# Are You Building Home Equity at the Expense of Your Retirement?

By Anthony J Byrnes (@anthonyjbyrnes) · Published 2026-11-06

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Imagine pulling out two mortgage statements twenty years from now. One shows a loan paid down steadily, month after month, until very little is left. The other shows a reverse mortgage whose balance grew, because interest and other loan charges accrued over time. Most people would call the first homeowner financially better off. But what if that homeowner spent the better part of two decades draining retirement savings to make those payments? And what if the homeowner with the growing balance had kept more liquid assets, kept more flexibility, and enjoyed more of retirement along the way?

Which household made the better decision? You cannot answer that by comparing the two statements alone. You have to look at everything else on each family's balance sheet, and at what those payments cost in terms of savings, taxes, and opportunity. That is the lens I want to bring to reverse mortgages.

## The decision at a glance

The table below frames the two approaches around the concerns that matter most to retirees, rather than around loan features. No single row settles the question; the point is that the rows must be weighed together.

concern

Traditional mortgage funded from an IRA

HECM line of credit

Monthly cash flow

Required principal and interest payments continue and must be funded from some income source.

No required monthly principal and interest payment while loan conditions are met, freeing cash each month.

Liquidity access

Retirement assets are steadily withdrawn to service the loan, shrinking liquid reserves.

More retirement assets can stay invested and available for unexpected needs or choices.

Tax efficiency

Pre-tax IRA withdrawals are generally taxable and can push income higher in given years.

Strategically reducing those withdrawals may lower taxable income in a given year; taxes can be deferred, not avoided.

Home equity growth

Balance declines through amortization, building equity all else equal.

Balance generally grows with accrued interest and charges, potentially reducing future equity.

Best for

Homeowners with ample liquid assets and a strong desire to maximize future home equity.

Homeowners who need to protect liquid retirement assets and want payment flexibility.

Main limitation

Requires steady withdrawals that can drain savings and pressure the retirement plan.

Balance grows over time, and frequently unsuitable for borrowers who don't intend to stay in the home.

## The mortgage statement doesn't tell the whole story

Most of us were taught that a declining mortgage is good and a rising one is bad. There is genuine value in paying down debt, and the costs of a reverse mortgage should never be waved away. But the monthly payment that shrinks a mortgage has to be funded from somewhere. For retired homeowners, that somewhere is often a savings account, an investment portfolio, or a traditional IRA.

When you withdraw money from retirement savings to make a mortgage payment, you're using accessible financial assets to build additional equity in your home. And while home equity is real wealth, it isn't readily available to cover everyday expenses. After all, you can't pay for bread and blood pressure pills with bricks and beams. Meanwhile, the interest portion of each payment is a financing expense that builds no equity at all. Month after month, you may be trading spendable dollars for illiquid home equity, often without recognizing the financial tradeoff you're making.

#### Key Takeaways

-   A declining mortgage balance is not the only measure of financial progress.
-   Required mortgage payments can quietly reduce retirement liquidity and investment flexibility.
-   Eliminating mandatory principal and interest payments can change the sustainability of a retirement-income strategy.
-   Reverse mortgages carry real costs, and growing loan balances must be considered.
-   The most meaningful comparison examines the whole household balance sheet and retirement goals, not a single mortgage statement.

## A couple heading toward financial exhaustion

Let me introduce you to Michael and Susan, a hypothetical example I use to illustrate a common pattern (not a real, identifiable borrower). They are 65 and 66, they have equity in their home, they have built retirement savings, and they had done what millions of homeowners aspire to do. Yet their required mortgage payment had created a quiet financial contradiction.

Their conventional mortgage required a significant monthly payment. To cover it, they were withdrawing a similar amount each month from retirement funds held in an IRA. In other words, they were pulling tens of thousands of dollars out of their retirement account every year simply to keep making payments on their home.

Their IRA was meant to support their retirement. Instead, a large share of it was being redirected toward mortgage debt service. Part of each payment did reduce the principal on their mortgage, but every dollar sent to the lender was no longer available for anything else. They had real wealth tied up in their house, and at the same time the house was demanding cash from their investment accounts every single month. That is the definition of a liquidity squeeze.

