How Do People Actually Use Reverse Mortgage Funds? What Surveys and Research Show
Quick answer
Surveys and retirement research consistently show that homeowners 62+ use reverse mortgage funds for a handful of practical goals: staying in their home as they age (the number-one priority), eliminating a monthly mortgage payment, covering health care and in-home care, paying down higher-interest debt, building a standby line of credit for emergencies, and helping family — including grandchildren's education. The common thread reported again and again is less financial stress and greater peace of mind, not luxury spending.
When people picture a reverse mortgage, they often imagine one dramatic use. The reality, according to surveys and retirement research, is much more practical and varied: most homeowners use the funds to stay in the home they love, ease month-to-month pressure, and handle health and family needs. This guide walks through what the research actually shows about how homeowners 62 and older put reverse mortgage funds to work.
What the Research Actually Shows
Studies from organizations such as AARP, the National Council on Aging (NCOA), and the National Reverse Mortgage Lenders Association (NRMLA), along with academic retirement research, paint a consistent picture. Homeowners overwhelmingly use home equity for security and stability rather than splurges. The most commonly reported uses are:
- Staying in their own home as they age (aging in place)
- Eliminating an existing monthly mortgage payment
- Paying for health care, in-home care, and home safety modifications
- Reducing higher-interest debt like credit cards and medical bills
- Setting up a standby line of credit as a safety net
- Supplementing retirement income month to month
- Helping children or grandchildren — including education costs
Figures and findings here are drawn from publicly reported industry and research sources. Individual situations vary, and a reverse mortgage isn't right for everyone — a free, no-obligation review is the best way to see what fits yours.
Staying Home: The Number-One Goal
Across survey after survey, the strongest desire among older adults is simply to remain in their own home. AARP's Home and Community Preferences surveys have consistently found that more than three in four adults age 50 and older want to stay in their current home as they age. The barriers are usually financial — paying for help and adapting the home — which is exactly where home equity comes in. Homeowners use reverse mortgage funds to make aging in place realistic, including:
- Hiring part-time or full-time in-home caregivers
- Installing grab bars, walk-in showers, ramps, and stair lifts
- Covering everyday costs so they don't have to move in with family or to a facility
Erasing a Monthly Mortgage Payment
The single most common immediate use is paying off an existing mortgage. Doing so removes the required monthly mortgage payment for as long as the homeowner lives in the home and keeps up property taxes, insurance, and maintenance. For someone on a fixed income, freeing up that monthly amount is often the difference between a tight budget and a comfortable one — and it's one of the clearest reasons people describe feeling 'less stressed' afterward.
A reverse mortgage does not eliminate property taxes, homeowners insurance, or upkeep — those obligations continue, and keeping them current is part of the loan.
Covering Health Care and In-Home Care
Health and care costs are a leading driver behind tapping home equity. Because reverse mortgage proceeds are loan advances rather than income, they are generally tax-free and do not affect Social Security or Medicare. Families commonly use the funds to cover:
- In-home caregivers, nursing aides, and home health services
- Out-of-pocket medical and prescription costs
- Care for one spouse while the other continues living in the home
Cash that builds up in your account can affect need-based benefits like SSI, which has resource limits. California eliminated the Medi-Cal asset test in 2024, so Medi-Cal eligibility is no longer based on assets — but it's still worth planning withdrawals carefully and asking a benefits advisor where relevant.
Reducing Debt and Everyday Financial Stress
Carrying credit-card balances, a car loan, or medical debt into retirement is both expensive and stressful. Many homeowners use reverse mortgage proceeds to clear high-interest debt, replacing required monthly payments with no required monthly payment on the reverse mortgage itself. When researchers ask borrowers how a reverse mortgage changed their lives, the answer is rarely about a specific purchase — it's about waking up with less financial worry.
A Safety Net: The Growing Line of Credit
One of the most overlooked uses is setting up a reverse mortgage line of credit and leaving it largely untouched as a reserve. The unused portion of a HECM line of credit grows over time, so the available amount can increase the longer it sits. Financial researchers increasingly view this standby line of credit as a legitimate retirement-planning tool — a buffer homeowners can draw on for surprise expenses or in years when investments are down, instead of selling assets at a loss.
Helping Family — Including Grandchildren's Education
Many homeowners would rather help their family now, when it matters, than only through an inheritance later. Surveys on 'giving while living' reflect this, and reverse mortgage funds are one way people make it happen. Common examples include:
- Contributing to a grandchild's college tuition or education fund
- Helping an adult child with a home down payment
- Providing support during a family member's job loss or medical event
Helping family is a personal choice with tax and estate implications — it's worth a conversation with your family and, where appropriate, a tax or estate-planning professional.
The Common Thread: Less Stress, More Peace of Mind
Underneath every category above is the same reported outcome: greater financial security and the freedom to stay in the home they love. Whether the funds erase a payment, cover care, or build a cushion, most homeowners describe the real benefit the same way — less worry and more peace of mind. That, more than any single line item, is what the research keeps pointing back to.
These are general findings, not promises of a particular result. A reverse mortgage is a significant decision, and the right answer depends entirely on your goals and situation.
How California Homeowners Put This Into Practice
There is no single 'right' way to use a reverse mortgage — many homeowners combine several of the uses above. The best next step is a free, no-pressure conversation and a personalized estimate, so you can see real numbers for your home and decide what fits. Miguel A. Vazquez (NMLS #401212) can walk you through it in plain language — in English or Spanish.
Key takeaways
- Surveys consistently show home equity is used for security and stability, not luxury spending.
- Staying in their own home is the top priority — more than three in four adults 50+ want to age in place (AARP).
- The most common immediate use is eliminating an existing monthly mortgage payment.
- Health care, debt reduction, a standby line of credit, and helping family are all leading uses.
- The benefit borrowers describe most is less financial stress and greater peace of mind.
Frequently asked questions
What do most people use reverse mortgage money for?
Research consistently shows the most common uses are staying in the home as they age, eliminating a monthly mortgage payment, paying for health care and in-home care, reducing higher-interest debt, building a standby line of credit, supplementing income, and helping family. The recurring theme borrowers report is less financial stress, not luxury spending.
Can I use reverse mortgage funds for anything I want?
Yes. With a standard HECM, once any existing mortgage is paid off, the remaining proceeds are yours to use for any purpose — living expenses, care, helping family, or saving for later. The main exception is a HECM for Purchase, which is specifically structured to buy a home.
Do people really use reverse mortgages to help grandchildren?
Some do. Many homeowners prefer to help their children or grandchildren now — with education costs or a home down payment — rather than only through an inheritance later. It's a personal choice with potential tax and estate implications, so it's worth discussing with your family and, where appropriate, a professional.
Are reverse mortgage funds taxable or counted as income?
Generally no. Because the money is borrowed against your own equity, it is typically not treated as taxable income and does not reduce Social Security or Medicare. However, cash that accumulates in the bank can affect need-based benefits like SSI, which has resource limits — note that California eliminated the Medi-Cal asset test in 2024, so Medi-Cal eligibility is no longer based on assets. Plan withdrawals carefully and check with a tax or benefits professional about your situation.
Is a reverse mortgage only for people who are struggling?
No. While some use it to relieve financial pressure, many financially comfortable homeowners use it strategically — as a standby line of credit, to protect investments, or to fund care and aging in place. Research increasingly treats it as a planning tool, not just a last resort.