A customer I met in Minneapolis was worried that using a reverse mortgage would mean they would have no home to pass on to their children. To answer this question, it's necessary to compare the scenarios of using a reverse mortgage versus not using one side by side. The dilemma of wanting to leave assets to children while managing immediate living expenses is not unique to this customer; many households approaching retirement face similar concerns.

First, to clarify the structure, 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 as 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 representative product is the HECM, which is insured by the FHA.

If a reverse mortgage is not used, the equity remains intact, and the inheritance assets are fully preserved. However, if living expenses or medical costs are insufficient, other assets may need to be liquidated or debt incurred. Using a reverse mortgage provides immediate cash flow, but over time, the loan balance increases, reducing equity and inheritance assets. There is no definitive answer as to which option is better; some families prioritize securing living and medical expenses now, while others prioritize preserving inheritance assets.

The average value of a home in Minneapolis is $338,937 (Zillow, as of May 2026). The average property tax rate in Minnesota is around 1.02% (staterates.org, as of 2026). It's important to remember that both options must continue to bear this property tax burden. When considering market value and tax rates together, Minneapolis is neither extremely high nor low compared to other major cities. There are also differences in how funds can be received; a reverse mortgage allows for a choice between a lump sum, monthly payments, or a line of credit, while not using one lacks such flexible cash access options.

In terms of costs, reverse mortgages have higher initial costs due to origination fees, mortgage insurance premiums (MIP, initially around 2% + 0.5% annually), and closing costs compared to traditional mortgages (CFPB). Conversely, not using a reverse mortgage has no initial cost burden but makes securing cash liquidity difficult.

From a risk perspective, a disadvantage of reverse mortgages is the risk of default if property taxes, insurance, and maintenance costs cannot be paid. However, 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 excess due to FHA insurance. On the other hand, the risk of not using a reverse mortgage is that there may be few alternatives if living or medical expenses become insufficient. As of 2024, 18.3% of Minnesota's population is over 65, which is higher than the national average (according to census press releases). As the retired population increases in an area, more families will face the dilemma between the two options. Families that consider various scenarios in advance are less likely to regret their decisions later.

I advised the aforementioned customer to organize the two options in a table for a clearer comparison. By considering monthly living expenses, the desired asset size to leave behind, and medical expense variables based on health status, the decision becomes much clearer. Ultimately, which option is right depends on each family's cash flow and inheritance priorities. There may also be a middle ground between the two options, such as downsizing or using a traditional home equity loan, so rather than rushing to a decision, I encourage you to compare multiple alternatives side by side. This article is not investment or legal advice, and I recommend consulting with a HUD-approved counseling agency before applying and discussing thoroughly with family.