How does a reverse mortgage work, and what happens to the property afterward?

What a reverse mortgage actually is

A reverse mortgage is a loan secured against your home, like any other mortgage, but structured so that no regular payments are required. Interest accrues on the growing balance instead of being paid month to month, and the loan, plus accumulated interest, becomes due when the home is sold, the owner moves out permanently, or on death.

You remain the registered owner throughout; a reverse mortgage does not transfer title to the lender, and property taxes, insurance and maintenance remain your responsibility.

How the balance grows over time

Because interest is added to the balance rather than paid, the amount owing increases over time rather than shrinking, the opposite of a conventional mortgage. How quickly it grows depends on the rate and how long the loan runs. Most reverse mortgage products cap the total that can ever be owed at a percentage of the home's value, though the specific limit is set by the lender's own contract, not by statute.

Ask for a projection showing the balance at several future dates before deciding.

What happens when the home is sold

When the home is eventually sold, whether by you, your estate, or an attorney under a power of attorney, the reverse mortgage is paid out from the proceeds like any other mortgage, and only the remainder belongs to you or the estate. If the home's value has fallen and the balance exceeds it, most reverse mortgage contracts cap what the lender can recover at the property's value, but this protection comes from the specific contract, not from general law.

Read that clause directly rather than assuming it applies.

What a lawyer checks before you sign

Before a reverse mortgage closes, we confirm what it commits you to, including any early exit charge if you move or sell sooner than expected, how the balance is calculated, and what happens to a spouse who is not on title. Independent legal advice, separate from the lender, is required by most reverse mortgage lenders before closing, precisely because the structure is different from a conventional mortgage.

We do not advise on whether a reverse mortgage is the right financial choice; that is a decision for you, often alongside a financial advisor or accountant.