Are reverse mortgages a safe option for seniors? Here’s what to know.

The realities of retirement may look a lot different now than you once imagined. While Social Security, pensions and investment withdrawals remain the backbone of retirement funding, issues with rising living costs, longer life expectancies and elevated healthcare expenses have put a lot of weight on the average retiree’s finances. That, in turn, has led many older Americans to search for ways to boost their incomes, and some senior homeowners are now turning to their most valuable asset — their homes — for financial support.

There are a few ways to do that, but one unique that’s option geared directly toward seniors is a reverse mortgage. These specialized loans, which are reserved for those ages 62 and older, allow seniors to convert part of their home equity into cash. And, the appeal is clear: There are no monthly payments to factor in, and this type of borrowing comes with flexible disbursement options and the ability to age in place. Plus, home values are still elevated in many parts of the country, so this may be an opportune time to tap into equity. 

But like most financial tools, there are also complexities and potential pitfalls that come with taking out a reverse mortgage. So, if you’ve been trying to determine whether a reverse mortgage would be safe to pursue, there are a few things you should know before deciding.

Learn more about the reverse mortgage loan options available to you now.

Are reverse mortgages a safe option for seniors? 

Here’s what you need to know about the safety of reverse mortgages in today’s unique economic environment:

Reverse mortgages are federally regulated, but they’re not foolproof

Most reverse mortgages are Home Equity Conversion Mortgages (HECMs), which are insured by the Federal Housing Administration (FHA). This means borrowers have certain protections, such as never owing more than the home’s value when it’s sold. Lenders also must follow strict guidelines for counseling and disclosures. 

Still, regulation doesn’t eliminate all risks related to this type of borrowing. Misunderstanding the fine print, failing to pay property taxes and insurance while you’re still in the home or living outside the home for too long can trigger repayment and even foreclosure.

Find out how to get started with the reverse mortgage borrowing process today.

The safety depends on your long-term housing plans

Reverse mortgages work best for seniors who plan to stay in their homes for the foreseeable future. If you think you might move within a few years, whether to downsize, relocate or transition to assisted living, the upfront costs and loan fees may outweigh the benefits. And, the safety of the loan decreases if it’s used short-term, because you could end up with less equity to put toward your next housing arrangement.

You must still maintain the property and pay certain costs

A common misconception is that a reverse mortgage eliminates all housing-related expenses. In reality, borrowers remain responsible for property taxes, homeowners insurance, HOA dues (if applicable) and maintenance. Falling behind on these obligations can lead to default. For seniors on fixed incomes, these ongoing costs should be carefully factored into the decision to ensure the loan remains safe and sustainable over time.

Interest and fees can eat into your equity

Unlike traditional mortgages, where your balance decreases as you make payments, a reverse mortgage balance grows over time because interest and fees are added to the loan. While you won’t owe the money until you leave the home, the accumulating balance can significantly reduce the amount of equity left for your heirs, or for you if you eventually sell. This makes reverse mortgages less safe for seniors who want to preserve their home as an inheritance.

Scams and bad advice are still out there

Even with federal regulation, seniors remain a target for scams involving reverse mortgages. Some schemes involve contractors pushing unnecessary home repairs financed by a reverse mortgage, while others exploit seniors through fraudulent loan offers. Working only with HUD-approved and trustworthy lenders, attending mandatory counseling and involving a trusted family member or advisor in the process can add an extra layer of protection.

The bottom line

A reverse mortgage can be a safe and effective tool for certain seniors. especially those with significant home equity, a desire to stay put and a need for additional retirement income. But safety isn’t guaranteed, so you’ll want to make sure you understand the obligations, plan for the long term, and work with reputable lenders if you take this route.

If you’re considering one, take the time to weigh it against other options, such as downsizing, taking out a home equity loan or tapping investment accounts. A conversation with a financial advisor who understands your broader retirement picture can help ensure your decision supports both your immediate needs and your future security.