How Reverse Mortgages Work
A reverse mortgage (Home Equity Conversion Mortgage, or HECM) allows homeowners aged 62 and older to borrow against their home equity without making monthly payments. The loan is repaid when you sell, move out, or pass away. You can receive funds as a lump sum, monthly payments, a line of credit, or a combination.
The appeal is clear: access your equity while staying in your home. However, reverse mortgages come with significant costs — origination fees, mortgage insurance premiums, and interest that accumulates over time, reducing the equity your heirs ultimately receive.
When Selling Makes More Sense
Selling generally produces a better financial outcome when your home is larger or more expensive than you need (downsizing frees up equity AND reduces expenses), when the property needs significant maintenance you cannot manage, when you want to relocate closer to family or to a lower-cost area, or when maximizing the inheritance you leave is a priority.
Selling provides the full equity in one transaction, eliminates ongoing housing expenses, and gives you maximum flexibility to deploy the funds as you choose.
Making the Decision
The right choice depends on your specific circumstances. A reverse mortgage works best when you love your home and want to stay, your primary need is supplemental monthly income, and you do not have heirs who need the full equity. Selling works best when you want maximum financial flexibility, lower ongoing costs, or a fresh start.
Consult a HUD-approved reverse mortgage counselor (required before obtaining a HECM) for an objective analysis. Then consult a real estate agent for a market analysis of what selling would produce. Compare both scenarios with your financial advisor.