Let's dispel the myths
“I’m giving up ownership of my home.”
False. With a reverse mortgage, you retain ownership and title—just like with a traditional mortgage.
“Reverse mortgages are only for people who are desperate.”
Wrong. Many financially stable retirees use reverse mortgages to increase liquidity, reduce taxes, and extend asset life.
“It uses up all my equity.”
Not necessarily. The loan is designed to give you access to equity while preserving it. You control how much you use.
“My heirs or estate will be stuck with the debt.”
No. It’s a non-recourse loan. Heirs/estate never owe more than the home’s value.
“Interest rates are sky high.”
False. Rates are often comparable to traditional mortgages, thanks to FHA insurance.
“Fees are always expensive.”
Not always. Costs vary depending on your home’s value and mortgage balance. Fees are typically comparable to a traditional loan.
“The bank takes my house when I die.”
Not true. You own the home and can leave it to your heirs. They can repay the loan or sell the home.
“I’ll lose my home if I travel or go into care.”
No. Temporary absences are fine as long as the home remains your primary residence.
“I can’t sell my home.”
Incorrect. You can sell anytime, repay the loan from the proceeds, and keep the remaining equity.
“If I’m 62 with equity, I automatically qualify.”
Not quite. Lenders also assess your income, credit, and the home’s condition.
Reverse Mortgage Criteria
The basics
You must:
- Be 62 years of age or older
- Own the property outright or paid-down a considerable amount
- Occupy the property as your principal residence
- Not be delinquent on any federal debt
- Have financial resources to continue to make timely payment of ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.
- Participate in a consumer information session given by a HUD- approved HECM counselor
Reverse Mortgage ideas
62 or older
Using a reverse mortgage to support retirement income is a strategy some homeowners use to:
- delay Social Security
- start portfolio withdrawals early and planning to use a reverse mortgage to continue cash flow during retirement
- reduce portfolio withdrawals
- increase cash flow.
Let’s walk through some strategies, assuming:
🏠 Key Assumptions:
- Home Value: $400,000
- Age at retirement: 62
- Home fully paid off (no mortgage)
- Interest rate: ~6%
- Type: FHA-backed Home Equity Conversion Mortgage (HECM)
- Principal Limit Factor (PLF): ~45% at age 62
→ Max initial borrowing capacity ≈ $180,000 (gross)
→ After fees/MIP, net available ≈ $160,000
💡 1. Bridge to Delayed Social Security
Strategy:
Use reverse mortgage to replace Social Security income from 62 to 70, then switch to higher SS benefit.
- Monthly need: $1,500/month
- Duration: 8 years
- Total draw: $1,500 × 12 × 8 = $144,000
🟢 Leaves some room for flexibility
🟢 SS benefits at 70 are ~77% higher than at 62
🔴 Accruing interest on loan balance
💡 2. Supplement Portfolio Withdrawals (Reduce Sequence Risk)
Strategy:
Instead of withdrawing heavily from your IRA/401(k during market downturns, use a reverse mortgage as a buffer.
- Draw $1,200/month for first 5 years only
- Total: ~$72,000
- Resume full portfolio withdrawals later when markets stabilize
🟢 Helps preserve investments
🟢 May reduce taxes (less taxable income early on)
🔴 Home equity erosion continues
💡 3. Open a Line of Credit — Let It Grow
Strategy:
Open a HECM line of credit at 62, don’t draw immediately, let the available balance grow (by ~5–6% annually).
- Line of credit grows = larger borrowing power in future
- Use in Year 5 or 6 if needed for long-term care, emergency, or delay SS
🟢 Huge advantage: LOC grows even if home value doesn’t
🟢 Flexible access
🔴 Must maintain property taxes, insurance, and upkeep
🔴 Unused LOC still accrues opportunity cost
💡 4. Lump Sum to Eliminate Expenses
Strategy:
Use a reverse mortgage to pay off existing debts like:
- $50,000 mortgage or credit card balance
- Save $1,000/month in payments
- Use that savings to fund living expenses or invest
🟢 Improves monthly cash flow
🟢 May improve retirement peace of mind
🔴 May lose future home equity faster
💡 5. Tenure Payment Option (Lifetime Monthly Income)
Strategy:
Set up a guaranteed monthly payment for life (or fixed term, like 10 years)
- $400–$500/month depending on age and rates
- Guaranteed even if home value drops
- Reverse annuity structure
🟢 Predictable income
🟢 Good for budgeting
🔴 Not flexible — harder to access lump sums later
💡 6. Use retirement funds as described (Rule of 55, 72t, IRA) early, utilizing a reverse mortgage in place during retirement.
Strategy:
Utilize withdrawals from a retirement workplace plan prior to age 62 to supplement cash flow during early retirement
- Rule of 55
- Rule of 72t
- Roth IRA withdrawals of contributions (not earnings)
🟢 Utilize some retirement funds early, with the reverse mortgage at/after age 62 to support cash-flow needs
🟢 Flexible withdrawal options as needed & no principle or interest payments required
🧠 Final Considerations:
- Reverse mortgages aren’t free: upfront costs and compounding interest matter
- Borrower must live in the home, maintain it, and pay taxes/insurance
- Loan becomes due when you move out, sell, or die — your estate will pay it
- Your estate will never owe more should the outstanding balance exceed the home value - it is a non recourse loan!