Recently, during consultations, I often receive similar questions from homeowners in the Fargo area who are approaching retirement. They have a home they have lived in for a long time, but they lack the cash to cover monthly living expenses or medical bills. Many are contemplating two options: selling their home and moving to a smaller place, or staying in their current home and utilizing their equity. A common topic that comes up in these discussions is the reverse mortgage, specifically the Home Equity Conversion Mortgage (HECM) insured by the Federal Housing Administration (FHA).

To first look at the housing prices in Fargo, according to Zillow, the average value of homes in the area is around $291,493 as of 2026, which has increased by 3.7 percent over the past year (zillow.com, 2026). Data from Redfin shows that the median sale price over the last month has been recorded at $301,000, reflecting a 6.8 percent increase compared to the previous year (redfin.com). In the past, it was possible to find a decent single-family home in Fargo for just over $200,000, but that threshold has certainly risen. With these home prices, the theoretically available equity has also increased, but the method of accessing that equity can significantly change the calculations.

A reverse mortgage is a product that allows homeowners aged 62 and older to receive funds by using the equity in their home as collateral. Unlike a traditional mortgage, where payments are made to the bank each month, with a reverse mortgage, funds are received from the lending institution in the form of a lump sum, monthly payments, or a line of credit. 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 (hud.gov, consumerfinance.gov). The ability to create cash flow without monthly payments is certainly appealing.

However, there are important aspects to consider. When you add the origination fee and mortgage insurance premium (initially around 2 percent plus an annual 0.5 percent), the upfront costs are definitely higher than those of a conventional loan (consumerfinance.gov). Additionally, since the equity decreases each year as the loan is drawn, the assets that can be passed on to children are correspondingly reduced. The average effective property tax rate in North Dakota, where Fargo is located, is about 0.99 percent (propertytaxrates.org, 2026), which is not significantly lower than the national average. It is crucial to note that obtaining a reverse mortgage does not eliminate the obligation to pay property taxes and homeowners insurance. Failing to keep up with these payments can lead to default and the risk of losing the home.

As of the latest estimates, 16.7 percent of North Dakota's total population is aged 65 and older (census.gov, estimated 2024). While this is still lower than the national average of 18 percent, the trend of an increasing retirement-age population is evident in this region as well. This suggests that the number of individuals seeking such consultations will continue to rise.

Common alternatives compared to reverse mortgages in Fargo include downsizing to a smaller home and utilizing a home equity line of credit while staying in the current home. Downsizing involves significant costs and moving burdens, but it allows for the complete cashing out of equity. A home equity line of credit, while requiring monthly repayments, generally has lower upfront costs than a reverse mortgage. A reverse mortgage can be seen as a middle-ground option between these two, and the right choice depends on remaining income, assets, and the portion one wishes to pass on to their children.

Ultimately, a reverse mortgage is not inherently advantageous or disadvantageous; it is a choice where the pros and cons vary based on individual circumstances. Those who wish to stay in their current home and create cash flow may reach a different conclusion than those who want to preserve as much equity as possible to pass on to their children. To apply for a HECM, one must undergo a mandatory counseling process with a HUD-approved counseling agency, where costs and alternatives will also be discussed (hud.gov). It may be wise to take the time to discuss the counseling information with family before making a decision. This article does not constitute investment or legal advice, and it is recommended to consult with a professional before applying.