The reverse mortgage you were warned about doesn't exist anymore.
Why a reverse mortgage?
Eliminate a payment. Create a line of credit that grows. Fund long-term care. Delay social security. This product is a tool. What matters is how you use it.
She didn't need the money. That's exactly why she did it.
$620K home with no mortgage. $1.4M in investments.
Her financial advisor had been watching the sequence-of-returns risk and it was keeping him up at night.
So we setup a HECM line of credit, $280K, which will continue to grow. Now if the market drops during retirement, she can draw from the line of credit instead of selling investments at a loss.
Not because she needed it but because smart money plans for the market doing exactly what it does.
Myths vs. What's Actually True
Myth: "The bank takes my home"
False. You remain the owner. The lender has a lien, exactly like a regular mortgage. You can sell, renovate, or leave it to your heirs.
Myth: "My kids inherit nothing"
Any equity remaining after the loan is repaid goes to your estate. If the home appreciates, there may be significant equity left over.
Myth: "It's only for desperate people"
Many of my clients have signifcant assets. They use reverse mortgages for cash flow optimization and income strategy.
Myth: "I'll owe more than it's worth"
HECM loans are non-recourse. FHA insurance covers any shortfall. Your heirs are never personally on the hook for the difference.
FAQs
What are the basic eligibility requirements?
Age 62+ (youngest borrower on title), primary residence only, sufficient equity (typically 50%+), current on property taxes and homeowner's insurance. The home must meet FHA property standards. Single-family, FHA-approved condos, and 2–4 unit properties qualify if you occupy one unit.
Can I get one if I still have an existing mortgage?
Yes and this is one of the most powerful uses. The reverse mortgage pays off your existing mortgage first, using your equity. If you had a $1,800/month mortgage payment, that payment disappears entirely. This is often the single biggest impact on monthly cash flow in retirement.
Is the money taxable?
No. Reverse mortgage proceeds are loan advances, not income, they are not subject to federal income tax. This also means they don't affect your Social Security benefits or Medicare eligibility. Consult your CPA for your specific situation.
What happens when I pass away or move out?
Heirs typically have 6–12 months to sell the home, refinance into a traditional mortgage, or pay off the balance. If the home sells for less than the loan balance, FHA insurance covers the shortfall, heirs owe nothing beyond the home's value. If the home sells for more, the difference goes to the estate.
My financial advisor hasn't recommended this. Should I be concerned?
Not necessarily but it's worth a conversation. Research over the past decade has changed how many FAs think about reverse mortgages, particularly the growing line of credit strategy. I'm happy to talk directly with your advisor about how it might fit into your overall plan. Many of my strongest referral partners are FAs who started skeptical.
Can I use a reverse mortgage to purchase a new home?What loan amounts are available?
Yes — the HECM for Purchase (H4P) lets you buy a new primary residence using a reverse mortgage. You bring a down payment (typically 40–60% of the purchase price depending on your age), and the reverse mortgage covers the rest with no monthly payment. Useful for downsizing, moving closer to family, or purchasing a retirement home.
How much ca I get?
The amount depends on your age, your home's value, and current interest rates. The older you are, the higher the percentage of your home's value you can access. The calculation uses something called the Principal Limit Factor (PLF). Use the calculator below for an estimate, or call me and I'll run the exact numbers for your home.
Let's run the numbers on your situation.
Free, no-pressure conversation. I'll show you exactly what a reverse mortgage would look like for your situation.
Roxy Miles
NMLS#2464939
Complex income specialist.
Former financial advisor.
865.424.7997
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