When it comes to retirement planning, homeowners in Tennessee are increasingly looking at innovative ways to reshape their financial picture. This is especially true in vibrant cities like Chattanooga and Nashville. One financial tool gaining attention is the Home Equity Conversion Mortgage (HECM), a federally-insured reverse mortgage product designed for homeowners aged 62 and older. In this article, we’ll explore how a HECM can serve both as a means of consolidating debt and as part of a broader financial planning strategy. We’ll also look at how homeowners working with a local lender like Mortgage South of Tennessee can benefit from tailored guidance specific to the Tennessee market.

1. Understanding the Basics: What is a HECM?

A HECM is a type of reverse mortgage backed by the Federal Housing Administration (FHA). It allows homeowners aged 62 or older who own their home (and live in it as a primary residence) to convert part of their home equity into cash.

Here’s How It Works in Simplified Form:

• Instead of you paying a lender each month (as with a traditional mortgage), the lender pays you or gives you access to cash based on your home equity.
• You still must live in the home as your primary residence, maintain property taxes and insurance, and keep the home in good condition.
• The loan becomes due when the last borrower (or eligible non-borrowing spouse) moves out permanently, sells the home, passes away, or otherwise no longer meets the residency requirement.
• Importantly: the borrower retains title to the home (they still own it) and may, if desired, still pay monthly towards the loan, but they are not required to make monthly payments toward principal and interest like a forward mortgage.

The key eligibility criteria: age 62+, the home must be the primary residence, sufficient equity, along with paying property taxes, homeowner insurance, and any homeowner association dues.

2. Why Consolidating Debt with a HECM May Be Worth Considering

For homeowners in Chattanooga and Nashville who may carry high-interest debt (credit cards, personal loans, medical bills, perhaps even lingering mortgages), a HECM can serve as a debt-consolidation tool. For this purpose, it carries some notable advantages.

Here are Several Ways it Can Help:

• Access to cash without monthly principal & interest payments: Because a HECM allows you to receive funds (in a lump sum, line of credit, or monthly draws) and defers monthly P&I payments, it can free up monthly cash flow.
• Use of proceeds for any purpose: The funds from a HECM are not restricted in usage. You could apply them to pay off high-interest credit card debt, eliminate outstanding personal loans, or even pay off an existing mortgage or home equity loan.
• Potential to lock in lower effective cost: If you’re paying 15–25% on unsecured debt, replacing that with home-equity-based cash could reduce the effective interest burden (though interest will accrue on the HECM).
• Reducing the pressure of monthly payments: In retirement, reducing required monthly cash outflows can help preserve other resources (such as retirement savings) and ease stress.

Example for a Tennessee Homeowner:

Suppose a homeowner in Nashville is carrying $50,000 in credit-card debt and $30,000 in personal loans, with payments eating $1,200/month. They own their home either outright or it is mostly paid off, and they use a HECM line of credit or lump sum to wipe out the unsecured debt. Now instead of $1,200/month to debt payments, they only need to maintain taxes/insurance/fees. Interest accrues to the HECM loan balance until repayment is triggered (sale/move/death). The monthly relief could then be redirected into other financial goals (such as home improvements, out-of-pocket health expenses, or simply enjoying retirement).

How this Could Help in Chattanooga or Nashville:

• Home values in many Tennessee markets have appreciated, meaning homeowners may have meaningful equity to access.
• Many retirees prefer staying in their home rather than downsizing immediately. A HECM allows staying put while leveraging that equity.
• The cost of living in these markets may allow for flexibility in executing such a strategy.

3. Integrating the HECM into a Financial Planning Framework

Using a HECM solely for debt consolidation is fine. However, the best results come when it becomes part of a holistic plan. With Mortgage South of Tennessee’s guidance, consider the following planning dimensions:

a) Cash flow optimization

• With high-interest debt eliminated and monthly payments reduced, you free up income for other goals.
• You still must budget for property taxes, homeowners insurance, maintenance, and HOA fees (if applicable). Missing those obligations can cause the HECM loan to become due.

b) Retirement income preservation

• Reducing debt preserves savings and investment assets. Rather than using them to service debt, you can let them grow or generate income.
• The HECM itself doesn’t create taxable income (the advances are loan proceeds, not income).

c) Estate and inheritance considerations

• A HECM is a “non-recourse” loan. This means you or your heirs will not owe more than the value of the home when it is sold.
• Because you are drawing down home equity, less may remain for heirs. For that reason, it’s important to balance current benefit vs future legacy.
• In planning with local heirs (children, etc.) in Chattanooga or Nashville, you may decide on a strategy: keep the home in the family, sell it, or refinance. Mortgage South will work with your financial advisor to help model scenarios.

d) Timing and exit strategy

• A HECM is best suited for homeowners who expect to stay in their home for a significant period (since closing costs and fees can be substantial). If you plan to move soon, the cost may outweigh the benefit.
• You should have an “exit strategy.” What happens when you move? When you sell? When the loan becomes due? Planning this upfront avoids surprises.
• Consider the potential for future home value changes and interest rate growth; model conservative scenarios.

e) Coordinating with other retirement planning tools

• A HECM can complement other instruments (like IRAs, Social Security, annuities, pensions) rather than replace them.
• For example, by reducing debt, you may be able to delay claiming Social Security, allowing your benefit to grow.
• Or you might decide to invest the freed-up monthly cash flow into an income-generating portfolio.

4. Local Considerations for Tennessee Homeowners

Working with a local lender like Mortgage South of Tennessee means you benefit from local expertise. This is important because market conditions in Chattanooga and Nashville change – and they affect your choices.

• Home values & equity: The amount you can borrow with a HECM depends on the lesser of the home’s appraised value or the FHA loan limit (one such limit is $1,209,750 in 2025) as well as your age and current interest rates.
• Property taxes and insurance rates: Particularly in Tennessee, local tax rates and insurance costs (including for flood, tornado, hail, etc.) influence whether you can comfortably meet the obligations required for the HECM.
• Lifestyle and residency: If you split your time between homes, travel often, or anticipate moving into assisted living, you’ll want to factor those in. The home must be your principal residence.
• Federal and state counseling requirements: A HECM requires a HUD-approved counseling session before an application can be taken in the State of Tennessee.
• Local tax & estate issues: Tennessee’s tax laws, estate laws, and inheritance expectations differ from other states; working with local legal/financial advisors ensures your plan is regionally optimized.

