Reverse Mortgage
A reverse mortgage can be a powerful retirement tool — or a costly mistake. Here is how to tell the difference.
If you are 62 or older and own a home in New Jersey or Pennsylvania, a Home Equity Conversion Mortgage (HECM) can convert equity into tax-free cash, a growing line of credit, or a lifetime monthly payment — without a required monthly mortgage bill. But the product is often sold poorly. We walk you through the math, the federal protections, the real costs, and whether this is the right move for your retirement plan.
What a reverse mortgage actually is
A reverse mortgage is a loan secured by your home that does not require monthly principal-and-interest payments. Interest and fees accrue onto the balance. The loan becomes due when the last borrower dies, sells the home, or permanently moves out. You or your heirs — not the lender — own the home throughout. When it is time to settle up, the loan is repaid from the home's sale proceeds; you or your heirs keep anything left over.
Roughly 95% of reverse mortgages in the U.S. are HECMs — Home Equity Conversion Mortgages insured by the Federal Housing Administration. The rest are private jumbo reverse mortgages used primarily on high-value homes above FHA's lending limit (currently $1,209,750 for 2025).
HECM — the FHA-insured standard
The HECM is the program most NJ and PA retirees will use. It is federally regulated, carries consumer protections private loans do not, and is non-recourse — you or your estate can never owe more than the home is worth at payoff.
Proprietary ("jumbo") reverse mortgage
If your home is worth more than the HECM limit, a proprietary reverse mortgage from a private lender can unlock additional equity — often on homes valued up to $4 million or more. Proprietary reverse mortgages are not FHA-insured, so protections and costs differ. For high-value homes in Short Hills, Princeton, Haddonfield, Main Line PA, or similar markets, this can be the better path. We will tell you honestly when it is and is not.
Four ways to receive the money
The payout option you choose shapes how useful the reverse mortgage is in your retirement plan. Most borrowers underuse the line of credit, which is often the most financially sound choice.
Line of credit — usually the smartest option
You do not take any cash at closing beyond closing costs. Instead, you open a line of credit against your home equity that grows over time at the same rate charged on drawn balances. This is a unique feature: the unused portion grows automatically, creating a standby resource for future health care costs, roof replacement, or market downturns when you do not want to sell investments. Many retirees set this up in their late 60s with no intention of drawing unless needed.
Monthly "tenure" payments
The lender pays you a fixed amount every month for as long as you live in the home. This functions like a private pension and is popular with retirees who need supplemental income to avoid drawing down investments in down years.
Term payments
Monthly payments for a fixed number of years. Useful for bridging a specific gap — delaying Social Security, covering the years before a pension starts, or funding a spouse's care for a defined period.
Lump sum at closing
A single upfront payout. This is the option most often associated with reverse mortgage regret. Taking a large lump sum means interest accrues on the full balance from day one, and many borrowers end up with less equity remaining than they expected. We rarely recommend pure lump-sum structures — there is almost always a better combination.
The real costs — no marketing spin
Reverse mortgages carry meaningful upfront costs. You should know the number before you decide.
2% of the home's appraised value (up to the HECM limit). On a $500,000 home, that is $10,000 — financed into the loan balance. This funds the FHA insurance pool that guarantees the non-recourse protection.
0.5% of the outstanding balance, added to the loan monthly. This also funds the insurance.
Capped by HUD. The fee is $2,500 on the first $200,000 of home value and 1% of the remainder, with a hard cap of $6,000.
Appraisal ($500 to $700), title insurance, recording fees, and in NJ an attorney ($800 to $1,500). Total third-party costs typically run $3,000 to $6,000.
Accrues on any drawn balance and on accumulated fees. Fixed or adjustable rate options are available. The interest compounds over the life of the loan — this is why structure and payout choice matter so much.
Reverse mortgages in New Jersey — what to know
NJ has strong protections and older-borrower programs
NJ consumer protection laws, combined with the required HUD counseling, create one of the most protected reverse mortgage environments in the country. For homeowners in Monmouth, Ocean, Cape May, Bergen, and Burlington counties — many of whom have owned their homes for decades and hold significant equity — a HECM can be a sensible retirement supplement.
NJ property tax reality
The single biggest risk factor for NJ reverse mortgage borrowers is property tax. Statewide average property tax is above $9,000 per year. If you cannot continue to pay property taxes and homeowners insurance from other sources, the lender can start foreclosure even though you have no mortgage payment. We will evaluate your overall income plan before recommending a HECM — not just whether you qualify on paper.
