A reverse mortgage is similar to a standard home loan in some ways – both have closing costs. Make sure to account for all costs like origination fees and mortgage insurance premiums. Because you’re not required to make payments on a reverse mortgage, the principal balance won’t go down during the course of the loan. However, interest will get tacked on to the outstanding balance every month, so as time goes on that balance will get higher, according to the Federal Trade Commission. It’s also important to note that many reverse mortgage interest rates are variable and could change over time depending on the market. To receive a fixed interest rate, you will have to take your loan as a lump sum. These fixed interest reverse mortgages are referred to as “closed-end” loans, because you receive funds at once, and no other draws are permitted. For this reason, the vast majority of all HECMs (Home Equity Conversion Mortgages) are now variable rate loans. This allows the borrower to only draw what is needed and leave the remaining available funds in a growing line-of-credit for future financial needs. Another one of the requirements of the loan is the homeowner must be willing and able to pay their own property taxes and insurance. If you are not interested in making these payments, the lender may set-aside funds upfront to pay these charges on the borrower’s behalf through their expected lifetime. Interest may not be deductible on income tax returns. For 2019, interest can be deductible under specific cases. For example, if you used a reverse mortgage to buy your home, the debt is 100% “acquisition debt” and interest on it may be deductible. However, no deduction is possible unless, or until, the borrower makes payments. While most borrowers don’t make regular payments during the entire term of the loan, there is a very large payment that occurs at the end. Whoever you choose as your lender, discuss these costs with them so you aren’t surprised when the bill comes.