11/18/2025
Don’t Wait to Consider a Reverse Mortgage
People familiar with reverse mortgages know that the initial benefit is affected by home value, homeowner age and interest rates. The higher the age, the more money available, the higher the interest rate, the lower the available credit at outset. This can encourage folks to attempt to “time” setting up a reverse mortgage. Yet there are several considerations that make this approach problematic.
Most importantly, today’s housing values are at an all-time high. “Since 1968, average single-family home prices have consistently risen, reaching the all-time high of $432,700 in June 2025.” United States Existing Home Sales Prices
Secondly, if homeowners delay setting up a Home Equity Conversion Mortgage reverse mortgage line of credit, they will miss out on the compounding growth that could serve them well later in retirement.
Nobody can predict the future of home prices or interest rates but setting up a reverse mortgage line of credit now ensures that the homeowner’s access to home equity credit will grow at a rate aligned with prevailing interest rates. And most strikingly, this reverse mortgage line of credit cannot be frozen, cancelled, or reduced by the lender. The growth in credit is there month after month and immediately accessible to the homeowner when he needs it.
This growth feature is significant, as well, should there be a drop in housing values. The reverse mortgage line of credit, once established, is completely independent of future declines in home assessments. It is important to understand that the house is the sole collateral for the loan and regardless of what happens to home values, the house will provide pay back, not the owner or his heirs.
Another consideration is making sure that the homeowner is not so financially compromised that he cannot honor his tax and homeowner’s insurance obligations. Although qualifying for a reverse mortgage is less stringent than a traditional loan in which the homeowner must be able to demonstrate the ability to make monthly mortgage payments, lenders must be convinced that taking on a reverse mortgage is a sustainable option for the homeowner. In other words, even though there are no monthly principal and interest payments ever due, a reverse mortgage will not be a solution for someone who cannot afford the other obligations of home ownership.
Summary
Benefits of Early Setup:
Early setup allows for compounding growth in the HECM line of credit (LOC), which can serve as a financial safety net.
Establishing a HECM early provides an alternative source of income during market downturns, reducing the risk of portfolio depletion.
Flexibility of HECM:
The HECM offers unique flexibility, allowing homeowners to treat it as an interest-only loan, make voluntary payments to keep the loan balance low, or let interest accrue if needed.
Borrowers can adjust their strategy based on their financial situation, ensuring peace of mind and financial security.
Non-Recourse Guarantee:
The HECM ensures that the house, not the borrower or their estate, repays the loan balance, even if the loan exceeds the home’s value. This shifts the risk to the FHA insurance pool.
~Shelley Giordano, What’s the Deal with Reverse Mortgages?