### What would another twenty years look like?

The math is straightforward, and it is worth seeing plainly. A required monthly payment that runs for decades adds up to a very large cumulative total. Sustaining that obligation means moving hundreds of thousands of dollars from savings into the home over the years, all while the same payment also needs funding from income or assets month after month.

These are cumulative payment totals in general terms, assuming the payment stayed the same and the loan remained outstanding. They are not an estimate of interest paid, of wealth lost, or of after-tax IRA withdrawals. Even so, the scale is worth sitting with. Over two decades, a couple could move a substantial portion of their savings into their home.

Whether that alone would exhaust their IRA depends on its starting balance, its investment returns, other distributions, taxes, and overall spending. In this couple's case, though, the monthly withdrawal requirement had already been identified as financially unsustainable. Regular withdrawals from a portfolio tend to create growing pressure as retirement progresses, and that pressure has a human cost. Households in this position often feel compelled to trim discretionary spending, delay experiences, or hoard cash out of fear of running out of money.

A retirement spent worrying about running out of money looks very different from one in which homeowners have the freedom to make choices. That difference mattered here.

**For this couple, whose stated priority was protecting their retirement assets, keeping the traditional mortgage and its required withdrawals was the riskier path to that objective.**

### The reverse mortgage changes the equation

Michael and Susan refinanced their existing mortgage with an FHA-insured Home Equity Conversion Mortgage, or HECM, structured as a line of credit. A HECM is the most common type of reverse mortgage, available to homeowners age 62 and over for their primary residence (CrossCountry Mortgage). The new loan paid off their existing mortgage as part of the refinance.

From that point, they no longer had a required monthly principal and interest payment. Instead of withdrawing a significant amount each month from their IRA to service the mortgage, they could leave those resources in place and decide how to use them.

This is not free money, and it did not eliminate the debt. The amount they owe will generally grow as interest, FHA mortgage insurance, and applicable loan charges accrue in the absence of optional payments. The crucial shift is that they now have the option to make payments rather than the obligation to make them. That difference between an obligation and an option can matter enormously in retirement.

They can choose to keep more assets invested, use savings for other needs, or make voluntary mortgage payments when it suits them. They still must pay property taxes, homeowners insurance, and applicable property charges, maintain the home, and meet the loan's occupancy and other requirements. A reverse mortgage does not guarantee they can remain in the property indefinitely; it becomes due upon specified events such as sale, the death of the last borrower, permanent departure, or a failure to meet the previously mentioned loan obligations.

**For Michael and Susan, shifting from an obligation to make payments to an option made the HECM the better fit for their goal of reducing pressure on retirement savings.**

### Compare the full balance sheet

Set the two scenarios side by side. Under the traditional mortgage, required payments continue, retirement assets keep being withdrawn to fund them, and the mortgage balance declines through amortization. The principal portion of each payment builds home equity, all else equal, but the IRA withdrawals reduce the capital left invested, and taxable distributions can add further consequences. Liquidity shrinks over time, leaving less room for unexpected expenses or lifestyle choices.

Under the HECM, required monthly principal and interest payments are gone while the loan conditions are met. Interest and applicable charges push the balance higher if no voluntary payments are made, so future home equity may be lower than it would have been. But more retirement assets can remain available rather than being drained to service a mortgage, and those assets have additional opportunity to grow, though growth is never guaranteed. The homeowners retain far more control over how and when their money is used.

Neither path is free of cost. A fair comparison has to weigh home equity, investment assets, debt, taxes, cash flow, and cumulative spending together, and it should not assume that a higher investment balance automatically means higher net worth. Each side carries real tradeoffs.

**On balance, for Michael and Susan, the HECM better served their stated goal of preserving liquid retirement resources, while accepting a tradeoff of lower future equity. This reflects their objectives, not a general financial outcome.**

#### Want to see more from me?

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## The opportunity cost that's easy to miss

There is a subtle cost buried inside Michael and Susan's old arrangement, one that never appears on a mortgage statement. When money is withdrawn from an IRA to make a payment, that money is no longer invested. If it would otherwise have grown, the homeowner gives up that future growth, and over long periods the compounding effect of foregone returns can be significant.