5. How Mortgage South of Tennessee Helps You Navigate This Decision

At Mortgage South of Tennessee, we understand that every homeowner in Chattanooga or Nashville has unique goals, concerns, and legacy desires. Here’s how we work with you:

• Customized analysis of home equity & eligibility: We assess your home’s value, outstanding mortgage (if any), and the maximum HECM amount you might access.
• Cash-flow and debt-consolidation modeling: We run scenarios that compare your current debt burden, monthly payments, and the effect of using a HECM to eliminate high-cost debt.
• Integration with retirement and estate goals: We help map out how using a HECM affects other areas like investment assets, IRA drawdown strategies, Medicare/Medicaid planning (if relevant in Tennessee), and inheritance planning.
• Exit strategy planning: We help you think ahead to “what happens when” moving, selling, or passing the home to heirs – so the HECM doesn’t become a surprise burden.
• Local expertise on Tennessee rules: From state tax implications to local insurance cost trends, we provide localized guidance you won’t always get from a national lender.
• Support through required counseling & closing logistics: We coordinate with HUD-approved counselors, appraisers familiar with Tennessee home values, and handle disclosures specific to HECMs.

6. Realistic Steps for Chattanooga/Nashville Homeowners

If you’re considering a HECM for debt consolidation or as part of your financial plan, here’s a practical step-by-step roadmap:

1. Inventory your debt.
2. Evaluate your home equity.
3. Meet with a qualified lender (like Mortgage South of Tennessee).
4. Attend the HUD-approved counseling session.
5. Run consolidation scenarios.
6. Discuss legacy and estate planning.
7. Consider alternative strategies.
8. Make the decision.
9. Monitor annually.

7. A Final Word

For many older homeowners in Chattanooga and Nashville, the HECM can be a creative and effective tool to consolidate debt, improve monthly cash flow, and enhance retirement planning flexibility. But it is not a plug-and-play solution. It requires understanding how it affects your home equity, your heirs, your monthly obligations, and your long-term goals.

Working with a trusted local lender like Mortgage South of Tennessee ensures you get a tailored plan, one that reflects the realities of the Tennessee housing markets and your personal lifestyle and legacy desires. If you’re thinking: “Can I use the equity in my home to simplify my finances and enjoy more peace in retirement?” then reaching out for a HECM exploration may well be the next smart step.

Mortgage South of Tennessee makes no guarantee of specific results. All financial decisions should be made in consultation with your financial advisor, tax advisor, and legal counsel. The information above is for educational purposes only and does not constitute legal or tax advice.

Thank you for reading … and congratulations on taking proactive steps toward your financial future! Contact us today to schedule a no-pressure consultation.

When you first hear about a reverse mortgage, it’s natural to pause at the cost. Compared to traditional mortgage products, reverse mortgages can seem expensive – with higher upfront fees, mortgage insurance premiums, and ongoing costs. But here’s the truth: those costs exist for a reason. They provide powerful protections that make reverse mortgages one of the most secure, flexible, and life-changing financial tools available to American homeowners age 62 and older.

In particular, the FHA insurance built into every Home Equity Conversion Mortgage (HECM) – the only reverse mortgage insured by the federal government – delivers enormous benefits that justify the price tag many borrowers first find intimidating.

Let’s unpack why reverse mortgages are expensive. But we won’t stop there. We’ll also look at why they’re worth the cost – and worth a second look. Especially when you understand the protection and peace of mind that FHA insurance provides.

Understanding What You’re Paying For

Every reverse mortgage has several components that make up the total cost. It’s important to know where the money goes before you judge whether it’s “too expensive.”

Here’s a breakdown of the most common costs:

1. Origination Fee
   This is charged by your lender to process, underwrite, and close your loan. FHA limits this to 2% of the first $200,000 of your home’s value plus 1% of the amount above that, capped at $6,000.
2. FHA Mortgage Insurance Premiums (MIP)
   The FHA requires two kinds of insurance fees:
   • Upfront MIP: 2% of the home’s appraised value or the FHA lending limit, whichever is less.
   • Annual MIP: 0.5% of the loan balance, added to the loan each year.
3. Third-Party Closing Costs
   This includes appraisal fees, title insurance, credit checks, and other standard costs associated with any mortgage transaction.

When you add all this up, a reverse mortgage might look expensive compared to a traditional refinance or home equity loan. But that’s comparing apples to oranges. A reverse mortgage isn’t just a loan – it’s a retirement security tool, and the FHA insurance transforms it into something far more valuable.

The Power of FHA Insurance

The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD), insures every HECM reverse mortgage. That insurance changes everything about how the loan works – for both borrowers and their heirs.

Without FHA insurance, a reverse mortgage would be a risky proposition. With it, it becomes one of the safest ways for older Americans to access their home equity.

Let’s look at what FHA insurance does — and why it’s worth the cost.

1. You Can Never Owe More Than Your Home Is Worth

This could be the most valuable feature of FHA insurance.

With a reverse mortgage, you’re borrowing against your home equity. Over time, interest accrues, and the loan balance grows. If you live a long time or if housing prices drop, your loan balance might eventually exceed the market value of your home.

With a traditional mortgage, that would be a nightmare. But with an FHA-insured HECM, you (or your heirs) will never owe more than the home is worth when it’s sold. This is called the “non-recourse feature,” and it’s entirely backed by FHA insurance.

In other words, if your home sells for less than the amount you owe on it, FHA insurance pays the difference. You and your family don’t incur any financial loss.

Benefit: Total peace of mind. Your heirs will never inherit debt.

2. Guaranteed Access to Your Funds – Even if the Economy Changes

Reverse mortgage proceeds can be taken as a lump sum, monthly payment, line of credit, or combination of these options. The line of credit option, in particular, is a favorite among financial planners because it grows over time – giving you more borrowing power later.

Here’s the key: even if your lender goes out of business or the housing market crashes, the FHA guarantees that your funds will still be available. You’ll always have access to the money that was promised to you, exactly as the loan terms state.

Benefit: Security and reliability, no matter what happens to the broader economy.

3. You Can Stay in Your Home as Long as You Want

A reverse mortgage allows you to live in your home for the rest of your life without making monthly mortgage payments. The only obligations you must meet are:

• Living in the home as your primary residence,
• Keeping property taxes and homeowners insurance up to date, and
• Maintaining the property in good condition.

