When most people hear "reverse mortgage," they think of a last resort — something you tap when you've run out of options. In reality, the FHA-insured HECM (Home Equity Conversion Mortgage) is a financial tool that many retirees use strategically to strengthen their retirement plan. Here are five ways it can help.
1. Eliminate Monthly Mortgage Payments
If you're still paying a traditional mortgage in retirement, a reverse mortgage can pay off that balance. You no longer make monthly principal and interest payments to the lender. You still need to pay property taxes, homeowners insurance, and keep the home in good repair — but removing a large monthly expense can free up cash for healthcare, travel, or simply peace of mind. For many homeowners, that single change is the difference between stretching a fixed income and living comfortably.
2. Create a Growing Line of Credit
One of the most powerful features of a HECM is the line of credit option. You don't have to take all your proceeds at once. You can leave a portion (or all of it) in a line of credit that grows over time — at a rate tied to your loan's interest rate plus the ongoing mortgage insurance premium. That means the amount you can draw later can be larger than what you leave in today. Retirees often use this as a backup: they don't need the money now, but they want a growing safety net for future expenses like medical costs or home modifications. No other mainstream product offers this kind of growth on unused credit.
3. Supplement Retirement Income Without Selling
You don't have to sell your home to access its equity. With a reverse mortgage, you can receive funds as a lump sum, monthly tenure payments (for as long as you live in the home), monthly term payments (for a set period), or a combination. That flexibility lets you match the loan to your goals. Some people use tenure payments to cover a shortfall in Social Security or pension income. Others use a line of credit to cover large, occasional expenses. In every case, you stay in the home you've built a life in.
4. Improve Cash Flow and Sequence-of-Returns Risk
Retirement research has shown that the order in which you experience market returns can dramatically affect how long your savings last. If you're forced to sell investments in a down market to cover expenses, you lock in losses. A reverse mortgage line of credit can serve as a buffer: you draw from the line of credit during a downturn instead of selling stocks, and repay or let the loan balance grow when the market recovers. Not everyone uses a HECM this way, but for those with significant home equity and a diversified strategy, it can reduce sequence-of-returns risk and improve the longevity of a portfolio.
5. Preserve Other Assets for Heirs or Later Life
Some retirees want to leave other assets (investments, life insurance) to heirs and use home equity for their own needs. A reverse mortgage allows you to spend home equity while preserving liquid assets. Others use the line of credit late in life to pay for in-home care or other needs, so they can age in place. The key is that you have choices: you're not forced to sell the house or drain other savings first.
A reverse mortgage isn't right for everyone. It depends on your age, home value, how long you plan to stay, and your overall financial picture. But when it fits, it can be a meaningful part of a thoughtful retirement plan. If you'd like to see how much you might access based on your situation, try our calculator — and when you're ready, we can talk through whether it makes sense for you.
Have questions about reverse mortgages or want to see how much you might access? Try our calculator or schedule a conversation with Jerry.