Investment returns are uncertain, and markets can decline. Leaving assets invested does not guarantee a better outcome. But there is a specific retirement risk worth naming: sequence-of-returns risk. Retirees who make consistent withdrawals during unfavorable market periods may be forced to sell investments when their values are depressed. Fewer shares remain invested to participate in the eventual rebound, which makes portfolio recovery harder.

Eliminating a fixed withdrawal obligation creates breathing room to manage investments through volatile stretches rather than selling into them. This is one reason housing wealth has drawn growing attention in retirement-income research. The point is not that a reverse mortgage is always better. The point is that the interest accruing on a loan balance is visible, while the opportunity cost of drained retirement assets is invisible, and a complete comparison has to weigh both.

## Could there be a tax consequence too?

If you are withdrawing money from a traditional IRA to make mortgage payments, there may also be a tax consequence. Withdrawals from pre-tax accounts are generally subject to ordinary income tax, and the money needed to pay that tax usually has to come from the IRA as well. If you need a meaningful amount of spendable cash each year, the gross distribution could be larger than that once the associated taxes are funded.

I am a reverse mortgage specialist, not a tax advisor or CPA, and I do not provide individualized tax advice. The general point is that these costs depend on a household's overall income, filing status, deductions, and applicable law, and they belong in the comparison. A HECM that reduces the need for those particular withdrawals may open room for tax planning, but it does not make IRA assets tax-free. Required minimum distributions may still apply later, and taxes can be deferred rather than avoided. If you are evaluating a move like this, a qualified tax professional is worth talking to.

**For Michael and Susan, the tax picture was not the deciding factor on its own, but reducing the need for IRA withdrawals opened room to plan around taxes, and a qualified professional can confirm the details for their situation.**

## What about the growing reverse mortgage balance?

Let me give the strongest counterargument a fair hearing. Twenty years from now, Michael and Susan's reverse mortgage balance may be substantially larger than it was at closing. Interest accrues, FHA mortgage insurance premiums and applicable fees may be added, and unpaid amounts can compound. That reduces their remaining home equity relative to a scenario where the debt was paid down instead.

Some readers will reasonably see that as a financial disadvantage, and it deserves to be taken seriously. But a larger liability is not, by itself, proof that a household's overall financial position has deteriorated. The full picture also includes the retirement assets that were not withdrawn, potential future returns, taxes, cash-flow flexibility, and the couple's ability to sustain the retirement they intended. By the same token, a higher IRA balance would not automatically prove the reverse mortgage was the superior choice. Both sides of the balance sheet matter.

The honest conclusion stays conditional. Depending on the assumptions and the actual outcomes, the reverse mortgage could prove more beneficial, less beneficial, or roughly equivalent. And if a homeowner has abundant liquid assets, a low-cost conventional mortgage, a short time horizon, or a strong desire to maximize future home equity, a HECM may be less attractive. This framework is not a recommendation that everyone refinance. It is a more complete way to ask the question.

## Retirement isn't just an ending balance

Retirement planning has a tendency to focus on the numbers we can measure at the end: net worth, investment performance, debt, what is left to pass on. Those are legitimate concerns. But retirement savings also have a purpose beyond the ledger. They are meant to provide security and to support the life someone worked for decades to build.

A strategy that produces a strong balance sheet at 85 may not be optimal if it required twenty years of financial pressure to get there. And a strategy that maximizes today's spending without any thought for the future would be just as irresponsible. The goal is balance.

Think of it this way. Imagine preparing for a twenty-year road trip knowing your fuel is being consumed faster than you can afford to replace it. Even if you still make the journey, knowing you might run out before the destination changes the experience. Financial uncertainty does something similar to retirement. In Michael and Susan's case, the required mortgage payment was putting unsustainable pressure on their resources. Their reverse mortgage offered another way to manage the relationship between their housing wealth and their savings.

