Reverse Mortgages Can Make Sense in Some Circumstances

Homeowners entering their golden years maybe able to take advantage of the financial benefits of a Home Equity Conversion Mortgage (HECM).

A government-insured HECM is essentially a reverse-mortgage line of credit that allows individuals over age 62, regardless of income, to unlock the equity in their primary home for almost any reason. The loan generally doesn’t have to be repaid until the borrower dies, sells the home or no longer lives principally in it. The maximum loan limit is $1,089,300 in 2023, and borrowers (or their estates) will never owe more than the home’s appraised value.

For retired investors who have stock-and-bond portfolios and depend on the proceeds to fund their lifestyles, an HECM means they can have access to a pool of cash without having to sell off their assets. That can be particularly useful in bear markets, when retirees should be especially reticent to sell because stock values are low.

Besides home improvements or financing other investments, a common use for this mortgage is paying for a spouse’s nursing home care. The line of credit can allow the borrower to remain in the primary family home without selling it, or gutting their investment portfolio, while paying for the long-term care.

There are downsides to reverse mortgages too, so talk to your AMG advisor for more information.

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