortfall.
Can I lose my home with a reverse mortgage?
You can, if you stop paying property taxes or insurance, let the home fall into disrepair, or move out for more than 12 consecutive months. As long as you meet those obligations and keep it as your primary residence, you can stay.
Is a reverse mortgage a good idea?
It depends on your timeline, equity, and goals. It can be a strong tool for a homeowner who wants to stay put long-term and needs monthly cash flow, and a poor fit for someone planning to move soon or hoping to preserve maximum equity for heirs. Talk it through before deciding — I am happy to help you weigh it.
By Alexander Parmenidez, Broker Associate | REALTOR®, Coldwell Banker Realty, licensed in RI, CT & MA. Wondering whether staying, selling, or a HECM for Purchase fits your situation? Call or text me anytime at 401-426-4857 · alexparmenidez.realtor.
This article is educational and not financial, tax, or legal advice. Reverse mortgage figures reflect 2026 FHA/HUD program terms and can change. Because a reverse mortgage affects your home’s title, your heirs, and can interact with estate planning and benefits like Medicaid, it is wise to confirm your specifics with a HUD-approved housing counselor, a licensed reverse mortgage lender, and an elder law or estate-planning attorney about your options.
