A retiree who received counseling in Birmingham mentioned that it is becoming increasingly difficult to manage monthly living expenses solely on Social Security benefits. Although the house has been fully paid off for a long time, there is a lack of cash on hand. In such cases, the first question that arises is whether there is a way to borrow money using the house as collateral. The answer is a reverse mortgage. However, it is not necessarily a favorable product, so I will address some frequently asked questions one by one.

The first question is how much can be received. This depends on the size of the home equity. As of March 2026, the median home sale price in downtown Birmingham is around $199,950, which is relatively low compared to other major cities in the southern U.S. However, when considering the Greater Birmingham metropolitan area as a whole, the median price can rise to $350,000, indicating significant regional variation. It is important to note that households that have gradually paid off their mortgage over many years may have different equity amounts compared to those who have recently purchased a home, even if they live in the same neighborhood. The larger the equity, the more money can be received, but if there is an existing mortgage balance, that balance must be paid off first.

The second common question is whether monthly payments are required. HECM operates in the opposite structure of a traditional mortgage. Homeowners aged 62 and older can receive funds from a lender in the form of a lump sum, monthly payments, or a line of credit, using their home as collateral, and repayment occurs when the home is sold, the owner passes away, or the home is no longer used as the primary residence. The absence of a monthly principal and interest payment burden can be appealing to retirees living on a fixed income.

The third question is about property taxes. This is often a point of misunderstanding. Even with a reverse mortgage, the homeowner is still responsible for paying property taxes and homeowners insurance. The effective property tax rate in Jefferson County is around 0.59%, with the median annual tax amount being approximately $1,409, which is relatively low within Alabama. However, this tax rate can vary by county and school district, so it is important to check based on the actual address. It is also necessary to pass a financial capability assessment to ensure that the borrower can continue to manage taxes and insurance before the loan is approved.

The fourth question is about the costs involved. When adding origination fees, mortgage insurance premiums, and closing costs, the initial costs tend to be higher than those of a traditional mortgage. Additionally, over time, the home equity may decrease, which could reduce the assets passed on to children. The non-recourse structure means that if the home value falls below the loan balance, heirs are not required to pay the excess, which can be seen as a safety measure, but this does not eliminate the decrease in equity itself.

The fifth question is why there is such a large tax variation even within Birmingham. Alabama classifies most homes as Class III, taxing only 10% of the market value, and with additional millage from counties, cities, school districts, and special districts, the median tax amount can range from $546 to $3,538 depending on the zip code. Therefore, it is much more accurate to check the tax amount based on one's own address before the consultation to gauge the actual burden.

As of 2024, Alabama has a population aged 65 and older that makes up 18.6% of the total, and the proportion of elderly individuals is steadily increasing. As more households consider how to utilize their assets after retirement, it is important to remember that a reverse mortgage is not always the best answer. If the equity is not substantial or if there are already sufficient alternative income sources, other options may be more suitable. It is advisable to go through the mandatory counseling with a HUD-approved counseling agency before applying and to discuss thoroughly with family members. This article is not investment or legal advice, and it is recommended to consult with a professional before entering into any contracts.