Reverse Mortgage vs Selling vs Downsizing: A Guide for Palm Beach County Retirees

Reverse mortgage vs selling is one of the biggest money choices a retiree can face. Both let you turn home equity into cash. However, they work in opposite ways. A reverse mortgage keeps you in the house and lets the loan grow. A sale ends the loan question for good and frees your equity now. Downsizing, the third path, mixes the two. This guide explains how each one works for Palm Beach County owners, what it costs, how it affects your heirs, and when selling is the better move.

Key takeaways

• The federal reverse mortgage, called a HECM, is for owners 62 and older who live in the home as their main residence.
• For 2026, the most home value a HECM can count is $1,249,125. The upfront FHA insurance premium is 2% of that figure or your home value, whichever is less, plus 0.5% a year on the balance.
• The loan balance grows over time. It comes due when the last borrower sells, moves out or dies.
• A HECM is non-recourse. Heirs never owe more than the home is worth, and they can settle the loan for 95% of the appraised value.
• Selling often wins if you plan to move within a few years, the home costs too much to keep, or you want to leave the most equity to family.

Reverse mortgage vs selling: the basic difference

With a reverse mortgage, you borrow against your home and make no required monthly loan payment. Instead, interest and fees are added to the balance each month. So the amount you owe goes up over time, not down. You keep the title, and you stay in the house.

When you sell, you get your equity in one lump sum at closing. After you pay off any loan and the cost of selling, the rest is yours. You then rent, buy a smaller place, or move near family. There is no loan balance growing in the background.

In short, a reverse mortgage spends your equity slowly while you stay. A sale hands you the equity now, but you have to move. Your choice depends on how long you want to stay and what the house costs to keep.

How a HECM reverse mortgage works

Most reverse mortgages in the US are Home Equity Conversion Mortgages, or HECMs. The FHA insures them. According to the CFPB, a HECM is only for owners who are 62 or older. You also must live in the home as your main residence.

Before you can apply, you must meet with a HUD-approved counselor. The counselor explains the costs, your duties and other options. That session is required, and it is worth taking seriously.

Your ongoing duties as a borrower

A reverse mortgage has no monthly loan payment, but it is not free of duties. You must keep paying property taxes and homeowners insurance. You also must keep the house in good repair and live there as your main home. If you fall behind on taxes or insurance, the lender can call the loan due. In Florida, that means budgeting for wind and flood coverage as well as taxes.

Ways to take the money

You can usually take HECM funds as a lump sum, monthly payments, a line of credit or a mix. A line of credit gives you room for future costs, such as a new roof or health needs. Your counselor and lender can walk through how each option affects the balance.

What a reverse mortgage costs

HECMs carry real costs, and they come out of your equity. The biggest one is FHA mortgage insurance. Under HUD Mortgagee Letter 2017-12, the upfront premium is 2% of the maximum claim amount. After that, an annual premium of 0.5% of the loan balance is added each year.

The maximum claim amount is the lesser of your home's value or the FHA limit. For case numbers assigned on or after Jan. 1, 2026, that limit is $1,249,125. So on a $600,000 home, the upfront premium would be 2% of $600,000, or $12,000.

You will also pay lender fees, title and closing costs, and interest. Most of these can be rolled into the loan. That keeps cash in your pocket today, but it raises the balance your heirs will face later. Ask each lender for a full cost estimate and compare them line by line.

Reverse mortgage vs selling: what your heirs face

This is where many families focus. A HECM comes due when the last borrower dies, sells or moves out for good. At that point, the heirs have a choice. They can pay off the loan and keep the home, sell it, or hand it to the lender.

HECMs are non-recourse loans. That means neither you nor your estate will ever owe more than the home is worth. If the balance is higher than the value, FHA insurance covers the gap. Heirs who want to keep or sell the home can settle the loan for the lesser of the balance or 95% of the appraised value.

Still, the growing balance reduces what is left for family. After many years, interest and premiums can use up much of the equity. If leaving the home or its value to your children matters to you, run the numbers with them before you sign. A reverse mortgage that lasts 15 years can leave far less than a sale today.

What about a spouse who is not on the loan?