Senior Freeze and property tax relief
NJ's Senior Freeze (Property Tax Reimbursement) and the ANCHOR program can materially reduce your annual tax obligation. If you qualify and are not enrolled, that is step one before any reverse mortgage conversation. Municipal tax assessor offices or the NJ Division of Taxation can help with enrollment.
Attorney review
A reverse mortgage closing in NJ requires an attorney. We strongly recommend your family attorney review the loan documents even though HUD counseling is already mandated — a second set of eyes that knows your estate plan is worth the fee.
Reverse mortgages in Pennsylvania — what is different
Lower property taxes change the ongoing math
PA property taxes are generally lower than NJ — often by half. That materially reduces one of the biggest ongoing obligations of a reverse mortgage. For retirees in Bucks, Montgomery, Chester, Delaware, and Lehigh counties, this is a real advantage.
Property Tax/Rent Rebate Program
Pennsylvania's Property Tax/Rent Rebate Program offers annual rebates to homeowners 65 and older within certain income thresholds. Combined with a reverse mortgage line of credit as a safety net, this can be a sound retirement structure for long-time PA homeowners.
No attorney required for closing
PA reverse mortgage closings are handled by the title company without a mandatory attorney, reducing closing costs by $800 to $1,500 compared to NJ. We still recommend estate-planning attorney review of the loan documents if you have heirs.
Common reverse mortgage scenarios
A HECM line of credit opened now, with minimal draws, is a defensible financial planning move. The unused line grows automatically, creating a bigger standby resource every year. Many fee-only financial planners now recommend this structure explicitly for healthy retirees.
Yes. A common structure is using a HECM to eliminate the existing forward mortgage and stop the required monthly payment. The freed-up cash flow often changes retirement budgeting dramatically. We run the before-and-after math so you see the full picture.
The borrower on title must be 62. A younger spouse can be named as an "eligible non-borrowing spouse" under HUD rules — which protects them from being forced to leave the home if the borrowing spouse dies first. Loan proceeds are calculated using the younger age, so the available amount will be lower than if both were 62+.
This is a values conversation, not just a math conversation. A HECM can fund gifting now at the cost of reducing the home's eventual inheritable equity. We will make sure all the family decision-makers understand the trade-off before proceeding.
No. You retain title and ownership. You can only lose the home through foreclosure for the same reasons any homeowner could — failure to pay property taxes, failure to maintain homeowners insurance, failure to keep the property in reasonable repair, or ceasing to occupy it as your primary residence. These obligations are real and we spend time making sure you can meet them before recommending a HECM.
Frequently asked questions
Yes. You and any co-borrowers remain on the title and retain full ownership. The lender holds a lien, exactly as with a traditional mortgage. The bank does not own your home.
The loan becomes due when the last borrower sells the home, permanently moves out, or passes away. It is typically repaid from the home's sale proceeds. Heirs can also refinance to keep the home or pay the balance with other funds.
No. HECMs are non-recourse. If the loan balance exceeds the home's value at payoff, FHA insurance covers the shortfall. Your heirs are never personally liable for a deficit.
Proceeds are loan advances, not income, so they are not taxable. They also do not affect Social Security or Medicare eligibility. Needs-based programs like Medicaid and SSI can be affected depending on how the funds are held — we will flag this early if it applies to you.
The available amount depends on your age, the home's appraised value (up to the FHA lending limit), current interest rates, and the HECM payout option you select. At 62, principal limit factors are relatively low; they increase each year you age. A 75-year-old can access substantially more than a 62-year-old on the same home.
No required monthly mortgage payments. You are still responsible for property taxes, homeowners insurance, HOA fees if applicable, and keeping the home in reasonable repair. Missing these can trigger foreclosure.
Heirs inherit the home subject to the reverse mortgage balance. They can sell and keep any equity above the payoff, refinance to keep the property, or deed it back to the lender. Because the loan is non-recourse, they never owe more than the home is worth.
Yes. Every HECM applicant must complete a session with a HUD-approved counselor before a lender can process the loan. The session typically costs $125 to $250 and exists to protect you. We provide a list of approved counselors in NJ and PA.
Is a reverse mortgage right for your retirement?
We will look at your full picture — Social Security, investments, pensions, home equity, and goals — and give you an honest answer. Sometimes the answer is no, and we will say so.