A family nearing retirement in El Paso recently inquired about their situation. They had already paid off their mortgage, but their fixed income was not providing much flexibility, so they were curious if there was a way to utilize their home equity for cash. One of the most common responses to such questions is a reverse mortgage.

Looking at the El Paso housing market, as of 2026, the typical value of homes in the area is around $210,000, which has increased by about 8 percent compared to the previous year. The longer someone has lived in their home, the more likely they have paid off a significant portion of their mortgage, thus increasing the amount of equity available for a reverse mortgage.

A reverse mortgage is a product that allows homeowners aged 62 and older to receive funds by using their home equity as collateral. Unlike traditional loans, instead of making monthly payments, borrowers receive a lump sum, monthly payments, or a line of credit from the lender, and the 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 Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration, is a representative product. To qualify, the homeowner must be at least 62 years old, the home must be their primary residence, and they must pass a financial assessment to ensure they can continue to pay property taxes and insurance premiums.

Due to its proximity to the border, El Paso often provides counseling materials in both Spanish and English. To avoid signing contracts without fully understanding the terms due to language barriers, it is advisable to ask questions multiple times during the counseling process. Additionally, for families in the early stages of retirement, it may be worth considering leaving some of the credit line untouched rather than withdrawing the full amount immediately, allowing for gradual access as needed.

The advantages of this product are clear. It can create cash flow without the need for monthly repayments, and due to its non-recourse structure, heirs are not required to pay any shortfall if the home value falls below the loan balance, thanks to FHA insurance.

However, there are also disadvantages to consider. The initial costs, including origination fees, mortgage insurance premiums, and closing costs, are generally higher than those of a traditional mortgage. The mortgage insurance premium starts at about 2 percent initially and adds 0.5 percent annually.

The second issue is property taxes. The average effective property tax rate in El Paso County is about 2.03 percent, which is higher than the Texas average of 1.49 percent. Even with a reverse mortgage, the homeowner is still responsible for these taxes and insurance premiums, and failure to pay them could lead to foreclosure.

The third concern is the reduction of equity. As the loan balance increases over time, the assets passed on to children may decrease. In Texas, the population aged 65 and older makes up 14 percent of the total population, which is lower than the national average of 18 percent, indicating that there is a relatively small proportion of retirees, and thus, it is important to actively seek out related information and counseling experiences.

There are alternatives worth considering beyond reverse mortgages. For example, a traditional home equity loan (HELOC) or downsizing the home to generate a lump sum can also be compared. Each option has different requirements for monthly repayments, initial costs, and interest structures, making it difficult to say that one is definitively better than the others.

Additionally, this product is a field where scams and exaggerated advertising targeting the elderly can occur. If approached with urgent contract offers via cold calls or door-to-door sales, it is wise to pause and consult with a HUD-approved counseling agency, family, or trusted professionals first.

It was also explained to this family that the loan estimate received during the initial consultation might differ from the final approved amount. The actual amount can vary based on the appraisal and interest rate conditions, so comparing explanations from multiple counseling agencies can be helpful.

For these reasons, HECM applications require mandatory counseling with a HUD-approved agency before proceeding. It is recommended to thoroughly review costs and alternatives during counseling and discuss them with family before making a decision. This article does not constitute investment or legal advice, and it is advisable to consult with professionals before entering into any contracts.