FHA insurance ensures that as long as you follow these basic requirements, you can never be forced to leave your home due to loan maturity. Even if your home value declines dramatically or you outlive your life expectancy, the FHA stands behind your right to stay.

Benefit: Lifelong housing security.

4. The Loan is Federally Regulated and Protected

Because the FHA insures HECM reverse mortgages, the program is tightly regulated to protect seniors from predatory lending and misinformation. This includes:

Mandatory third-party counseling: Before getting a reverse mortgage, you must go through an HUD-approved session with a counselor to ensure you fully understand the loan.

• Caps on fees: FHA sets strict limits on origination and closing costs.
• Transparent disclosures: Borrowers receive detailed projections of loan balances, equity, and costs over time.
• Lender accountability: FHA monitors participating lenders to ensure compliance with federal rules.

This level of oversight is rare in the mortgage world – and it’s all made possible because of the FHA insurance program.

Benefit: A safer, government-regulated process designed to protect seniors.

5. Your Heirs Have Options – Not Obligations

One of the things most often misunderstood about reverse mortgages is what happens after the borrower dies or permanently moves out of the home.

Here’s how FHA insurance protects your heirs:

• They have the right to repay the loan and keep the home if they choose.
• Or they can sell the home and keep any equity that remains after the loan is repaid.
• If the home is worth less than the balance owed, they can simply walk away – with no liability for the shortfall.

FHA insurance covers any losses to the lender so that the family never faces financial harm.

Benefit: Estate protection and financial flexibility for your loved ones.

Why Reverse Mortgages Are “Expensive” – And Why That’s a Good Thing

The FHA insurance premiums are what make reverse mortgages look pricey compared to traditional loans. But that cost isn’t a penalty – it’s the price of a powerful guarantee.

Think of it like this:

You wouldn’t buy a car without insurance, and you shouldn’t unlock hundreds of thousands of dollars of home equity without protecting yourself from the risks.

Reverse mortgage insurance is your safety net – and it protects both you and your heirs in every scenario:

• If home values fall, you’re covered.
• If you live longer than expected, you’re covered.
• If your lender fails, you’re covered.
• If your line of credit grows larger than your home’s worth, you’re covered.

Those protections are possible only because of FHA insurance – and they’re what make reverse mortgages a uniquely secure way to age in place.

The Hidden Value: Stability and Independence

At Mortgage South, we see firsthand how reverse mortgages change lives. The costs fade into the background once homeowners experience the freedom and stability that come with unlocking their home equity without the burden of monthly payments.

Here are just a few real-world benefits that clients often share:

1. Reduced Financial Stress

Many retirees live on fixed incomes that don’t always keep pace with inflation. A reverse mortgage provides a reliable cushion – a way to pay medical bills, home repairs, or everyday expenses without draining savings.

2. Improved Quality of Life

Homeowners often use reverse mortgage proceeds to travel, help their grandchildren with college, or make home improvements that enhance safety and comfort.

3. Protection Against Market Volatility

Retirees who depend on investments can use reverse mortgage funds as a buffer during market downturns, avoiding the need to sell investments at a loss.

4. The Ability to Age in Place

Perhaps the most emotional benefit – staying in the home you love, surrounded by memories, and maintaining independence. FHA insurance guarantees that right, as long as you meet loan obligations.

Reverse Mortgages: A Smart Financial Tool, Not a Last Resort

It’s true that reverse mortgages once had a stigma. They were often viewed as a “last resort” for desperate homeowners. But today’s FHA-insured HECM is a modern financial planning tool embraced by financial advisors, estate planners, and retirement specialists nationwide.

Used wisely, it can:

• Supplement Social Security income
• Delay drawing down retirement accounts (increasing long-term sustainability)
• Fund long-term care needs
• Provide tax-free cash flow in retirement

When you consider these advantages, the cost of FHA insurance becomes a small price to pay for the freedom, protection, and flexibility it provides.

Final Thoughts: Expensive, Yes – But Worth Every Penny

At Mortgage South of Tennessee, we believe in being transparent about costs – and we never sugarcoat that reverse mortgages come with fees and insurance premiums. But we also know that those costs buy something priceless: security, peace of mind, and guaranteed protection for you and your family.

The FHA insurance that comes with every HECM reverse mortgage is what makes this product truly special. It transforms what could be a risky loan into a federally backed, consumer-protected financial lifeline for homeowners 62 and older.

So yes – reverse mortgages are expensive. But when you understand what that money buys you, you realize they’re also worth it.

Call Mortgage South of Tennessee

If you or a loved one are considering a reverse mortgage in Tennessee, Mortgage South is here to help. Our experienced team will walk you through every detail, explain the costs, and show you exactly how FHA insurance protects you at every stage.

Because in the end, the goal isn’t just to get a loan – it’s to secure your retirement with confidence and peace of mind. We’re trusted reverse mortgage experts, serving Tennessee homeowners with honesty, clarity, and care.

Contact us today to schedule a no-pressure consultation and discover how a reverse mortgage can help you live more comfortably – and more securely – in your own home.

If you’ve searched online for a reverse mortgage calculator, you’ve probably seen dozens of tools that promise to estimate how much money you could qualify for. These calculators can seem like a quick way to learn whether a reverse mortgage is the right option for your retirement. But is a reverse mortgage calculator accurate? And, more importantly, should you rely on one to help you make a life-changing financial decision?

At Mortgage South of Tennessee, with offices in both Nashville and Chattanooga, we’ve helped countless homeowners explore their options. In this guide, we’ll explain these 7 points:

1. What reverse mortgage calculators are

2. How they work

3. Their limitations

4. Pros and cons of using one

5. Why your location can make a difference

6. When it makes sense to talk to a professional

7. Our final thoughts

1. What Is a Reverse Mortgage Calculator?

A reverse mortgage calculator is an online tool that estimates how much equity you could access from your home through a reverse mortgage. It usually asks for:

• Your age (or your spouse’s, whichever is younger).
• Your estimated home value.
• Your current mortgage balance.
• Your ZIP code or city (such as Nashville, TN or Chattanooga, TN).

From those numbers, the calculator generates a payout estimate. Some even break down lump sum, monthly payment, or line-of-credit options.

However, calculators are only a rough estimate. They don’t factor in every detail of your financial situation, your property, or Tennessee-specific lending requirements.

