Should I sell and downsize, or stay put with a reverse mortgage?

How do the three paths compare?

	Sell and downsize	Stay with a reverse mortgage	Reverse mortgage for purchase
Where you live	A smaller home, or renting	Your current home	A new home that fits better
Cash freed up	Often the most	Depends on age and home value	Whatever you don't put into the new home
Monthly mortgage payment	None if you pay cash	None required	None required
Upfront costs	Selling costs, often 6% to 8%, plus moving	Loan costs, often paid from the loan	Loan costs plus buying costs
Taxes	Gain above $250,000 (single) or $500,000 (married) can be taxable	No tax on loan money	Selling your old home can still trigger tax
Equity for heirs	Cash or the new home	Whatever's left after the loan is repaid	Whatever's left after the loan is repaid

When does downsizing make the most sense?

• The house is more than you need: stairs, a big yard, empty bedrooms
• Upkeep, taxes, or insurance are becoming too much
• You want to move closer to family, or somewhere easier to age in place
• You'd like cash in the bank more than equity in a house

When does staying put make sense?

• You love your home and neighborhood, and it works for you as you age
• Selling would mean a large taxable gain (common for long-time California owners). See reverse mortgages and taxes
• A smaller home nearby wouldn't cost much less

What is a reverse mortgage for purchase?

A HECM for Purchase lets you buy your next home with a reverse mortgage. You make a large down payment, often from selling your current home, and the reverse mortgage covers the rest. After closing, there's no monthly mortgage payment. You still pay property taxes, insurance, and upkeep. The down payment depends mostly on your age: the older you are, the less you need to put down.

It's a way to right-size without spending all your equity on the new home, and without taking on a new payment.

Are there tax breaks for moving?

• California: under Prop 19, homeowners 55 and older can generally move their property tax base to a replacement home anywhere in California, up to three times.
• Florida: "Save Our Homes" portability can let you carry part of your homestead tax savings to a new Florida home.

Rules have limits and deadlines, so confirm with your county assessor.

Can you help me sell and buy?

Yes, in California. Our affiliated real estate brokerage, The Home Advisory (California DRE #02020987, Ace Ausar, broker), can help you sell your current home and find the next one, while we handle the financing. Having one team coordinate the sale, the purchase, and the loan makes the timing much easier. You're always free to choose any real estate agent; see the affiliated business disclosure below.

Example scenario (illustrative)

A couple in their early 70s in Thousand Oaks own a two-story home worth $1.3 million. The stairs are getting hard. They sell, use part of the proceeds as a down payment on a $750,000 single-story home, and a reverse mortgage for purchase covers the rest. They move in with no mortgage payment and several hundred thousand dollars in the bank.

Our take

There's no wrong answer here, only the one that fits the next 20 years of your life. I'll put all three side by side: what you'd walk away with, what you'd pay each month, and what's left for your family.