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How a Reverse Mortgage Actually Works

Evergreen Mortgage Advisers · July 2026

If you're 62 or older and own your home outright — or have significant equity — a reverse mortgage lets you convert some of that equity into usable funds without taking on a monthly mortgage payment. It's one of the most misunderstood products in lending, partly because of how it's been marketed over the years. Here's the plain version.

The basic mechanism

A reverse mortgage is still a loan — you're still borrowing against your home, and the loan still needs to be repaid eventually. The difference is timing: instead of you paying the lender every month, the lender pays you (as a lump sum, monthly payments, a line of credit, or some combination), and the loan balance grows over time as interest accrues. The loan becomes due when you sell the home, move out permanently, or pass away.

The most common type: HECM

Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), insured by the FHA. That federal insurance is what makes the product's most important protection possible: a HECM is non-recourse, meaning you (or your heirs) will never owe more than the home is worth, even if the loan balance eventually exceeds the home's value.

The counseling requirement — and why it's a good thing

Before you can move forward with a HECM, HUD requires an independent counseling session with a third-party counselor who has no financial stake in whether you proceed. This isn't a formality to get through — it's a genuine, unbiased opportunity to make sure a reverse mortgage actually fits your situation before you commit to anything. We walk clients through what to expect from this session as part of our process.

What it actually costs

Reverse mortgages carry real costs — origination fees, mortgage insurance premiums, and standard closing costs. In Pennsylvania specifically, the realty transfer tax adds to the picture too — typically around 2% combined (state plus local) in most of the state, though Philadelphia and Pittsburgh run notably higher. See our full transfer tax breakdown for the exact numbers. These costs are usually rolled into the loan rather than paid out of pocket, but they do reduce the equity available to you. A full, itemized breakdown for your specific property is something we'll walk through before you commit to anything.

How it affects your heirs

This is often the biggest concern we hear, and it's a fair one. When the loan becomes due, your heirs typically have the option to repay the loan and keep the home, sell the home and keep any remaining equity after the loan is paid off, or walk away with no financial obligation if the loan balance exceeds the home's value (thanks to that non-recourse protection). It's worth having this conversation with your family before moving forward, not after.

This article is for general educational purposes and isn't a commitment to lend. Reverse mortgage eligibility, terms, and costs vary by borrower and property. Evergreen Mortgage Advisers, LLC — NMLS #2839469. Jennifer Yamamoto, NMLS #259293.