2. How Reverse Mortgage Calculators Work

Behind the scenes, most calculators rely on:

• FHA lending limits (as of 2025, $1,149,825).
• Principal Limit Factor (PLF), which increases with age and is tied to interest rates.
• Home value – based on what you enter, not an official appraisal.
• Mortgage balance, which must be paid off before you can access equity.

It’s a helpful formula for education, but it’s not the whole story.

3. Is a Reverse Mortgage Calculator Accurate (or, Why It’s Not)

Home value is self-reported

Without a professional appraisal, the numbers may be inflated or underestimated.

Your full financial picture is missing

Lenders also review income, credit, and ability to pay taxes and insurance.

Interest rates change

Calculators usually use an average rate, but your rate may be different at the time of application.

Fees aren’t included

Closing costs, FHA insurance, and origination fees reduce what you receive.

Marketing bias

Some calculators are designed more for lead capture than accuracy.

4. Pros and Cons of Using a Reverse Mortgage Calculator

Pros

• Quick and free – Results appear in minutes.
• Educational – Helps homeowners understand how age and loan balance affect eligibility.
• Good for early research – Perfect for homeowners who are “just curious.”

Cons

• Can create false expectations – Numbers look precise but are only estimates.
• Misses key costs – HOA fees, property taxes, and maintenance obligations matter.
• May require personal information – Some sites collect your phone or email.
• Not city-specific – Housing markets in Nashville and Chattanooga vary widely, and calculators can’t adjust for local conditions.

5. Location Matters

Reverse Mortgages in Nashville, Tennessee

Nashville’s housing market has grown rapidly over the past decade, with home values rising significantly. For retirees, that means many have more equity than they realize.

But Nashville also comes with unique financial considerations:

• Property taxes in Davidson County may be different than surrounding counties, which affects eligibility.
• Higher home values can increase your potential proceeds, but only up to FHA’s lending limit.
• Neighborhood differences (East Nashville vs. Green Hills vs. Bellevue) can dramatically impact appraised value. That’s something a calculator won’t capture.

For homeowners in Nashville, TN, using a reverse mortgage calculator can give a ballpark figure, but to know your true options, you’ll need a professional appraisal and tailored advice from a local lender like Mortgage South.

Reverse Mortgages in Chattanooga, Tennessee

Chattanooga has a very different housing profile compared to Nashville. Home values are generally more affordable, which impacts reverse mortgage calculations.

Here’s what stands out in Chattanooga:

• Hamilton County property taxes are typically lower than in Nashville, which can help borrowers meet financial obligations.
• Neighborhood variation is also strong. Downtown condos, Lookout Mountain estates, and suburban properties all appraise differently.
• Local retirement trends indicate that Chattanooga is popular with retirees because of affordability. This means many homeowners look to reverse mortgages as part of their retirement income strategy.

For homeowners in Chattanooga, TN, a reverse mortgage calculator might underestimate what’s possible if you don’t input an accurate home value. Only a local expert who knows the Chattanooga market can provide realistic numbers.

6. Know When It’s Time to Talk to a Professional

When a Calculator Can Be Helpful

• Early-stage curiosity about reverse mortgages.
• Comparing “what if” scenarios, like waiting a few years to apply.
• Learning the basics of reverse mortgage eligibility.

When Not to Rely on a Calculator

• If you’re making retirement income plans.
• If your situation is complex (multiple properties, high-value estates).
• If you’re ready to apply, you’ll need a full consultation instead.

Why Talk to Mortgage South

Unlike generic calculators, Mortgage South of Tennessee provides:

• Accurate home valuations based on professional appraisals.
• Complete cost breakdowns including fees, insurance, and closing costs.
• Local expertise in both Nashville and Chattanooga housing markets.
• Personalized advice that aligns with your retirement goals.

Whether you’re in a bustling Nashville neighborhood or enjoying life near the Tennessee River in Chattanooga, Mortgage South can help you understand your true reverse mortgage options.

7. Final Thoughts

So, is a reverse mortgage calculator accurate? The answer: only as a rough guide.

These tools are helpful for education and early research, but they fall short when it comes to precision. Home value differences between Nashville and Chattanooga, property tax variations, and personal financial details all matter too much to rely on a calculator alone.

The smarter choice? Use the calculator to learn the basics, then schedule a conversation with a local lender you trust.

At Mortgage South, we take the time to walk you through every step – so you know exactly what to expect before making a decision.

Key Takeaways

1. Reverse mortgage calculators provide estimates, not guarantees.
2. They often miss important details like fees, taxes, and local housing differences.
3. Nashville homeowners may see higher payouts due to rising values, but only up to FHA limits.
4. Chattanooga homeowners benefit from affordability, but calculators may underestimate values.
5. Mortgage South of Tennessee offers accurate, personalized guidance in both cities.

Let’s Talk About The Myths Surrounding Reverse Mortgages—and Why Working with a Local Lender Like Nathan at Mortgage South Is Your Best Option

As homeowners move into retirement, many find that the equity in their home is their largest financial asset. Most people do not tap into that equity or utilize it to its fullest because reverse mortgages remain shrouded in myths and misconceptions. At Mortgage South, we’ve guided hundreds of clients in Chattanooga and Nashville through the ins and outs of reverse mortgages. In this blog, we will tackle the most commonly asked questions about reverse mortgages, the myths, explain the advantages of working with a trusted local lender, and show you how a Reverse Mortgage or HECM for Purchase can work for you during retirement.  A reverse mortgage is more than a loan; it is a valuable tool that has been underutilized by homeowners in retirement.

1. Myth: “The Bank Will Own My Home”

Fact:

The most common misconception that we hear from potential clients is that they will no longer be in ownership of their home.  This just simply isn’t true!  The borrower retains complete ownership of the home just like with any other mortgage.  They can continue to live in the home as their primary residence until the last remaining borrower leaves the home. Homeowners are responsible for property taxes, homeowners’ insurance, and upkeep.  At any point in time, they can sell the home, pay off the loan and keep the equity, just like any other mortgage. Most people feel most comfortable when they work with a local lender who truly understands the markets in Nashville and Chattanooga.  To sum it up, you remain in 100% ownership of the home and a reverse mortgage allows you to stay in your home during retirement with no required monthly mortgage payment.

