A family planning to retire recently reached out with concerns about moving to the Burlington area. They were worried about whether they could manage living expenses on a fixed pension income after relocating from another state. Even with the same retirement funds, the situation can vary greatly depending on the area of settlement. In such cases, reverse mortgages often come up for consideration.

A reverse mortgage is a loan that works in the opposite way of a traditional mortgage. Homeowners aged 62 and older can use their primary residence as collateral to receive funds in the form of a lump sum, monthly payments, or a line of credit, rather than making monthly repayments. This money is repaid when the home is sold, the owner passes away, or no longer resides in the home. The Home Equity Conversion Mortgage (HECM), which is backed by the Federal Housing Administration, is the only type of reverse mortgage guaranteed by the federal government.

When comparing Burlington itself to nearby areas, the circumstances can differ slightly. According to Zillow data as of July 31, 2026, the average home value in Burlington is $516,143, which has decreased by 1.9% over the past year. Since market trends can vary significantly within different neighborhoods in Vermont, it's important to verify the equity based on the specific address.

Tax considerations can be a tricky aspect if judged by other states' standards. Vermont's average effective property tax rate is around 1.51%, which is relatively high compared to states like Tennessee or Utah. Even if one receives a reverse mortgage, property taxes and insurance premiums must still be paid by the owner, and failing to do so can lead to default, which is something those coming from states with lower tax rates should be particularly mindful of.

As of 2024, the percentage of the population aged 65 and older in Vermont is 22.8%, significantly higher than the national average of 18%. Being one of the states with the highest proportion of elderly residents, consultations regarding housing equity for retirees are more common here than in other regions.

When weighing both aspects, the advantage of a reverse mortgage is that it provides cash flow for living expenses without the burden of monthly repayments. HECM loans are non-recourse, meaning that if the home value falls below the loan balance later on, heirs are not required to pay the difference.

On the other hand, the costs are not insignificant. The origination fee, initial mortgage insurance premium of about 2%, annual maintenance insurance fee of around 0.5%, and closing costs can lead to a higher initial burden compared to traditional mortgages. Over time, the loan balance increases while equity decreases, which could reduce the inheritance. This is particularly important to calculate carefully in a state like Vermont with high property tax rates.

How the received funds will be utilized is also something to consider in advance. While reverse mortgage funds do not affect Social Security or Medicare benefits, if one is receiving benefits like Medicaid or SSI that are based on income and asset criteria, how the funds are held can impact eligibility, so it's important to check this beforehand.

It's also worth noting the protections in place if only one spouse is listed as the borrower. HUD regulations allow the non-borrowing spouse to continue living in the home after the borrowing spouse passes away, provided certain conditions are met.

To apply for a HECM, one must pass a financial assessment and go through a mandatory counseling process with a HUD-approved counseling agency. There have been reports of reverse mortgage scams targeting the elderly, so it's not a decision to rush into without sufficient consultation and discussion with family. If contacted by a specific company urging a quick decision, it's safer to refrain from responding immediately and verify the facts through a HUD-approved counseling agency. This article is not legal investment advice, and it is recommended to seek professional consultation before entering into any contracts.