Recently, a couple I met brought up the topic of reverse mortgages while discussing their overall retirement planning. They were contemplating how to manage their cash flow after retirement. In such consultations, I tend to explain both the advantages and the burdens of the product. Since making a decision based on only one side of the story can lead to regrets later, I believe it's essential to present both sides in a balanced manner from the start.

A reverse mortgage is a product that allows homeowners aged 62 and older to receive funds from a lender by using their home equity as collateral. Unlike a traditional mortgage, which requires monthly payments, funds can be received in a lump sum, monthly payments, or as a line of credit, and the loan principal and interest are repaid when the home is sold, the owner passes away, or the home is no longer used as the primary residence. The most common product is the HECM, which is insured by the FHA.

Starting with the advantages, one significant benefit is the ability to secure cash flow for living expenses or medical costs without the burden of monthly repayments. The average home value in Kansas City is around $255,647 (Zillow, as of May 2026), so long-term homeowners may have considerable equity available. Compared to other major cities, the market is relatively stable, making it more accessible. However, this point should be considered alongside the disadvantages for a balanced judgment. The prospect of receiving funds without having to make monthly payments during a time when fixed income may decrease can certainly seem attractive.

The downside is the costs involved. When you add the origination fees, mortgage insurance premiums (MIP, initially around 2% + 0.5% annually), and closing costs, the initial expenses are higher than those of a traditional mortgage (CFPB). Missouri's average property tax rate is about 0.88%, which is lower than the national average (propertytaxrates.org, as of 2026), but this tax must still be paid after obtaining a reverse mortgage. While the ability to choose between a lump sum, monthly payments, or a line of credit is an advantage, making the wrong choice could lead to a shortage of funds when needed, which is a disadvantage that should be carefully considered.

Returning to the advantages, the HECM is structured as a non-recourse loan, meaning that if the home value falls below the loan balance, heirs are not required to pay the difference thanks to FHA insurance. Conversely, a disadvantage is that over time, the equity decreases, which may reduce the assets passed on to children, and there is a risk of default if property taxes and insurance premiums cannot continue to be paid. Since interest and insurance premiums are added to the balance each month, it is common to encounter cases where equity diminishes faster than initially expected. Weighing both the advantages and disadvantages, whether this product is suitable ultimately depends on each household's cash flow situation. Rather than jumping to a conclusion on one side, it's better to calmly assess your own circumstances. It's not too late to make a decision after hearing about the disadvantages as well as the advantages.

As of 2024, Missouri has a population aged 65 and older at 18.8%, which is similar to or slightly higher than the national average (according to related census reports). As the retirement population increases, such consultations are also on the rise, but it's important to be cautious of explanations that emphasize only the advantages. It should also be noted that downsizing or using a traditional home equity loan are alternative options that should be presented in a balanced manner.

Before applying, you must undergo mandatory counseling with a HUD-approved counseling agency and pass a financial capability assessment to confirm that you can continue to pay property taxes and insurance premiums. I also guided the couple I consulted earlier through this assessment process and alternatives, advising them to take their time and make a thoughtful decision. This article is not investment or legal advice, and I encourage you to discuss thoroughly with a HUD counselor and family before making any actual decisions.