A HECM is a first-lien loan, so it pays off any existing mortgage at closing and replaces that monthly payment with a balance that grows (24 CFR §206.27); keeping the forward mortgage means continuing the payment and continuing to build equity.
A homeowner 62 or older who still has a forward mortgage has a choice that gets framed too narrowly. The question is not only "should I get a reverse mortgage" but "should I use one to pay off the mortgage I have, or keep paying it." A HECM is a first-lien product, so it pays off any existing mortgage at closing and replaces that monthly payment with a growing loan balance. Keeping the existing mortgage means continuing the payment and continuing to build equity. The matrix compares the two paths, each cell sourced.
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How do a reverse mortgage and keeping your mortgage compare side by side?
| Dimension | Take a HECM (pays off the existing mortgage) | Keep the existing mortgage | |---|---|---| | The existing mortgage | Paid off at closing, usually out of HECM proceeds (HUD Handbook 4000.1 §II.B) | Stays in place; the borrower continues the scheduled payments | | Required monthly mortgage payment | None while the borrower occupies the home and stays current on taxes and insurance (24 CFR §206.27) | The existing principal-and-interest payment continues | | What happens to the balance over time | The HECM balance grows as interest and MIP accrue | The forward-mortgage balance shrinks as the borrower amortizes it | | Effect on monthly cash flow | Frees up the cash that went to the mortgage payment | No change; the payment continues to claim that cash | | Up-front cost | A HECM closing, typically 3–6% of home value; origination capped at $6,000 (24 CFR §206.31) | None; the borrower is not transacting | | Mortgage insurance | 2% upfront FHA MIP + 0.5% annual MIP on the HECM balance (24 CFR §206.105) | Whatever the existing loan already carries, if anything | | Equity over time | Equity declines as the HECM balance grows | Equity rises as the forward mortgage is paid down | | Effect on heirs | The HECM balance, capped by non-recourse at 95% of value, comes out of sale proceeds (24 CFR §206.125) | The home passes with whatever equity has been built, minus the remaining mortgage | | Typical use case | A borrower whose monthly mortgage payment is straining the budget | A borrower who can comfortably carry the payment and wants to keep building equity |
Estimatehow this number is calculatedWhen does keeping the mortgage fit?
Keeping the existing mortgage fits a borrower who can comfortably make the payment and wants to keep building equity. Every payment reduces the balance, so the borrower owes less and the heirs inherit more over time. There is no transaction, so there is no closing cost and no new mortgage insurance. For a borrower whose retirement income covers the payment without strain, there is often no reason to disturb a forward mortgage, particularly one with a low rate locked in years ago.
When does a reverse mortgage fit?
A HECM fits a borrower 62 or older whose monthly mortgage payment is the strain on the budget. Because a HECM is a first-lien product, it pays the existing mortgage off at closing, and the borrower's required monthly mortgage payment goes away. That can free a meaningful amount of monthly cash flow. The cost is real and works in the opposite direction from keeping the mortgage: the HECM balance grows instead of shrinking, equity declines over time, and the borrower pays the upfront and annual MIP plus closing costs. The reverse mortgage pros and cons guide lays out each line.
When does neither a reverse mortgage nor keeping your mortgage fit?
A borrower who could carry the payment but would rather not might look at a simple rate-and-term refinance to lower it, if income and credit support one, before turning to a HECM. A borrower ready to leave the home may free more cash by selling. The refinance comparison and the alternatives guide cover those paths.
How do you choose between a reverse mortgage and keeping your mortgage?
The row order is not a ranking. The decisive question is whether the existing mortgage payment is straining the budget. If it is, the cash-flow row carries the most weight and a HECM addresses it directly. If it is not, the equity and up-front-cost rows favor leaving the mortgage alone. Model both paths in the reverse mortgage calculator.
See methodologyRelated comparisons
Other reverse-mortgage comparisons that bear on the same decision:
The full set is on the comparisons hub.
FAQ
Does a reverse mortgage pay off an existing mortgage?
Yes. A HECM is a first-lien product, so any existing mortgage balance is paid off at closing, usually out of the HECM proceeds (HUD Handbook 4000.1). After that the borrower has no required monthly mortgage payment as long as the home stays occupied and taxes and insurance stay current.
Is it better to keep a low-rate mortgage than take a reverse mortgage?
It depends on whether the payment is straining the budget. A borrower who can comfortably carry a low-rate mortgage keeps building equity by paying it down, and there is no closing cost to disturbing it. A borrower for whom the payment is the binding constraint may value the cash-flow relief a HECM provides, even at the cost of a growing balance. The two paths point in opposite directions on equity.
What happens to home equity in each case?
They move in opposite directions. Keeping the mortgage and paying it down builds equity over time. Taking a HECM lets the balance grow with interest and MIP, so equity declines. The non-recourse cap limits what the borrower or heirs can owe to the lesser of the balance or 95 percent of appraised value, but the trend in equity is downward with a HECM and upward when a forward mortgage is paid down.
Sources
- 24 CFR §206.27, Mortgage requirements: borrower obligations. https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
- 24 CFR §206.31, Allowable charges and fees. https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
- 24 CFR §206.105, Mortgage insurance premium. https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
- 24 CFR §206.125, Acquisition and sale of the property. https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
- HUD Single Family Housing Policy Handbook 4000.1, §II.B (Home Equity Conversion Mortgages). https://www.hud.gov/program_offices/housing/sfh/handbook_4000-1
- Consumer Financial Protection Bureau. Reverse Mortgages: What You Should Know. https://www.consumerfinance.gov/consumer-tools/reverse-mortgages/