Credit...Brooke VanDevelder

By Susan B. Garland

Published April 1, 2022Updated April 5, 2022

After her husband died suddenly from a fall in 2016, Marjorie Fox decided to hold off on any big decisions. She waited two years to retire as a financial planner and three to sell their house and buy a lakeside townhome in Reston, Va. For added protection, she took out a reverse mortgage on her new home.

Ms. Fox, 75, had set aside $150,000 in a cash reserve, and the reverse mortgage was another backup. If something unexpected did happen, “it could be when the stock market is down and it could be an inopportune time to sell assets,” she said. Reverse mortgage borrowers can take the money as a lump sum, as fixed monthly payments or as a line of credit. Ms. Fox chose a line of credit, which she could tap as needed.

Within a year, her cash reserve was depleted, and Ms. Fox began pulling money from her reverse mortgage. Among her expenses: $50,000 on emergency dental work and a down payment to reserve a spot in a retirement community set to open in 2025. Untapped money in the line of credit earns interest.

Until recently, it was conventional wisdom that a reverse mortgage was a last-resort option for the oldest homeowners who desperately needed cash. But a growing number of researchers say these loans could be a good option for people earlier in their retirement like Ms. Fox who are not needy at all.

Homeowners in their 60s and early 70s could use cash from a reverse mortgage to protect investment portfolios during market downturns, to delay claiming Social Security benefits or to pay large medical bills.