A customer who requested a consultation in Plano expressed a concern. They needed funds for living expenses after retirement but did not want the value of the home they would pass on to their children to decrease significantly. It is worth noting that even within the same reverse mortgage, the outcomes can vary considerably depending on the method used.

Looking at the Plano housing market, as of June 2026, the typical value of homes in the Plano area is about $518,000, which is a 2.4 percent decrease from the previous year. Given that it is a high-value area, the equity is also substantial, but this means there are significant assets to protect.

A reverse mortgage is a product that allows homeowners aged 62 and older to receive funds from a lender by using their home equity as collateral. Instead of making monthly payments, the principal and interest are repaid when the home is sold, the owner passes away, or the home is no longer used as the primary residence. The most common product is the HECM, which is insured by the Federal Housing Administration, and funds can be received as a lump sum, monthly payments, or a line of credit.

If the budget is the same, we can compare how the two methods differ. The lump sum option is good for addressing urgent expenses, but interest starts accruing on the entire principal from the beginning, which can reduce equity relatively quickly. In contrast, the line of credit option allows for withdrawals only as needed, helping to preserve equity for a longer time.

The eligibility requirements are the same for both methods. Applicants must be at least 62 years old, the home must be their primary residence, and they must pass a financial assessment to confirm their ability to continue paying property taxes and insurance.

There are clear advantages as well. It allows for cash flow without monthly repayment burdens, and due to its non-recourse structure, even if the home value falls below the loan balance later, heirs are not required to pay the difference thanks to FHA insurance.

Plano is known for its good school districts, so there is steady demand from young families. Some may expect that home values will not drop significantly due to these local characteristics, but actual appraisals can vary based on market conditions, so it is wise not to rush decisions based on specific price predictions.

However, regardless of the method chosen, costs come along with it. When adding origination fees, mortgage insurance premiums, and closing costs, the initial expenses are higher than those of a traditional mortgage. The mortgage insurance premium starts at about 2 percent initially and adds 0.5 percent annually.

The average effective property tax rate in Collin County, where Plano is located, is reported to be around 1.16 percent. This is lower than the Texas average, but even after obtaining a reverse mortgage, the owner must continue to pay these taxes and insurance, and failing to do so can lead to default risk, which is the same regardless of the method.

It is also worth noting that there is a monthly payment option available. This method provides a fixed amount each month, making it convenient for planning regular living expenses, but it lacks flexibility when a large sum is needed urgently. It is possible to mix the three methods, so one can consult to determine a combination that fits their lifestyle.

For this customer, I also suggested organizing an inheritance plan through a trust or will in addition to the reverse mortgage. Even if a reverse mortgage is obtained, the remaining equity is still subject to the inheritance process, so it is helpful to work with a tax advisor or estate planning attorney to get a complete picture. I also informed them that the estimated loan amounts presented by different consulting agencies may vary slightly. Since the actual amount can differ based on appraisal and interest rate conditions, it is advisable to compare explanations from multiple sources before making a decision.

Whichever option is chosen, an HECM requires mandatory counseling with a HUD-approved counseling agency before applying. For families considering inheritance, it is important to compare the rate of equity reduction for each method during this counseling and to discuss it with family before making a decision. This article is not investment or legal advice, and it is recommended to consult with professionals before entering into any contracts.