Reverse Mortgages Can Work Both Ways — Here's What Sellers Need to Know

A closer look published May 28, 2026 at HousingWire is drawing renewed attention to one of the least-understood features of federally insured reverse mortgages: borrowers on adjustable-rate Home Equity Conversion Mortgages (HECMs) can make voluntary payments at any time, without penalty, and those payments directly restore available borrowing capacity dollar-for-dollar. For the roughly 80,000 HECM loans originated each year, that flexibility has real consequences — including for homeowners who eventually want to sell.

How Voluntary Payments Reshape a HECM Loan Balance

The standard assumption about reverse mortgages is that the loan balance only grows over time. That framing is accurate for borrowers who make no payments — which is most of them, since eliminating the monthly mortgage obligation is the primary reason retirees seek a HECM in the first place. But the adjustable-rate HECM product does not prohibit repayment. Borrowers can make what are called partial prepayments whenever they choose.

According to the HousingWire analysis, when those payments are made consistently at the same interest rate over a sustained period, the loan behaves much like a traditional forward mortgage — the balance shrinks rather than grows. The difference is that a traditional mortgage captures that payment permanently. With a HECM, the payment also replenishes the available line of credit by an equivalent amount. The borrower simultaneously reduces debt, builds equity, and preserves future access to funds.

That third outcome — restored liquidity — is what financial planners are increasingly treating as a planning asset rather than a side effect. The HECM line of credit cannot be frozen or reduced due to falling home values as long as the borrower meets basic loan obligations, a protection that standard home equity lines of credit do not offer.

What This Means if You're Selling a Home With a Reverse Mortgage on It

For sellers, the practical issue is straightforward: a reverse mortgage must be paid off at or before closing. The full outstanding balance — original loan amount plus accrued interest and fees — becomes due when the home is sold. That number can be substantially larger than what the borrower originally received, particularly if the loan has been in place for a decade or more without any voluntary repayments.

Here is where the payment flexibility covered in HousingWire's analysis becomes directly relevant to sellers. A homeowner who made even occasional voluntary payments over the life of a HECM will carry a meaningfully lower payoff balance at closing than one who made none. Lower payoff means more net proceeds after the sale — and a simpler transaction overall.

Some strategic borrowers, according to the analysis, time large lump-sum payments to calendar years when they plan to itemize tax deductions, using the mortgage interest reported on a Form 1098 as an offset. Others route required minimum distributions from retirement accounts into a single large HECM payment for the same reason. For a seller approaching the market within the next one to three years, either approach could reduce the payoff obligation while also generating a potential tax benefit — two outcomes worth discussing with a financial advisor well before listing.

Pricing Your Home When a HECM Is in the Picture

Sellers carrying a reverse mortgage need to work backward from the payoff figure, not forward from an asking price. The sequencing matters. Before setting a list price, request a formal payoff statement from your HECM servicer. That figure — not an estimate — is your baseline. Anything above it, minus closing costs and agent commissions, is what you walk away with.

In markets where home values have risen significantly since the HECM was originated, that math often works cleanly in the seller's favor. The loan may represent a fraction of current market value, and the voluntary payment feature described in HousingWire's report means sellers who have been making payments could be in an even stronger position than they realize.

In softer markets, or in cases where the HECM has been in place for 15 or more years with no voluntary payments, the payoff balance can consume a larger share of sale proceeds. If you are in that situation, pricing aggressively enough to clear the payoff and still net meaningful proceeds requires a realistic assessment — not an optimistic one. An overpriced listing that sits too long will not fix an underwater reverse mortgage math problem.

One option worth exploring before listing: use the HECM's voluntary prepayment feature to reduce the outstanding balance now, if you have accessible funds. That approach directly increases your future net proceeds. If you want to model what a sale might yield under current market conditions before committing to that strategy, Local Home Buyers USA's instant-offer tool can give you a working number to anchor those calculations.

The Broader Shift in How Reverse Mortgages Are Understood

For years, the HECM carried a reputation as a product of last resort — something retirees turned to only after other options were exhausted. The HousingWire analysis, authored by Dan Hultquist, co-founder of REVERSE plus, reflects a growing reframing among financial planners who view the adjustable-rate HECM as a planning instrument with genuine strategic uses, including the ability to generate liquidity while simultaneously building equity.

For sellers, the takeaway is not that a reverse mortgage is always a smart financial move — that decision is personal and depends heavily on individual circumstances. The takeaway is that a HECM is not a static loan product. Its balance is not fixed. Sellers who understand that have more levers to pull than those who assume the payoff is simply what it is and there is nothing to be done about it.

Know your payoff. Know your payment options. Then price accordingly.