2. Myth: “My Estate will be responsible for the Debt”

Fact:

An FHA insured reverse mortgage is a nonrecourse loan.  This means that neither the borrower nor their estate will ever owe more than the home is worth when the loan becomes due and payable. The estate can choose to keep the home by repaying the loan or they can sell the home, repay the loan and keep the difference if the sale exceeds the loan payoff.  The remaining equity goes to the estate; if there is a shortfall, the FHA insurance covers the remaining balance.

Let’s sum it up: FHA insurance offers unique terms in that it makes the loan a non-recourse loan.  This protects the borrower and their estate from ever owing more than the home is worth.

3. Myth: “Only Financially Desperate People Take Out a Reverse Mortgage. “

Fact:

Reverse Mortgages were developed to help those in retirement utilize the equity in their home to pay off debt, payoff an existing mortgage, turn on an income stream through the line of credit feature or even right-size or relocate using a HECM for Purchase without a required monthly mortgage payment. In the current inflationary environment, tapping the equity in their home is a great way to hedge against depleting their retirement accounts or their taxable IRAs.

Let’s sum it up: While a reverse mortgage can help those in a challenging financial situation, a reverse mortgage line of credit will grow over time, building a buffer against inflation and market volatility.

4. Myth: “I’ll Lose My House If I Travel for an Extended Period of Time”

Fact:

Even though a reverse mortgage requires you to live in the home as your primary residence, you are free to travel without limit.  If you decide to move permanently or sell your property, you can repay the loan or let your estate sell it, repay the loan, and keep any remaining equity.

Let’s sum it up: A reverse mortgage does not limit your ability to travel, as long as you maintain the home as your primary residence.

5. Myth: “Reverse Mortgages Are Too Expensive”

Fact:

The closing costs are more expensive than a traditional mortgage because of the upfront FHA mortgage insurance premium that is financed into the loan.  This premium allows the homeowners some very unique terms to their mortgage, such as the ability to live in the home with no required monthly mortgage payment, the non-recourse feature to protect the borrower and their estate, and the ability to always have access to their line of credit regardless of the housing or banking market.

Let’s sum it up: Fees are capped by FHA and can be financed into the loan—ensuring affordability.

6. Myth: “I Have to Have My Home Paid Off to Qualify”

Fact:

A reverse mortgage will pay off your existing mortgage, as long as the balance does not exceed the lending limits set by FHA.  Clients can qualify as long as they have sufficient equity in their home and meet age and occupancy requirements.

Fact: A reverse mortgage can be used to pay off existing liens, consolidating debts into one interest-accruing, tax-free loan.

6. Why Should I Work with a Local Lender Like Mortgage South?

Reverse Mortgages Are All We Do!

Mortgage South has been in business since 1987 and in 1993, we worked with the State Legislature in Tennessee to get the first reverse mortgage passed.  We then closed the very first reverse mortgage in the state!  We understand the real estate markets in Nashville’s vibrant neighborhoods and Chattanooga’s scenic riverfront communities. Our local experience means we sit down with you face to face and explain the process in detail.  We will listen to your needs and specifically craft a plan to help you meet your retirement goals.  We only use local appraisers to give you peace of mind, faster closings, and seamless coordination with local attorneys, title companies, and realtors.

Unlike national call-center lenders, we offer one-on-one consultations. Clients speak directly with Nathan Guerrero who will guide them through every step—from initial equity analysis to closing day!

8. How to Use a Reverse Mortgage as a Financial Tool.

A reverse mortgage line of credit can act as a financial buffer during times of high inflation and market volatility. Any unused portion of the line of credit will grow over time, offering more money available when it is needed for unexpected expenses such as home repairs or medical needs.

To Delay Social Security or IRA Withdrawals

By drawing on home equity instead of retirement accounts, clients can postpone taxable withdrawals from IRAs and delay claiming Social Security, thereby maximizing delayed-retirement credits and avoid taxable withdrawals.

For Downsizing or Relocation

With a HECM for Purchase, homeowners aged 62+ can buy a new primary residence using proceeds from the reverse mortgage—often with no monthly mortgage payment. This strategy has enabled many retirees to sell large family homes for a more manageable home closer to healthcare, family, or cultural amenities or to relocate to the Nashville or Chattanooga areas.

9. How Do I Apply For a Reverse Mortgage with Mortgage South?

Call our Nashville or Chattanooga office to speak with Nathan Guerrero. He will consult face to face with you to talk about your goals, your needs, your property and help guide you to find the best solution for your situation.  He will design a plan for you whether it be using a reverse line of credit, paying off your existing mortgage, a lump sum, or a hybrid plan.  Your future goals are his priority, and he has the experience to help make the process easy.

Conclusion: Tennessee Homeowners Depend on Mortgage South for Their Retirement Goals.

Reverse mortgages are great financial tools and not a last resort.  They can be leveraged strategically to help retirees maintain their lifestyle utilizing equity in their home, while still remaining in complete ownership of it. By working with a local lender like Mortgage South, you gain access to our deep local expertise in Nashville and Chattanooga and personalized service honed over decades of reverse mortgage lending.

Don’t let the myths you may have heard about reverse mortgages stand in the way of your retirement goals.  Ask an expert like Nathan Guerrero, who has helped more Tennesseans find the best solution to their retirement needs.  Contact Nathan Guerrero to explore how a Reverse Mortgage or HECM for Purchase could fit into your retirement plan—and take the next step toward financial confidence in your golden years.

Nashville:  615-657-5878    Chattanooga: 423-624-3878 

Many times, people think of a reverse mortgage as something that people only use as last resort. Once all retirement accounts have been exhausted and all other options have been explored, then it’s time to examine a reverse mortgage, but what if data suggested otherwise? What if the right move is to examine the reverse mortgage early and use it preemptively? Many people who are on the cusp of retiring were not able to save enough for retirement for a multitude of reasons. The inability to save enough for retirement has led many in this group to keep more risk in their portfolios than is recommended in order to make up lost ground. Many of them have made up lost ground with the big gains that most Americans who own stocks have experienced over the last decade. This could all change in a hurry if we are not able to achieve the “soft landing” that the Federal Reserve has been trying to stick. If the Fed can’t thread the needle and we have a significant recession, many who just needed a few more years of work in order to get to full retirement and sock away money in their retirement accounts will face the harsh reality of a 20% to 40% loss in to their nest egg, as well as a layoff. This means that they may have no other option than to tap those retirement accounts a few years early while also selling investments at a loss. This will wreak havoc on the future performance of their retirement accounts. In this scenario, thousands if not millions will not have money at the end of retirement leaving them in a position of dependence. What if this could be stopped? If a person has fully paid for their home or has a low mortgage balance, a federally insured reverse mortgage line of credit with a montly disbursement could be a game changer.

