A reverse mortgage flips the traditional mortgage on its head: instead of paying the lender each month, the lender pays you. The loan balance grows over time as interest accrues, and it is repaid when you sell the home, move out permanently, or pass away. The most common type is the Home Equity Conversion Mortgage, or HECM, which is insured by the Federal Housing Administration. Because the FHA insurance guarantees you will never owe more than the home is worth, HECMs dominate the legitimate market.

Reverse mortgage companies act as the originators and often the servicers of these loans. They evaluate your age, home value, and current mortgage balance to calculate how much you can borrow, with older borrowers and higher equity unlocking larger amounts. You continue to own your home and must keep paying property taxes, homeowner's insurance, and maintenance. The company's job is to structure the payout, handle the paperwork, and service the loan over its life.

Payout options give you real flexibility in how you use the money. A lump sum works for paying off an existing mortgage or covering a large expense, while monthly tenure payments supplement retirement income for as long as you live in the home. A growing line of credit is popular with planners, since the unused portion can increase over time and serve as a standby reserve. Many borrowers combine options — for example, paying off a mortgage with a lump sum and keeping the rest as a credit line.

Costs are where reverse mortgage companies differ most, so compare them carefully. Expect an origination fee, an upfront mortgage insurance premium, closing costs, and a servicing fee, plus the ongoing interest rate on the growing balance. A slightly higher payout offer can be a worse deal if it comes with steep fees, so ask every lender for a side-by-side breakdown of total costs. Fixed rates are available for lump-sum payouts, while adjustable rates typically apply to monthly payments and credit lines.

Consumer protections are built into the process, and legitimate companies follow them. Federal rules require you to complete a counseling session with a HUD-approved counselor before the loan closes, which ensures you understand the tradeoffs. Reputable lenders will never rush you, discourage the counseling session, or push you to invest the proceeds in their other products. Check that any company you consider is FHA-approved and has a clean record with regulators and the Better Business Bureau.

Finally, be honest about whether a reverse mortgage fits your situation at all. It can be a lifeline for house-rich, cash-poor retirees who want to age in place, but it reduces the inheritance you leave behind and compounds costs over time. If you plan to move within a few years, the upfront fees rarely pay off; downsizing or a home equity line of credit may serve you better. The reverse mortgage companies worth your business are the transparent, patient ones — and the best choice starts with the required counseling session, not a sales pitch.