A retiree I met in Lexington mentioned feeling burdened every time they received their increasing property tax bills. With a fixed income reduced after retirement, the unchanged taxes and living expenses can understandably cause concern. In such situations, a common question that arises is whether there is a way to utilize the equity built up in their home.

So, what is the structure of a reverse mortgage? It is a product that allows homeowners aged 62 and older to receive funds from a lending institution by using the equity in their home as collateral. Unlike a traditional mortgage, which requires monthly payments, reverse mortgages provide funds in a lump sum, monthly payments, or 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. A typical product is the HECM, which is insured by the Federal Housing Administration.

What about the market value and taxes in Lexington? The typical value of homes in Lexington recently stands at around $336,762 (Zillow, June 2026, a 3.0% increase from the previous year). The effective property tax rate in Kentucky is about 0.75%, which is lower than the national average (Tax Foundation, 2026). However, it's important to remember that a lower tax rate does not eliminate the obligation to pay taxes each year. If you are moving to Lexington from another state, you might miss some details by judging based on the tax rates of your previous residence, so it's advisable to check the actual property tax bill before moving.

How can you receive the funds? If you need a lump sum, you can opt for that; if you need a fixed amount each month, you can choose the monthly payment option; and if you want to withdraw funds as needed, you can select the line of credit option, or you can mix these methods. The best option depends on your future living expense plans, so it's good to ask plenty of questions during the consultation process.

Does receiving a reverse mortgage mean you won't have to pay property taxes? Not at all. A reverse mortgage does not eliminate the obligation to pay property taxes and insurance premiums; rather, you must pass a financial assessment to ensure you can continue to pay these obligations. Additionally, when you factor in origination fees and mortgage insurance premiums (MIP, initially around 2% + 0.5% annually), along with closing costs, the initial expenses can be higher than a traditional mortgage (CFPB).

What are the risks involved? If you cannot continue to pay property taxes, insurance, and maintenance costs, you risk defaulting and losing your home. Furthermore, as time goes on, the loan balance increases, reducing the equity in your home, which may also decrease the assets you can pass on to your children. Interest and insurance premiums are added to the balance each month, so the equity may decrease faster than initially expected. However, HECM is a non-recourse loan, meaning that if the home value falls below the loan balance, thanks to FHA insurance, heirs are not required to pay the difference.

What procedures must you go through before applying? You must have a mandatory consultation with a HUD-approved counseling agency. This consultation is a process to ensure you fully understand the product structure and alternatives, and it is a careful step to take, especially since there are actual scams targeting seniors involving reverse mortgages. You will also need to pass a financial assessment to confirm that you can continue to pay property taxes and insurance, so it helps to organize your fixed monthly expenses and expected income before the consultation.

While it is completely understandable to want to reduce the burden of property taxes, a reverse mortgage may not be the right solution for every situation. Considering downsizing or utilizing a traditional home equity loan are also options worth exploring. Each method has its pros and cons, so I recommend comparing several alternatives side by side. This article is not investment or legal advice, and it is important to discuss thoroughly with a HUD counselor and consult with family before applying.