Let’s walk through a scenario. Mary, who is 68 years old went through a divorce 8 years ago. Mary wanted to stay in the family home valued at $400,000. She received a portion of the couples qualified retirement account that came out to be $200,000. She also received half of the couple’s cash savings of which her portion was $30,000. Mary had some really good fortune in that her real-estate nearly doubled to $700,000 over the 8 years since her divorce. She was also able to put back an average of $30,000 per year into her employer sponsored 401k retirement plan with an average return of 10.2%. Her home was worth $700,000 and she had $780,000 in retirement savings when the news came that due a down turn in the commercial lending department where she worked in as an underwriter, she would be laid off. The sector as a whole was in a down turn, so Mary did not feel confident that her plan of working until 70 would come to fruition. Another blow to her plan was that a recession had officially been declared and the stock market was in the midst of a major sell off. Her retirement account was now sitting at $690,000 and seemed to be dropping in value every day. So just as in every tough moment in her life, Mary had to dig deep and find a solution. She applied for social security after her unemployment and severance pay had run its course. She would receive $3,200 per month. She knew that this much alone would not cover her basic monthly expenditures of $5,000 dollars. She was looking at an $1,800 monthly deficit, and the thought of dipping into her retirement account when it was down and still losing money was alarming to her. So, she had a meeting with her advisor to finalize a plan for her. They had spoken once about 6 months earlier. At that time, they did a good bit of fact finding and conversing, but now was the time to start making decisions.

During those 6 months, her advisor David had looked at different options for clients in similar situations. He began to understand how a federally insured reverse mortgage could possibly bridge the gap for certain clients. He called a professional he trusted in the reverse mortgage industry and worked on a potential solution to share with Mary at their next meeting. David fully understood that the impact of sequence of return risk to his client. He knew that taking money out of her account while her investments were down would have a significantly negative impact on the longevity of her retirement savings. So, he asked a trusted professional in the reverse mortgage industry to run a projection for him. He asked for the reverse mortgage to disburse $1,800 per month for three years then stop the disbursement. This would allow for Mary’s portfolio to start recovering from the recession losses before any funds were withdrawn. The reverse mortgage also provided a federally insured open-ended line of credit that would grow over time. This reverse mortgage line of credit would be waiting in the wings in case of an emergency or the inevitable next economic downturn. David was truly amazed at how much longer Mary’s assets would last by not taking withdrawals during a period of negative returns in the market.

If you or a client, friend, or family member would like more specifics about how this strategy could potentially benefit, please do not hesitate to reach out. We have helped many clients in similar situations using the federally insured reverse mortgage. The reverse mortgage loan is our only focus, and we have done over 3,000 of these loans since 1993.

Unfortunately, some grandparents are put in the very difficult position of raising their grandchildren. There are various reasons as to why this is the case. One thing is for sure, this reality transcends socioeconomic lines. Let’s take a look at a way that I recently helped a pair of grandparents that found themselves in this precarious situation. For the purpose of this blog, I will call our client’s the Martins. The Martins became guardians of their granddaughters two years ago. The oldest age 16 and the youngest age 13. Mr. Martin age 68 and Mrs. Martin age 67 were not anticipating that they would need to raise children during retirement. However, when they were called upon, they stepped up to the plate and I commend them for that. Here is how the Martin’s were set up for retirement. The Martin’s receive $4,200 a month in combined social security benefits. They had paid for their home along with all other debt. They fully paid for an automobile that would hopefully see them through the majority of their retirement and had around $50,000 in cash savings. They also had saved $275,000 in their pre-taxed retirement accounts. This allowed them to live a reasonable lifestyle. Their goal was to live within their
means and use the $50,000 in cash savings for larger unforeseen expenses. They wanted to leave their IRA intact without withdrawals for as long as possible so that it could continue to grow until they began taking their required minimum distributions. Needless to say, their plans had to be recalibrated once they became the guardians of their granddaughters.

The average cost of raising a child according to the Institute of Family Studies is a whopping $1,438 dollars a month! So, its not surprising that over the last two years the Martins have spent down $35,000 of their cash reserves. Once they realized that the rate at which they are spending is unsustainable, The Martins started exploring solutions for their dilemma. First, they looked at a traditional cash out refinance of their home. Then they explored a traditional home equity line of credit. They quickly understood that obtaining more debt in the traditional manner was not the solution that would work for them. They needed additional cashflow plain and simple. This is where Mortgage South of Tennessee was able to provide a solution that fit their situation.

The Martins called me and gave me a brief synopsis of their situation. They scheduled an appointment and I gathered some more detailed information from them. Once my analysis was complete, I provided a potential solution with a HECM (also known as the federally insured reverse mortgage). First, I wanted the HECM to provide much needed positive cash flow to the situation so, I created a monthly distribution to them of $2,000 a month for a specific period of time. In their case, I proposed 5 years because the youngest granddaughter would be 18 at that time. Next, I used the reverse mortgage to create additional emergency funds that would be there for the inevitable home repair, etc. This would give them the peace of mind that they still had $15,000 remaining in cash and another $95,000 in their new found HECM emergency fund. This reverse mortgage solution allowed the Martins to add $24,000
of positive nontaxable cashflow to their family budget until their youngest granddaughter reaches age 18. It also created a HECM line of credit of $95,000 for emergencies, and finally allowed them to keep their original plan in place of not tapping into their taxable IRA account until it was time to start taking their mandatory distributions from their qualified IRA. A federally insured HECM reverse mortgage will not provide the correct solution for every situation, but when it does, it is a game changer for retirees trying to navigate a world that has become increasingly more financially complicated.

