Unlocking the Value of Your Home with Reverse Mortgages
For many Americans, their home often represents more than half of their total wealth. As more retirees face the challenge of funding longer, more expensive retirements, reverse mortgages—specifically the FHA-insured Home Equity Conversion Mortgage (HECM, pronounced “heck-um”)—have become a powerful tool for unlocking that home equity to support financial security in retirement.
A HECM allows homeowners aged 62 or older to convert a portion of their home equity into tax-free loan proceeds—without having to sell their home or make monthly mortgage payments. Unlike a traditional mortgage, the loan doesn’t come due until the last borrower permanently leaves the home, whether due to moving, entering long-term care, or passing away. Borrowers retain ownership and title to the home, and they can never owe more than the home is worth when the loan is repaid.
Reverse mortgages can serve many roles in a retirement plan. Whether used to eliminate existing mortgage payments, create monthly income through tenure payments, or set up an emergency reserve via a growing line of credit, HECMs provide retirees with increased flexibility and peace of mind. Over 1.2 million Americans have used reverse mortgages, and studies show that 94% report improved peace of mind after doing so.
Reverse mortgages can be tailored to meet individual retirement needs:
Pay off an existing mortgage to improve monthly cash flow
Set up a line of credit to cover unexpected expenses
Fund home renovations to make aging in place safer
Purchase a new home through a HECM for Purchase, allowing retirees to “right-size”
Provide tax-free income to reduce dependency on retirement accounts
Flexibility to help fund long-term care or even assist children or grandchildren with major expenses
A particularly attractive option is the line of credit, of which the unused portion increases in size over time—potentially creating a larger financial cushion.
Unlike Home Equity Lines of Credit (HELOCs, article in UH News 9/2025), HECMs are not based on your income, do not require monthly payments, offer non-recourse protection (you never owe more than the home’s value), and remain available even if your financial situation changes.
To be eligible, you must:
Be at least 62 years old (some lenders offer HECMs at age 55)
Own and live in the home as your primary residence
Undergo a financial assessment and complete HUD-approved counseling
Meet minimum property standards and be current on taxes
Your loan amount depends on your age, home value, and current interest rates.
For retirees looking to improve their financial flexibility and age in place with confidence, a reverse mortgage can be a valuable tool and make your home not just a place to live, but a key part of a secure retirement.
Next month: Reverse Mortgages as a Strategic Investment Tool
Guido and Tara with First California Funding are UHCA Business Members