A couple living in Lansdale requested a consultation. They were contemplating whether to sell their current home and move to a smaller condo or to stay in their current home and utilize a reverse mortgage. Downsizing and reverse mortgages are often compared options. There are three main points to consider in order.

The first point is that the basic structures of the two options are different. Downsizing involves selling a home to cash out the profit and moving to a smaller place. In contrast, a reverse mortgage is a product that allows homeowners aged 62 and older to borrow against the equity of their home, receiving funds in a lump sum, monthly payments, or a line of credit instead of making monthly repayments. The 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 representative product is the HECM, which is the only type of reverse mortgage insured by the federal government.

The second point is that both the advantages and burdens of each option should be considered together. Downsizing comes with the burden of moving costs and adjusting to a new home, but the advantage is that the equity can be fully cashed out. A reverse mortgage allows homeowners to maintain their familiar neighborhood, school district, and community relationships, which is advantageous, but the downside is that over time, the home equity decreases, potentially reducing the assets passed on to children. Which option is better depends on individual health status, relationships with children, and future moving plans.

The third point is to check the actual market prices and costs in Lansdale. According to Zillow, the typical home value in Lansdale is $461,115 (a 5.4% increase over the past year), while the median sale price according to Redfin is $449,731 (as of May 2026). This provides a basis for estimating the available equity, but it should be noted that the actual loan limit varies based on age, interest rates, and appraisals. Property taxes are also an ongoing consideration. The effective property tax rate in Montgomery County is around 1.35%, with the median homeowner paying about $5,875 annually. Even with a reverse mortgage, the obligation to pay property taxes and insurance remains, so a financial capability assessment to ensure ongoing payment is necessary.

In terms of costs, the origination fee, initial mortgage insurance premium (MIP) of about 2%, and annual costs of around 0.5%, along with closing costs, make the initial costs higher than a standard mortgage. This can be compared to the moving and brokerage costs of downsizing. An advantage is that it allows for cash flow without monthly repayment burdens, and since it is a non-recourse loan, heirs are not required to pay any excess if the home value falls below the loan balance. Conversely, if property taxes or insurance cannot be paid, there is a risk of foreclosure, which is a risk unique to reverse mortgages that downsizing does not have.

The fourth point to check is the consultation process. HUD-approved counseling agencies can be contacted for appointments by phone or online, and counseling fees generally range from $100 to $200, with exemptions available for low-income individuals. The counseling covers not only the loan structure but also alternatives like downsizing and home equity lines. Utilizing this counseling as a step before making a final decision on downsizing is also a viable option. It is also worth remembering that interest accumulates on the remaining balance each month, reducing the remaining equity over time.

In Pennsylvania, the population aged 65 and older makes up 20.4% of the total (as of 2024), which is higher than the national average of 18%, and has increased by 10.6% from 2020 to 2024. As the retiree population continues to grow in the area, consultations surrounding both options are increasing, but it is important to remember that there are actual scams related to reverse mortgages targeting the elderly. HECM requires mandatory counseling from a HUD-approved agency before applying, and it is advisable to thoroughly assess whether it truly fits one's situation compared to downsizing. It is also recommended to discuss decisions with family members. This article does not constitute investment or legal advice, and consulting with a professional before making any actual contracts is advised.