 The news on the financial front for folks in retirement is both good and bad. Let’s have some good news first. Those retirees who have been fortunate enough to have owned a home and or have saved for their golden years, have in many cases experienced as much as a 40% increase in their real estate asset values.  Also, they can finally receive favorable interest rates on certificate of deposit accounts. I’ll give you an example. My mom is a retired schoolteacher. As a single mother, she raised my brother and I on modest pay. She never was able to save above what was taken out for social security and her state provided pension program. Fortunately, the state of Georgia currently provides a nice pension benefit, so she lives comfortably now and even saves money each month. She is in her late 70’s and lives alone and independently. A few health scares and the ever-present maintenance needs of her long-term residence caused her to recognize that it was time for a transition. So, with the help of my brother and I, she listed her home and sold it at the peak of the post covid real estate frenzy. She now rents a very affordable and nice single level cottage from longtime friends she had developed from her church.  Her rent is well below the national average for a property of this type, so after running the numbers, renting made a lot of sense for her situation. She cleared $240,000 from the sale of her home. After paying off her car and adding $20,000 to her cash reserves, she wanted to place the balance of her funds in interest bearing accounts. She has no investment experience, so her risk tolerance is very low. With the help of a financial advisor, we laddered her funds in FDIC insured CD’s. She will average 5.3% for 3 years from the start of the plan. My mother is ecstatic about a $30,000 gain over 3 years with no risk! It’s been well over a decade since anyone with savings could reap this type of benefit.

Now let’s face the bad news. Retires are faced with inflation and borrowing cost at a forty and twenty year high respectively. Social Security benefits have increased thanks to the cost-of-living adjustments of 5.9, 8.7 and 3.2% in the years 2021-2023.  The aggregate increase of 17.8%, while helpful, doesn’t fully offset the increased cost of the inflation ratchet. For this blog post, I will highlight the impact of inflation on transportation. According to Edmunds’ latest data, the share of 1,000+ monthly car payments has reached 17.5% in Q3 of 2023. That’s up from 17.1% in Q2 of 2023 and a massive increase from the meager 4.3% back in 2019. The average car payment in Q3 of 2023 reached a record high of $736 per month for new cars, up 4.5% since Q3 of 2022 and a 32% increase from 2019! Meanwhile, the average monthly car payment for used cars is $567 making a 46% rise from 2019! So, I believe it is apparent that an individual in retirement has a lot of trepidation when it comes to the prospects of purchasing the highest priced ticket items outside of a new home. Let’s not forget, this is just one sector of the economy that has seen massive increases in cost due to inflation.  Inherently retirees are on some type of fixed income. Whether it is a standalone social security benefit or a combination of social security and other savings. The number is finite. So, this leaves many of them and the people that advise them searching for ways to offset inflation in order to maintain the standard of living and essential services that they have grown accustomed to. One way to help alleviate this is by using the federally insured HECM, also known as the reverse mortgage loan as a solution. Let’s cover the process step by step. The first step is education. I sit down with my clients and ask a series of questions that help me understand how they are positioned financially. Then I will explain the ins and outs of the reverse mortgage loan. Once the program has been fully explained and all questions are answered, I ask my clients to express any concerns they have for their current and or future financial needs. The next step is catering a solution for their specific situation.

Now, let’s look at an example of how I helped a particular client utilize a HECM or reverse mortgage loan to purchase a new vehicle and provide additional resources for future retirement needs.  For this blog, I will call my client Henry.  Henry owned a small business here in Chattanooga, TN. He enjoyed his work until his early 70s. He had to close his business because the technology had changed dramatically, and it did not make sense for him to invest in updating the equipment needed to keep his business going. Henry had saved around$300,000 in his tax deferred IRA.  He also had a paid for home that is located in a very sought after area of Chattanooga. He called my office because he was interested in finding out how or if a HECM reverse mortgage could improve his current and future financial standing. During our initial conversation, Henry mentioned that his car was in good shape, but it lacked the safety features that he thought were important for him to have as he becomes an aging driver. He wanted to purchase a car with the features but didn’t want to increase his taxable withdrawals from his IRA to do so. So, I went to work for him and created an option that allowed him to tap his home equity in a unique way to accomplish his goals. His home appraised for $530,000. This allowed him to have a total of $230,000 in available reverse mortgage proceeds. Now the neat part of this is how funds were disbursed to him in a way that met his needs. First, I provided a monthly disbursement of $765.00 per month for 6 years. This provided funds to cover the purchase of a new car that provided him with all the safety options he desired and covered the increase in his auto insurance premium. Second, I provided a HECM or reverse mortgage line of credit of $181,000 that grows over time regardless of the fluctuations in housing values. All monthly disbursements and the line of credit are federally insured. So, Hennery can rest assured that his transportation and future retirement needs are now standing on solid ground.

In my line of work, I meet with clients that are either entering or are currently in retirement. One question that I ask married couples is, are you prepared for life after the loss of a spouse? Most of the time I get sort of a blank stare and then each spouse looks to one another for an answer. Needless to say, this strikes an uncomfortable chord with nearly all of them. I totally understand why this is the case. I myself have been married for close to two decades now to my lovely wife and business partner Candy. We have three great sons together and are constantly talking about what life will look like when we are able to take the next big adventure of our lives together “retirement”. We have taken care of the estate planning several years ago; however, that is just the technical part of it. I know there is more work to do in this arena from a financial planning perspective. Making sure both of our names are on all of the deeds to all of our major possessions, cars, etc. It’s just a very tough exercise and conversation because we just don’t want to think about it.

I have seen first hand how avoiding this subject can be devastating when a spouse is suddenly lost. Once the initial fog of grief has dissipated, two primary questions seem to come to mind for the surviving spouse. 1. Who am I as an individual, and what is now going to be my purpose for the rest of my life? 2. What is my financial position, and am I going to be able to maintain my standard of living for the balance of my retirement? I am not qualified to counsel with someone on the first question. However, the service that we provide can make a big and positive impact on an individual’s financial security during retirement.  Our company Mortgage South of Tennessee completed the very first federally insured HECM also known as the reverse mortgage in 1993. Since then, we have advised our clients on how to strategically deploy their home equity during retirement in order to shore up their financial position.

I am going to give two scenarios that illustrate how we have helped our clients maximize all of their available assets during retirement in order to shore up their financial positions. In the first scenario, John age 70 and Sara age 68 are referred to me by their financial advisor. Their home valued at $400k is paid for and they have a total retirement savings of $500k. Of these savings, $75k is cash or cash equivariant accounts. The other $425k are in qualified retirement accounts. “Qualified” retirement accounts are typically the employee sponsored retirement accounts that have been transferred into individual accounts after retirement. When an individual withdraws funds from these accounts, a taxable event takes place. So, if someone who has a $425k qualified IRA and they are in a 22% tax bracket they effectively have $331,500 after taxes are accounted for. John and Sara have a combined income of $6,500 a month. This is comprised of John’s social security benefit of $2,800, Sara’s social security benefit of $2,100 plus Sara’s $1,600 pension benefit. John and Sara have had a conversation with their financial about the” what if” scenario of one of them passing prior to the other. Their advisor explained to them that when people are married and one spouse passes, only the larger of the two social security checks will be available for the surviving spouse. They also reviewed Sara’s retirement separation paperwork and now understand that the surviving spouse would receive half of her current benefit. So, in John and Sara’s case, John’s monthly income would be $3,400 should Sara pre decease him. Sara’s monthly income would be $4,400 should John Pre decease her.

