A couple approaching retirement came to Rockville for comprehensive retirement planning advice. As they reviewed their 401(k), pensions, and savings, they found themselves slightly short of the monthly living expenses they would need. The last remaining asset was their long-time home, and the discussion turned to using a reverse mortgage to leverage that equity.

A reverse mortgage is a product that allows homeowners aged 62 and older to receive funds by using their home equity as collateral. Unlike a traditional mortgage where payments are made monthly, with a reverse mortgage, the lender provides funds in a lump sum, monthly payments, or a line of credit, and the principal and interest are repaid when the home is sold, the owner passes away, or no longer resides in the home. A common type is the Home Equity Conversion Mortgage (HECM) insured by the Federal Housing Administration (FHA).

While this aspect is advantageous, it is also important to consider the potential drawbacks. The ability to secure cash flow without monthly repayment obligations is a clear benefit. Additionally, because of the non-recourse structure, heirs are not required to pay any excess if the home value falls below the loan balance. However, over time, the equity decreases, which means there may be less to pass on to children, and the initial costs are typically higher than those of a traditional mortgage.

The average home value in Rockville is approximately $607,784 according to Zillow. Other sources indicate that the median sale price can be around $712,500, showing significant variation depending on the area and type of home within Rockville. The actual amount available through a reverse mortgage is determined by age, interest rates, and home value, meaning not all equity will be accessible.

When considering overall retirement planning, a reverse mortgage is just one item to weigh alongside other assets. The order of withdrawals from 401(k) or Individual Retirement Accounts (IRAs), as well as the timing of Social Security benefits, must be evaluated to gauge the actual impact.

The average effective property tax rate in Maryland is about 1.00% (based on a median home value of $397,700, resulting in an annual property tax of $3,989, according to propertytaxrates.org). Given the high home values in Rockville, the absolute amount of property tax can also be significant. Even after obtaining a reverse mortgage, homeowners must continue to pay property taxes and insurance, and failing to do so could lead to a risk of default. This is why a financial capability assessment is conducted during the application process.

In Maryland, the population aged 65 and older makes up about 16% of the total, and it has increased by 3.35% between 2023 and 2024 (Maryland Matters, reported July 2025). This indicates a steady rise in households in Rockville considering retirement planning.

Rather than rushing in based solely on the advantages, it is better to compare various scenarios with a financial planning expert. In some cases, delaying the reverse mortgage can lead to more equity being built up, resulting in a larger amount available later, suggesting that a few years down the line might be a better time to access these funds.

• Initial costs are higher than those of a traditional mortgage
• Homeowners must continue to pay property taxes and insurance
• As equity decreases, inherited assets may also diminish
• Mandatory counseling from a HUD-approved agency is required before applying

Retirement planning is not a one-time setup; it requires ongoing review as health conditions or spending patterns change. Even after deciding to take a reverse mortgage, it is practical to reassess financial status annually, adjusting how much credit to leave available and when to utilize it. In areas like Rockville, where home values are high, it may be more flexible from a financial planning perspective to keep a portion of the equity as a line of credit and draw from it as needed rather than withdrawing a large sum all at once.

Before applying for a HECM, mandatory counseling from a HUD-approved agency must be completed. In the context of overall retirement planning, a reverse mortgage is just one of many options. It is safest to weigh the pros and cons from both sides and discuss thoroughly with family before making a decision.