A client nearing retirement recently visited the office and asked this question. Whether living in Manhattan or Queens, home prices in New York have already skyrocketed, and they wondered if there was a way to utilize their equity without selling it. This is a concern that many long-established Korean families in New York have likely pondered at least once. They often weigh two options: whether to move to a rental and cash out their equity or continue living in their current home while accessing their equity. This article will focus on the second option, reverse mortgages, and outline key points to consider in New York.

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, payments are not made monthly; instead, funds can be received as a lump sum, monthly payments, or a line of credit. If the terminology is unfamiliar, think of it this way: it's like receiving the principal and appreciation of your home value that you have been paying off monthly in advance. The loan principal and interest are settled 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 guaranteed by the Federal Housing Administration, is the most representative form and the only reverse mortgage product backed by the federal government.

According to Zillow data, as of June 30, 2026, the average home value in New York City is $823,251, which has increased by 3.8 percent over the past year. While there are significant disparities among boroughs, it suggests that many long-term Korean families in New York may have accumulated substantial equity. However, having a large equity does not automatically make a reverse mortgage a favorable choice. While it can help secure monthly living expenses, one must also consider the initial costs and the long-term reduction in equity.

Eligibility requirements include being at least 62 years old, the home must be the primary residence, if there is an existing mortgage balance, it must be at a level that can be paid off with the reverse mortgage loan, and passing a financial assessment to confirm the ability to continue paying property taxes and insurance. Although the proportion of homeowners in New York City is lower than in other major cities, for many Korean families who own homes, this equity often serves as a key asset for retirement funding.

From a cost perspective, there are origination fees, an initial mortgage insurance premium of about 2 percent, an annual insurance premium of approximately 0.5 percent, and closing costs, making the initial costs higher than a traditional mortgage. The property tax system in New York City must also be considered. For Class 1 properties, which include 1-3 family homes, the tax rate for the 2025/26 fiscal year is 19.843 percent of the assessed value, which is determined to be about 6 percent of the market value, resulting in an effective tax rate of approximately 1.19 percent compared to the actual market value. Even with a reverse mortgage, the homeowner must continue to pay these property taxes and insurance, and failure to do so can lead to the risk of default.

The advantages include the ability to create cash flow without monthly repayment burdens, and the non-recourse loan structure means that if the home value falls below the loan balance, heirs are not required to pay the excess due to FHA guarantees. However, a downside is that over time, the equity decreases, potentially leaving less for heirs. In New York State, individuals aged 65 and older make up 18.9 percent of the population, which is higher than the national average of 18 percent, indicating that more families in New York will likely face this dilemma in the future.

Before applying for a HECM, one must undergo mandatory counseling with a HUD-approved counseling agency. During this session, alternatives for utilizing equity, such as downsizing or transitioning to renting, can be compared with reverse mortgages. There have been reports of scams related to reverse mortgages targeting the elderly, so it is important to be cautious of hasty recommendations. This is not investment or legal advice, and it is advisable to consult with HUD and discuss with family before proceeding with an application.