Second, the heirs owe the balance. When the borrower dies, the heirs must repay the loan (usually by selling the home) within 6 to 12 months, or the lender forecloses. The catch is that the loan balance has grown over time because of the interest compounding, which means the heirs may get less equity than expected. On a 300,000 dollar home with a 150,000 dollar initial reverse mortgage at 6.5 percent interest, the loan balance after 15 years is 380,000 dollars, which is more than the initial loan. The right way to plan is to leave clear instructions in the will and to discuss the options with the heirs before the death.
Third, the reverse mortgage reduces the estate. The loan balance grows over time, which means less equity for the heirs. On a 300,000 dollar home with a 150,000 dollar reverse mortgage, the heirs start with 150,000 dollars in equity; after 15 years, the equity is negative if the home value stays flat. Fourth, the interest compounds. The loan balance grows at compound interest, which means the balance grows faster over time. The right way to see the long-term cost is to use the National Council on Aging reverse mortgage calculator at ncoa.org, which shows the projected loan balance over 5, 10, 15, and 20 years.
Fifth, the reverse mortgage is hard to leave the home. If the borrower wants to move to a smaller home or a retirement community within 5 to 10 years, the loan must be repaid (usually by selling the current home), which incurs closing costs and moving costs. The right way to plan is to commit to staying in the home for life before taking the reverse mortgage.
Who should and who should not take a reverse mortgage
Three types of homeowners should take a reverse mortgage in 2026. First, homeowners aged 70 and older with a paid-off or nearly paid-off home who plan to stay in the home for life and who have exhausted other retirement income sources. Second, homeowners who need to pay for in-home care, medical expenses, or long-term care insurance. Third, homeowners who want to preserve their other retirement assets (401k, IRA, brokerage) and would rather tap the home equity than the investment portfolio in a down market.
Three types of homeowners should not take a reverse mortgage. First, homeowners who plan to move within 5 to 10 years; the upfront fees will not be recouped. Second, homeowners who want to leave the home to heirs; the loan balance will eat into the estate. Third, homeowners who have other retirement income sources (Social Security, pension, 401k, brokerage); the right approach is to use those sources first and reserve the home equity for later in retirement.
The right way to decide is to talk to a HUD-approved reverse mortgage counselor at 1-800-569-4287 (free), who will review the financial situation, the home equity, the retirement income, and the goals. The counselor will recommend the reverse mortgage, an alternative (HELOC, downsizing, cash-out refinance), or a combination. The right way to shop is to contact 3 to 5 lenders, ask for the Loan Estimate (the standardized 3-page form), compare the fees, and pick the lender with the lowest total cost.
What the math actually looks like
The math of a reverse mortgage in 2026 on a 300,000 dollar home owned by a 70-year-old at a 6.5 percent interest rate: the lump sum is 120,000 to 150,000 dollars. The origination fee is 6,000 to 9,000 dollars (2 to 3 percent of the home value). The upfront mortgage insurance premium is 6,000 dollars (2 percent of the home value). The annual mortgage insurance premium is 1,500 dollars (0.5 percent of the loan balance per year). The interest on the loan is 7,800 to 9,750 dollars in the first year, and grows over time as the balance grows.
The total cost over 10 years is 30,000 to 50,000 dollars in fees and interest. The total cost over 15 years is 70,000 to 100,000 dollars. The total cost over 20 years is 120,000 to 180,000 dollars. The right way to compare to alternatives is to compute the total cost of a HELOC at 6.5 percent (lower origination, higher monthly payment), a cash-out refinance at 6.0 percent (lower origination, higher monthly payment), and downsizing to a smaller home (eliminates the home equity, but adds the cost of the smaller home and the moving expenses).
The right way to think about the math is that the reverse mortgage is the most expensive way to access the home equity, but it is the only way to access the home equity without a monthly payment and without selling the home. The right way to decide is to compare the total cost of the reverse mortgage to the alternative uses of the home equity (downsizing, HELOC, cash-out refinance) and to the alternative uses of other retirement assets (401k, IRA, brokerage).
The total cost in 2026 for a reverse mortgage is 30,000 to 50,000 dollars over 10 years on a 300,000 dollar home. The right way to budget is to assume the loan will be outstanding for 10 to 15 years, to add up the fees and the interest, and to compare to the alternative uses of the home equity. The right way to leave a legacy is to discuss the reverse mortgage with the heirs before taking it, to leave clear instructions in the will, and to consider a hybrid approach (HELOC for the first 5 years, reverse mortgage after age 75) to minimize the total cost.
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Fazlur Rahman
