Many people in Fullerton are asking whether downsizing to a smaller home or staying in their current home while cashing out equity is the better option. Both methods have their advantages and disadvantages, so let's break them down one by one.

First, let's clarify what a reverse mortgage is. Simply put, it is a product that allows homeowners aged 62 and older to use their home equity as collateral to receive money from a bank. Unlike a traditional mortgage, where you pay back the loan monthly, a reverse mortgage allows you to receive funds in a lump sum, monthly payments, or a line of credit. The loan is repaid when the home is sold, the homeowner passes away, or the homeowner no longer lives in the home. A prominent example is the Home Equity Conversion Mortgage (HECM) insured by the Federal Housing Administration (FHA).

Now, let's simplify the eligibility requirements. You must be at least 62 years old, and the home must be your primary residence. If there is an existing mortgage, it must be paid off first, and you will only receive the remaining funds. In comparison to downsizing, downsizing provides a lump sum from selling your home but requires you to leave a familiar neighborhood, while a reverse mortgage allows you to stay in your neighborhood and receive funds as needed. There is no definitive answer as to which option is better; it depends on how long you plan to stay in your home.

Looking at home prices in Fullerton, you can see why this choice feels attractive. According to Zillow, the average home value in Fullerton is $916,245, and other sources report the median sale price for single-family homes in June 2026 to be $996,000. If the terminology is unfamiliar, think of it this way: if you have lived in your home long enough to pay off the mortgage, you likely have equity worth this amount.

When comparing to downsizing, a crucial factor to consider is property taxes. The average effective property tax rate in Orange County is around 0.66%, which translates to approximately $6,330 annually for a home valued at the median price of $962,600. Even with a reverse mortgage, the property taxes and insurance remain the homeowner's responsibility. Downsizing may reduce this burden, but it comes with the cost of leaving a familiar neighborhood, school district, and neighbors.

In California, 16.5% of the population is over 65, and in areas like Fullerton, it is common for long-term residents to weigh these two options.

To summarize the advantages of a reverse mortgage, you can create cash flow without worrying about monthly payments, and because of the non-recourse structure, if the home value falls below the loan balance, heirs are not required to pay the difference thanks to FHA insurance. However, be aware of the following points:

• Initial costs such as origination fees and mortgage insurance premiums (MIP) are higher than those of a traditional mortgage.
• Over time, the remaining equity may decrease, reducing the assets passed on to children.
• If property taxes and insurance are not continuously paid, there is a risk of default.

Ultimately, whether to choose downsizing or a reverse mortgage is not a question with a clear answer. HECM requires mandatory counseling with a HUD-approved agency before applying, so comparing both options during this session can be beneficial. Given that there are scams targeting the elderly, it is important to discuss thoroughly with family before making a decision.

During the counseling process, you will also determine how to receive funds. If you need monthly living expenses, a monthly payment option may be suitable, while a lump sum may be necessary for home repairs. The line of credit option offers flexibility as you can withdraw funds as needed. However, regardless of the method, the accumulation of principal and interest over time remains the same.

This article is not investment or legal advice, and it is recommended to consult with a HUD-approved counselor and financial or legal professionals before entering into any contracts.