Reverse Mortgage Guide
Honest. Pros and cons.
What it is
For homeowners 62+. Bank pays YOU monthly OR lump sum, using home as collateral. You owe nothing while alive + in home. After death/move, home sold to repay loan. You can never owe more than home is worth.
When it might make sense
- You're 70+ and want to age in place.
- House is paid off / nearly paid off.
- You need monthly income — pension/SS not enough.
- You don't plan to leave home to heirs.
- You're NOT moving in next 5+ years.
- Heirs are OK with selling home after.
Big downsides
- High fees — 4-6% upfront. Eats home equity fast.
- Compounding interest — balance grows monthly.
- Heirs lose home — they must sell or pay off loan.
- Must keep paying property tax, insurance, maintenance — or foreclosed.
- Hard to sell if you change mind quickly.
- Heavy sales pressure — many sketchy salespeople.
- Affects Medicaid eligibility in some cases.
Better alternatives
- Downsize — sell home, buy smaller, pocket difference. Often best.
- HELOC — line of credit. Lower fees. Can be cancelled by bank.
- Cash-out refinance — at lower rate.
- Sell + rent — eliminates maintenance hassle.
- Sell + use proceeds in CDs/ HYSA.
- Rent room out on Airbnb / boarder.
Required HUD counseling
Federal law requires HUD-approved counseling before getting reverse mortgage. ~$125. Counselor explains alternatives + costs. Listen carefully — they're neutral, salesman isn't.
Fee-only advisor first
Reverse mortgages are right for ~10% of 62+ who consider them. For the rest, alternatives are better. Talk to fee-only fiduciary (NAPFA.org). Pay $300-500 for unbiased opinion. Salesman gets paid $5,000+ to sell you one — they're biased.