By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
Reverse Mortgage vs. Selling
As you head toward retirement, you might be looking for ways to shore up your finances and plan a secure future. If you own your home, you may want to convert your existing equity to cash.
There are a few ways to do so, but among retirees, selling a home and taking out a reverse mortgage are two of the most common.
How do you choose between the two? To make the right choice, you’ll need to look at your personal circumstances as well as current market conditions.
Selling Your Home vs. Taking Out a Reverse Mortgage: The Basics
Many retirees want to relocate, downsize, or both. In this case, they may sell their home, use some of the proceeds to purchase a newer, less expensive home, and pocket the remainder.
If you intend to live out your retirement in your current home, you might consider a reverse mortgage. A reverse mortgage is a type of loan that uses your home as collateral. The lender sends you payment either as a lump sum or in installments.
You don’t make payments on the loan balance during your lifetime unless you move or sell the home. Your heirs may sell the house and use some of the proceeds to pay off the loan. Alternatively, they may also sign the house over to the lender.
When Is Selling Your Home a Good Idea?
In 2025, the housing market continues to favor sellers. If you sell your home, you might see a considerable return on your investment. These are some situations where it might be smart to sell:
You Want to Relocate Anyway
If you want to stay in your home, a strong market likely isn’t enough to convince you to sell. However, if you’ve been hoping to move somewhere else, selling your home will likely provide you with the funds you need to get started.
You Want to Avoid the Cost of Owning a Home
Owning a home has its advantages. However, many people want to avoid the cost of maintenance and home repairs as they get older. If you want to rent a home, move to a retirement community, or move in with family, selling can free you from ongoing expenses.
You Want to Streamline Your Finances
If you sell your home, you’ll likely end up with a significant lump sum. This may be used to bolster your retirement savings, invest, or pay off debt.
When Is a Reverse Mortgage a Good Idea?
The current market leans toward sellers, but if you don’t want to sell your home right now, a reverse mortgage can still offer you a way to tap into your home’s equity. These are some situations where a reverse mortgage might be best:
You Want to Age in Place
Understandably, many retired people want to remain in the home they’ve had for years. If you intend to stay put through your retirement, a reverse mortgage provides you with funding.
You Want to Avoid Mortgage Payments
Many people who take out reverse mortgages have paid off their homes. However, you can also get a reverse mortgage if you have significant equity. If you are still paying your mortgage, a reverse mortgage will eliminate monthly mortgage payments while also providing you with cash.
However, you should bear in mind that reverse mortgages don’t eliminate the costs of owning a home — you must still pay property taxes and cover routine maintenance.
You Want Reliable Monthly Income
Many people with reverse mortgages opt to receive loan proceeds in monthly installments. This way, you receive a payment each month, like you would a paycheck. The IRS counts these payments as loan proceeds, so they are not taxed as income.
Are You Eligible for a Reverse Mortgage?
(Find out in 60 seconds)
Reverse Mortgage (HECM) vs. Selling Your Home
| Feature | Selling Your Home | Reverse Mortgage (HECM) |
|---|---|---|
| Access to Cash | One-time lump sum after realtor commissions, closing costs, and any capital gains tax. | Choose lump sum, monthly payments, line of credit, or a combination. |
| Where You Live | Must move out; you can downsize, relocate, or rent. | Stay in your current home as long as it remains your primary residence. |
| Costs & Fees | Realtor commissions (typically 5–6%), closing costs, moving expenses. | Upfront FHA mortgage insurance (2%), origination fee, closing costs, ongoing interest + annual MIP. |
| Monthly Payments | None if you buy a replacement home outright; new mortgage if you finance. | No monthly mortgage payments; you must still pay property taxes, insurance, and maintenance. |
| Impact on Heirs | Heirs inherit remaining proceeds or the new property you purchase. | Heirs inherit the home subject to loan payoff; non-recourse means they never owe more than the home’s value. |
| Best For | Those who want to relocate, downsize, or eliminate homeownership costs. | Those who want to age in place and turn equity into stable income. |
Example Scenario: Selling vs. Reverse Mortgage
Let’s say John and Mary own a $400,000 home and want to free up $150,000 for retirement. Here’s how their situation might play out:
Option 1: Selling
- They sell the home, pay 6% realtor commission ($24,000) and about $6,000 in closing costs.
- Net proceeds: roughly $370,000.
- They buy a $250,000 condo with cash, leaving $120,000 to invest or use for retirement.
- They’ve freed themselves from upkeep on a larger home — but they must move, pay HOA dues, and adjust to a new environment.
Option 2: Reverse Mortgage (HECM)
- They stay in their home and take out a reverse mortgage, paying off their $50,000 remaining mortgage balance.
- They receive a $100,000 line of credit they can tap as needed or convert to monthly payments.
- They don’t have to move, and they’ve eliminated their monthly mortgage payment — but their home equity will decline over time as interest accrues.
Tax Considerations
Taxes can tip the scale one way or another. When you sell, you may owe capital gains tax on profits above the IRS exclusion — currently $250,000 for individuals or $500,000 for married couples filing jointly.
A reverse mortgage avoids this issue altogether, because the money you receive is treated as loan proceeds, not taxable income.
Emotional & Lifestyle Factors
Finances aren’t the only thing at stake. For some retirees, selling a home can be liberating — it removes the burden of maintenance, may bring them closer to family, and can simplify life.
But moving is also disruptive and sometimes emotional, especially if you’ve lived in the same place for decades.
A reverse mortgage allows you to age in place, keep your community ties, and avoid the hassle of packing up, though it does mean committing to stay in the home and to keep up with taxes and upkeep.
Can You Combine the Two?
In some cases, you can. A reverse mortgage for purchase allows you to sell your old home, use the proceeds to make a substantial down payment on your new home, and then finance the rest of your new home’s purchase with a reverse mortgage.
Not Sure What to Do? Let Us Help!
At South River Mortgage, we aim to empower retirees as they move through their golden years. We’ll discuss your situation and options and help you make the right decision for you. Get in touch today to get started.
FAQs
Can I sell my home if I have a reverse mortgage?
Yes. You can sell at any time. The sale proceeds first pay off the reverse mortgage balance, and you keep any remaining equity.
What if I outlive my reverse mortgage?
You can’t outlive a reverse mortgage. As long as you live in the home, pay property taxes and insurance, and keep the property maintained, you can remain there indefinitely.
Is selling cheaper than a reverse mortgage?
It depends. Selling avoids future interest accrual but includes realtor commissions and moving costs. A reverse mortgage lets you stay in your home but comes with upfront FHA insurance and interest charges that grow over time.