This did not sit well with John, Sara or their advisor, so they began to think of possible options to hedge against such a significant loss to their monthly cashflow in the event of the loss of a spouse. That’s were Mortgage South and the federally insured HECM or Reverse Mortgage comes into play. I sat down with John and Sara and completed a needs analysis. After completion, I proposed that they deploy the HECM stand by line of credit strategy. Now let me explain how that works. Based upon Sara’s age of 68, because she is the youngest spouse, the appraised value of $400k and the current expected interest rate of 6.380%, John and Sara would have a HECM “Reverse Mortgage” line of credit with an availability of $137,059. Next is the cool part and in my option the best kept secret about the FHA insured HECM loan. John and Sara’s HECM line of credit will not stay stagnant. Every month that they do not use their reverse mortgage line of credit, it grows and they have more access to additional funds! The stand by line of credit strategy would mean that John and Sara leave their HECM line of credit waiting in the wings until it is time to deploy it. Let’s say that in ten years John or Sara were to unfortunately pass away, their reverse mortgage line of credit that started out at $137,059 is now valued to the remaining spouse at $254,131 an increase of $117,072 or 46% from its original starting point! John or Sara could now start a monthly distribution to themselves in order to replace the loss of income due to the passing of their spouse there by maintaining the standard of living that they have been accustomed to for the entirety of their retirement. Now, I’m sure that you may have detailed questions that you would like to ask. I highly encourage you to reach out to me for a one-on-one conversation. This strategy will not fit every couple in retirement; however, in my opinion, thousands of middle to upper middle income retirees should at least be educated on how home equity can or should fit into their retirement planning.

When it comes to leveraging the value of a home, both a home equity line of credit (HELOC) and a home equity conversion mortgage (HECM, reverse mortgage) are options to tap into your home equity. However, a HELOC is not necessarily the most appropriate option for older homeowners, ages 62+.  

HELOC vs HECM: How Do HELOCs Affect Borrowers?

Due to the unprecedented rise of interest rates that started in March of 2022, HELOC monthly payments have doubled, or in some cases tripled and created a strain on borrowers. We have received many calls about homeowners not being able to afford their HELOC payment anymore. Home equity lines of credit come with variable rates. This means that their rate can go up or down based on the decisions of the Federal Reserve — so even if our borrowers took out a HELOC with a low rate, they are now facing much higher interest rates on their monthly payments. Also, HELOC loans mature at either 5 or 10 year intervals. When they mature, the borrower must re-qualify or begin to pay back both principal and interest, typically over a 20 year period with full amortization. This can cause even higher payments and has even led to forcing the sale of the home or foreclosure. With most retirees on a fixed income, the increase in monthly payments at the end of the draw period can be an unwelcome surprise.

Why HELOCs May Not Be the Best Option for Senior Homeowners

Many borrowers in an older age bracket have managed the revolving debt for as long as possible, but now their savings have been depleted as interest rates continue to skyrocket. According to a new GOBankingRates survey of 1,000 people, about three out of four have savings accounts, but the biggest percentage by far — about one in three — have only $100 or less stashed away. American consumers are depleting the “excess savings” they accumulated during the COVID pandemic. Americans’ excess savings from the pandemic peaked at about $2.1 trillion in August 2021 but fell to roughly $500 billion as of this spring, according to estimates by economists at the Federal Reserve Bank of San Francisco.

This problem is most acute with older Americans because of the likelihood that they are on fixed incomes. Even high-yield savings are depreciating assets. Savers with the highest-yield accounts are growing their money at 4.5% while that money loses 7.6% of its buying power.

How Might HELOCs Reduce Your Available Assets?

Many people get a HELOC while they are still working to do home repairs, put a child through school, start a business, etc. —but the problem arises ten years later when they’re living on retirement cash flow that’s about 75-80% of what it used to be prior to retirement. And when their HELOC payment suddenly spikes up a few years after they’ve retired, it may create a serious cash flow problem. With HELOC payments doubling or tripling and savings/IRAs depleting, Americans (specifically older Americans) are really running into a cash crunch. Medical payments, revolving debts, and general inflation are snowballing into a potential bankruptcy looming over many seniors. 

Why a Reverse Mortgage (HECM) May Be Your Best Option

This is why it is important to see a reverse mortgage as a financial planning tool, not a last resort. Many borrowers are refinancing from a HELOC to a reverse mortgage, once they realize it’s the better choice in the long run because with a HECM, seniors’ financial stability can’t be jarred by the possibility of a payment spike. A reverse mortgage is like few others you’ve experienced. You have no monthly payment and have access to a line of credit. It turns the equity you’ve built in your home into cash. Depending on the terms you select, you can receive monthly payments, a lump sum, or another payment option. However, it is similar to other loans in the sense that you still own your home, the property must be the borrower’s primary residence, and you still maintain taxes and insurance on the property. You can also sell your home at any time with no prepayment penalty or leave the property to your heirs. 

Reverse mortgages are designed specifically to help seniors manage their cash flow. While payments may be piling up and inflation at the highest we’ve seen in four decades, taking out a home equity conversion mortgage, or a reverse mortgage, can be extremely beneficial. Perhaps the two biggest benefits of a HECM are that there are no monthly mortgage payments required and there will be a growing line of credit that can be accessed over the life of the loan. With the average monthly payment on a HELOC now hovering around $800-$1300, obtaining a reverse mortgage presents a major savings opportunity every month. 

Contact Us for Help With Your Reverse Mortgage

Utilizing the equity in your home to fund your retirement is a viable option that benefits many seniors. The federally insured reverse mortgage, or HECM, enables homeowners to eliminate their existing monthly mortgage payment. At the same time, it offers a growing standby line of credit for future needs. If you think that a reverse mortgage is right for you – get in touch with Mortgage South today!