When Does It Make Sense to Get a Reverse Mortgage?

Retirement is supposed to be carefree — a time when you can finally step back and enjoy the life you’ve built. However, given the rising cost of living, many retired seniors are running into more financial problems than they anticipated.

Some of these seniors take out reverse mortgages to improve their cash flow. These mortgages let you turn equity in your home into cash, but they aren’t without cost.

Here’s a closer look at how reverse mortgages work and when it makes sense to get one.

Why Timing Matters for a Reverse Mortgage

Reverse mortgages are most powerful when used at the right time in retirement.

Getting one too early can reduce long-term equity. Waiting too long can make you miss years of financial comfort.

The key is understanding your stage of life, your cash flow needs, and how long you plan to stay in your home.

When used strategically, a reverse mortgage can protect your savings, reduce financial stress, and help you enjoy the retirement you worked for.

How Does a Reverse Mortgage Work?

A reverse mortgage allows you to borrow money using your home as collateral. You can choose to receive the money in a lump sum or monthly payments.

However, unlike home equity loans and home equity lines of credit (HELOCs), you don’t have to pay toward the loan balance each month. Instead, the balance of the mortgage goes up over time, and the loan is repaid in full when you pass away or sell the home.

This might sound like a great way to turn your home equity into cash without worrying about monthly payments. In some cases, it is. However, not every homeowner can access a reverse mortgage.

These are some of the key conditions:

• You are at least 62 years old
• Own your home outright or have significant equity
• The home must remain your primary residence
• Keep the home in good condition
• Must continue to pay property taxes
• You must continue to pay homeowners’ insurance

With a reverse mortgage, your home stays in your name. However, if the loan is not repaid after your death, your lender can foreclose on the house.

What Makes Reverse Mortgages Different from Other Loans

A reverse mortgage isn’t just another type of home loan. It’s designed specifically for homeowners in or near retirement.

Here’s what sets it apart:

• No monthly payments. You don’t make payments while you live in the home.
• Flexible payout options. Choose a lump sum, monthly income, or line of credit.
• Federally insured protection. With FHA-insured HECM loans, you can never owe more than your home’s value.
• You stay on the title. The home remains yours, and you can live there as long as you maintain property taxes, insurance, and upkeep.

These differences make reverse mortgages a valuable tool for stability and independence — especially when retirement income feels stretched.

When Does a Reverse Mortgage Make Sense?

In the right situation, a reverse mortgage can make your life significantly easier. These are some of the circumstances where taking out a reverse mortgage makes sense.

You’re Planning on Staying in Your Home

If you’re planning on aging in place, a reverse mortgage may be right for you. It will allow you to access a substantial amount of money and live more comfortably, knowing that the loan will be repaid when your heirs sell your home.

You’re Having Trouble Managing Expenses

Is retirement costing more than you expected? You’re not alone. The lump sum or periodic payments you receive from a reverse mortgage may make it easier to handle both routine and unexpected expenses.

Note that the IRS doesn’t tax money from a reverse mortgage as income.

Real-Life Example: Turning Equity Into Breathing Room

Meet Janet, age 74. After her husband passed, she found her monthly bills harder to manage on one income.

Her home was paid off, but most of her wealth was tied up in it.

After speaking with a reverse mortgage specialist, Janet chose a line of credit option. Now, she can draw funds only when needed — keeping her home, her independence, and her peace of mind.

For Janet, a reverse mortgage wasn’t about borrowing money. It was about creating freedom and flexibility in retirement.

You Can’t Qualify for a Home Equity Loan

You may find it much easier to qualify for a reverse mortgage than a home equity loan, especially if you’re retired. Even if your credit score is poor or your income is low, you might still be able to get a reverse mortgage.

Using a Reverse Mortgage Strategically

Reverse mortgages aren’t just for emergencies — they can be part of a smart financial plan.
Here are a few ways homeowners use them effectively:

• Supplementing Social Security. Use your proceeds to delay Social Security benefits and increase your long-term payout.
• Creating a financial safety net. Keep a line of credit available for future healthcare or home repair costs.
• Reducing withdrawals from savings. Use loan proceeds instead of drawing from retirement accounts during market downturns.

When used strategically, a reverse mortgage can stretch your retirement income and give you more control over your finances.

When Does It Not Make Sense?

Reverse mortgages aren’t right for everyone. These are some instances where getting one may not be the best option.

You’re Planning to Move

If you intend to sell your home and move in the near future, a reverse mortgage might not be practical. Reverse mortgage closing costs are often higher than those of traditional loans, so you may lose more money than you anticipated.

You Might Need to Move to an Assisted Living Facility

Because reverse mortgages require you to keep your home as your main residence, a permanent move to assisted living typically means the loan becomes due.

Many reverse mortgages have a 12-month rule: If you move out of the home for a full year, the loan balance is due immediately.

You’re Concerned About Eligibility for Benefits

Although the IRS doesn’t count loan proceeds as income, in rare instances, a reverse mortgage can affect eligibility for Medicaid. This is more likely to be true if you choose to receive the amount as a lump sum, since this sum will be counted toward your assets.

If you exceed your state’s Medicaid asset limit, you won’t be eligible for coverage.

Questions to Ask Before Applying

Before deciding on a reverse mortgage, take time to ask yourself these key questions:

1. How long do I plan to live in this home?
    If you expect to move soon, the upfront costs might outweigh the benefits.
2. Do I have other sources of income?
    Consider how a reverse mortgage will fit with Social Security, pensions, or savings.
3. What are my goals for my heirs?
    If leaving the home’s full value is a top priority, this loan may reduce that equity.
4. Have I spoken with a HUD-approved counselor?
    Counseling is required — and it’s the best way to make sure you understand every detail before signing.

Asking these questions helps ensure your decision aligns with your financial goals, not just your short-term needs.

The Bottom Line: When a Reverse Mortgage Makes the Most Sense

A reverse mortgage makes sense when it adds to your retirement — not replaces it. It’s often the right choice if you:

• Plan to stay in your home long-term.
• Need extra income or a safety cushion.
• Want to reduce financial strain without selling your property.
• Have significant equity and limited cash flow.

If these apply to you, a reverse mortgage can turn your home into the resource it was always meant to be — your foundation for a secure, stress-free retirement.

Talk to a Reverse Mortgage Specialist

Every homeowner’s situation is unique — and timing is everything. At South River Mortgage, we help you understand exactly when a reverse mortgage makes sense for your goals, lifestyle, and family.

Call (844) 230-6679 or check your free eligibility in 60 seconds to see how much you could qualify for today.

FAQ: When Does a Reverse Mortgage Make Sense?

Is there a “best age” to get a reverse mortgage?

There’s no perfect age, but many homeowners apply in their late 60s or early 70s when they plan to stay in their home long-term.

Can I still leave my home to my kids?

Yes. Your heirs can keep the home by paying off the balance or refinancing into a traditional mortgage.

What if I want to move later?

You can sell your home anytime. The loan is paid off from the sale, and any remaining equity is yours to keep.

Can I use a reverse mortgage to pay off other debts?

Yes, many borrowers use proceeds to pay off high-interest loans or credit cards, freeing up monthly income.

Do I need good credit to qualify?

Credit history matters less than your ability to maintain taxes, insurance, and upkeep. FHA counseling ensures you can meet these requirements.