Eliminating a required payment does not solve every retirement problem. Other expenses continue, and future needs remain uncertain. The most honest message is not that reverse mortgages magically create wealth. It is that they may allow homeowners to use the wealth they already have differently. The question isn't whether a reverse mortgage costs money. It's whether avoiding one might cost you more.

Choose the traditional mortgage if you have abundant liquid assets, a low-cost loan, a short horizon, or a strong desire to maximize the equity you leave behind. Choose a HECM if protecting liquid retirement assets and gaining payment flexibility matters more to your retirement than the size of a future loan balance. The right choice depends on your own financial objectives, not on any general rule.

?Frequently Asked Questions7 questions

1Can a reverse mortgage help preserve retirement savings?

It can, by removing a required monthly withdrawal. In the case above, eliminating the monthly IRA draw let more retirement assets stay invested and remain available. Outcomes depend on the household's circumstances, and growth is never guaranteed.

2Will eliminating IRA withdrawals reduce my income taxes?

Withdrawals from a traditional IRA are generally taxable, so reducing them may lower taxable income in a given year. Actual consequences depend on income, filing status, and applicable law, and taxes may be deferred rather than avoided. A qualified tax professional should review the specifics.

3Can I still make payments on a reverse mortgage if I want to?

Yes. A HECM does not require monthly principal and interest payments, but voluntary payments are permitted and can reduce the balance and preserve equity. Borrowers remain responsible for property taxes, insurance, maintenance, and occupancy requirements.

4What happens to my home equity over time?

A HECM balance generally grows when payments are not made, and home equity can decline accordingly. Because a HECM is non-recourse under applicable rules, a borrower's obligation is generally limited to the home's value, and borrowers and heirs have specific protections and repayment options. The loan becomes due on maturity events such as sale or the last borrower's death.

5Can I remain in my home for the rest of my life?

A borrower can remain in the home while meeting the loan's obligations, including taxes, insurance, maintenance, and primary-residence requirements. A reverse mortgage does not guarantee the ability to stay indefinitely regardless of circumstances.

6Is a reverse mortgage better than using retirement savings to pay off a traditional mortgage?

It depends on the full picture. Using savings to pay off a mortgage removes the payment but drains liquidity that might otherwise support retirement. A HECM keeps more assets available but accrues interest. The better path depends on balances, taxes, cash flow, and personal goals.

7Does a reverse mortgage mean I'm losing money because my loan balance increases?

A growing balance is not by itself a sign of a poor choice. Interest and applicable charges accrue when no payments are made, which reduces future equity. But a full evaluation also weighs the retirement assets that were not withdrawn and the flexibility preserved. One figure alone rarely tells the whole story.

## Change the question

Start asking a broader question than the balance. Instead of only asking how much your reverse mortgage balance might grow, also ask what will happen to your savings, liquidity, taxes, investment flexibility, and retirement lifestyle if you keep making required mortgage payments. Those two questions belong together, because they describe the same financial decision.

For Michael and Susan, removing the required payment created room to reduce the pressure on their retirement accounts and to approach the future with greater flexibility. It changed the way their housing wealth and their savings worked together. I cannot promise their future investment performance, and no honest adviser would.

Sometimes the most important number in retirement isn't how much you owe on your home. It's how much financial flexibility you have to live the life you've worked so hard to build.

Interested in exploring more ways housing wealth can fit into a thoughtful retirement plan? Visit my author page on Voce for additional articles on reverse mortgages, retirement income, and financial-planning strategies.

_All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. CrossCountry Mortgage, LLC (“CrossCountry”) does not guarantee the quality, accuracy, completeness, or timeliness of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by CrossCountry. CrossCountry its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort, or other tortious action._

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_Reverse mortgages are available for borrowers 62 and older. Available to borrowers as young as 55 in select states and programs only. Higher minimum age requirements may apply. To obtain a Reverse Mortgage, you must attend counseling and receive a certificate of completion that will be required during the application process. Must meet financial assessment requirements and be responsible for monthly property charges such as property tax and homeowner's insurance or could be subject to foreclosure. Applicant must qualify based off age, equity, current balances, and other various factors. Restrictions may apply. This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD), the Federal Housing Administration (FHA), or any other government agencies._