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  • Writer's pictureRoch Clapp


A “reverse mortgage” can sound daunting and intimating for individuals when they learn that a reverse mortgage allows the owner to borrow against the equity of their residence. Instead of thinking about a reverse mortgage as a typical loan, think of your residence as an investment that you have already paid into. Essentially, a reverse mortgage releases the equity in your home and you receive cash tax-free available for investing, retirement, or other needs.

Benefits of the Reverse Mortgage

There are no restrictions on how you use the proceeds of the reverse mortgages, but here are a few examples for how the funds can be utilized:

(1) Funding for Long-Term Healthcare. Long-term care is a consideration for many and a reverse mortgage can be used to pay for medical costs, medical insurance, or in-home care, instead of depleting your savings or other assets. A reverse mortgage in and of itself does not impact Medicaid or Medicare qualification.

(2) Dealing with Potential Estate Taxes. If you are an individual who is concerned about their estate exceeding the current $5.43 million estate tax exemption, a reverse mortgage may eliminate or decrease these potential taxes. A reverse mortgage will decrease the value of the residence (due to the loan) which lowers your overall estate net worth. This is particularly helpful for individuals with large equity in their homes.

(3) Retirement. A reverse mortgage can be used to bridge the gap between retirement expenses and retirement income.

(4) Pay off other Debts, Travel, Purchase Life Insurance, or satisfy other needs.

(5) Investing. A reverse mortgage can be used to invest in other property or investment portfolios netting a greater return.


You can apply for a reverse mortgage if you own your home outright or if you own approximately fifty percent (50%) of the equity. Other requirements include: (1) being sixty-two (62) or older; (2) the residence must be your primary residence; (3) all liens and judgments must be paid on the residence; (4) certain financial assessment may be required; and (5) must still be able to pay taxes, maintenance, and insurance on the residence. The loan enables you to continue to reside in your residence, rent-free, with no monthly payment on the loan. You can choose to receive the loan payment as a lump-sum, fixed monthly payments, a line of credit, or as a combination of a line of credit and monthly payments. The loan amount will depend on the age of the individual, the equity in the home, and the type of mortgage program you choose.

The loan is paid back when the property is sold, when you stop residing in the residence for more than twelve (12) months, the last title owner dies, or if taxes or insurance on the residence are not paid. These are non-recourse loans, meaning that the bank’s only recourse is to sell the property and the bank cannot go after your heirs or other estate assets.

Reverse mortgages have increased in popularity among the elder population over the last five (5) years. Although complex, if used appropriately, a reverse mortgage can be a useful investment, retirement, or estate planning tool.

This article is not intended to replace legal advice applicable to your situation and should be used only for informational purpose. Consult with your legal or tax advisors before implementing any suggestions contained herein. Ms. Clapp-Younggren is an associate attorney with the firm of Sandra L. Clapp & Associates, P.A. and can be reached at or (208) 938-2660.

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