Spouses under 62 cannot be borrowers. In some cases, a non-borrowing spouse may stay in the home after the borrower dies, if certain rules are met. These rules are detailed, so make sure your counselor covers them and that both of you understand them.

Downsizing with a HECM for Purchase

There is a middle path that many downsizers miss. A HECM for Purchase lets you sell your current home and buy a new main home using a reverse mortgage in one step. You put down a large down payment, often from the sale of your old house. The reverse mortgage covers the rest, and you have no monthly loan payment on the new place.

The down payment depends on your age and current rates. Older borrowers usually need less down. The same counseling, insurance and upkeep rules apply. This option can work well if you want a smaller home in Boca Raton or Boynton Beach but want to keep more cash in the bank.

For a wider look at the move, read our guide on whether to downsize your house. It covers homestead portability, condo rules and timing.

Reverse mortgage vs selling: when a sale wins

A reverse mortgage fits some retirees well. Still, selling often comes out ahead in these cases:

• You plan to move within a few years. Upfront costs are high, so a short stay rarely makes them worthwhile.
• The house costs too much to keep. If taxes, insurance and repairs strain your budget, a HECM does not remove those bills.
• You want to leave the most to heirs. A sale locks in the equity you have now instead of letting a balance grow.
• Your health may require a move. If you leave the home for more than 12 months in a row, the loan can come due.
• The market favors sellers. In August 2026, single-family homes in Palm Beach County had a median price of $650,000 and 3.5 months of supply, per Miami Realtors.

Selling also brings a tax benefit. Under IRS Publication 523, you can exclude up to $250,000 of gain on a main home, or $500,000 if married filing jointly. You must have owned and lived in the home for 2 of the last 5 years.

Reverse mortgage vs selling: when the loan fits better

On the other hand, a HECM can make sense if you plan to stay for many years and can afford upkeep. It may also help if you have little other savings, want to remove a current mortgage payment, or want a standby line of credit. In those cases, the cost buys you the right to age in place.

Comparing a reverse mortgage vs selling side by side

Before you decide, put three numbers on one page. First, find what your home would sell for today and what you would net after costs. Second, ask a HECM lender what you could borrow and what the balance might be in 5, 10 and 15 years. Third, price a smaller home or a 55+ community and see what cash would be left.

Then add the costs of staying, such as insurance, taxes, a roof or an aging AC system. Many owners find the answer once the numbers sit side by side. Our 55+ home selling page explains how we help older sellers plan the move.

Frequently asked questions

Is a reverse mortgage vs selling better for a 70-year-old?

It depends on how long you plan to stay and what the house costs to keep. Long stays favor a reverse mortgage. Short stays, high carrying costs or a wish to leave equity to heirs often favor selling.

Can I lose my home with a reverse mortgage?

Yes, if you break the loan terms. Not paying taxes or insurance, letting the home fall into disrepair, or moving out for more than 12 months in a row can make the loan come due.

Do my children have to pay back a reverse mortgage?

Not from their own money. The loan is non-recourse, so it is repaid from the home. Heirs can keep the home by paying the lesser of the balance or 95% of the appraised value.

Can I sell my house if I have a reverse mortgage?

Yes. You can sell at any time. The loan balance is paid from the sale proceeds, and you keep what is left.

Can I cancel a reverse mortgage after closing?

Yes. The CFPB notes that you have three days after closing to cancel for any reason without penalty.

Sources

• CFPB, What is a reverse mortgage?
• HUD, FHA announces 2026 loan limits
• HUD Mortgagee Letter 2017-12, HECM premiums
• HUD, Inheriting a home secured by a HECM
• IRS, Publication 523: Selling Your Home
• Miami Realtors, Palm Beach County August 2026 market report

This article is general information, not legal, tax or financial advice. Reverse mortgage rules and limits change, so talk with a HUD-approved counselor and a licensed professional about your own situation.

Not sure whether to borrow or sell? Start with what your home would sell for today. Get a free Pure Equity home value report and compare it with a reverse mortgage quote. If you plan to buy a smaller home, our agents can help you find the right condo, villa or 55+ community. Talk with our team.