Tom and Mary are looking to buy a new house. They are both on fixed income and have a healthy investment portfolio. Their options are, either withdraw enough funds to pay cash for a new house, or use a traditional mortgage to finance a new home. A third and better option is to buy the house with a reverse mortgage.

Here’s how the numbers work: Tom and Mary’s current home is worth $400,000. They want to move to a home that costs $500,000. Based on their age, a reverse mortgage allows Tom and Mary to buy the new home for only 38% of the $500,000, thus $190,000. Since they will sell their current home for $400,000, the remaining proceeds of $210,000 from the sale of their old home is now available to invest as they wish.

One of the biggest benefits to a reverse mortgage is the option to not pay the mortgage payment and only pay the required annual taxes and insurance. As you can see in the chart below, their new home is now estimated to be worth $740,122.

Reverse Mortgage in 2025. Home Value: $740,122

  • Accrued Principal: $311,000
  • Accrued Interest: $203,751
  • Insurance Fees: $64,596

In this example, the chart illustrates the borrower taking advantage of not making their mortgage payment, thus the principal and interest of the mortgage payments have accrued along with mortgage insurance fees to have a loan balance of $579,347 ($311,000 + $64,596).

The value of the home is estimated to increase at a conservative 4% instead of the national average of 6%.

Mrs. Grimes is 75 and is currently living in a $300,000 house that she owns free and clear. She wants to move to Florida but the beach house she wants is $600,000. Mrs. Grimes has $1,000,000 in her portfolio and is thinking about withdrawing the $300,000 difference to pay for her beach house in cash.

A reverse mortgage is a great fit in this example. Mrs. Grimes can leave her portfolio untouched and use the $300,000 proceeds from the sale of her current house to buy her new beach house.

Ms. Jones is 68 and currently lives in a $200,000. She’s on a fixed income with very little investments. She wants to move to the area where her grandchildren live, but homes are more expensive. The average price of a new home would be approximately $300,000. Ms. Jones can sell her current home and liquidate a large piece of her investments to buy the house in cash, or use a reverse mortgage for the purchase of a new home.

With a reverse mortgage, Ms. Jones can use $150,000 from the proceeds of the sale of her old home to buy the new home in the area she desires and take the remaining $50,000 to use how she wishes.