 TITLE: What Is the Downside of a Reverse Mortgage? CONTENT: As its name suggests, a reverse mortgage is the opposite of a traditional mortgage loan. With a reverse mortgage, you don't borrow money to buy a house; rather, you tap into the equity of your home to take out a loan. A reverse mortgage is meant for homeowners who have paid off their mortgage or who have accumulated a lot of home equity.\nReverse mortgages frequently are marketed to retirement-age homeowners who want more money to cover living expenses but still want to hang on to their homes. One of the upsides of a reverse mortgage is that lenders characteristically don't impose income or credit requirements.\nProceeds from a reverse mortgage loan are usually tax-free, and not a penny of the loan needs to be paid back if the borrower stays in the home, pays property taxes and homeowners insurance, and covers maintenance expenses. That changes, though, if you sell or move out of the home, or if you (or in certain cases, your spouse) die. Those situations trigger the requirement for you, your spouse or your estate to repay the loan.\nThree kinds of reverse mortgages are available:\n1.  Single-purpose reverse mortgage: These loans, available from government agencies and nonprofit groups, are designed for just one purpose outlined by the lender. For instance, someone might use proceeds from a single-purpose reverse mortgage to tackle a home improvement project or pay property taxes. They're the lowest-cost option among reverse mortgages.\n2.  Proprietary reverse mortgage: Proprietary reverse mortgages, available from private lenders, offer more flexibility than single-purpose reverse mortgages. Unlike single-purpose reverse mortgages, proprietary reverse mortgages usually don't come with restrictions on how you can spend the proceeds. This option can be especially attractive to owners whose homes carry high values and who want to borrow a substantial sum of money.\n3.  Home Equity Conversion Mortgage (HECM). An HECM, insured by the Federal Housing Administration (FHA), is the most common kind of reverse mortgage. As of 2020, the HECM borrowing limit was $765,600. Although proceeds from an HECM can be used for any purpose, some homeowners might not qualify due to certain restrictions. These loans are available only to homeowners who are at least 62 years old. END