A reverse mortgage comes up in almost every conversation I have with longtime Silicon Valley homeowners who want to stay put but are feeling squeezed. Property taxes are low thanks to Prop 13, but everything else isn’t: in-home help, roof replacements, insurance, and the plain cost of living here. A reverse mortgage lets a homeowner 62 or older borrow against the house without making monthly payments, and for the right person it’s a good tool. The catch is that it only unlocks part of your equity, it costs real money up front, and it works best for people who are healthy and confident they’ll stay in the home for a long time. Selling and downsizing does the opposite: it unlocks all of the equity at once, but you have to move. Here’s how I help families think through the choice.
Key Takeaways
Summary: A reverse mortgage can let you stay in your Silicon Valley home, but the FHA lending limit is well below most local home values and the loan comes due if you move to a care facility for a year. Selling unlocks all of your equity, and at 55 or older you can often carry your Prop 19 tax base to your next home.
How a Reverse Mortgage Actually Works
A Home Equity Conversion Mortgage, or HECM, is a federally insured loan for homeowners 62 and older. Instead of making payments to a lender, you receive money from one, as a lump sum, a monthly payment, a line of credit, or a combination. Interest and mortgage insurance get added to the balance each month, so the amount owed grows over time while the equity shrinks. You keep title to the home, and you keep all the usual owner responsibilities: you have to live there as your primary residence, pay the property taxes, homeowners insurance, and any HOA dues, and keep the house in reasonable repair. Falling behind on any of those can make the loan due early, which is the part people most often overlook.
Before you can take a HECM, you’re required to meet with a HUD-approved counselor who is independent of the lender. I’d treat that meeting as a real planning session and bring your adult children if they’ll be involved later, because they’re the ones who’ll be dealing with the loan when it comes due.
Why the Numbers Look Different in Silicon Valley
The biggest limitation here is the lending cap. FHA will only lend against home value up to $1,249,125 for loans with case numbers assigned in 2026. When a typical single-family home in San Jose, Cupertino, or Los Gatos is worth well over that, a $2.4 million house and a $1.25 million house can produce roughly the same HECM proceeds. On top of that, the amount you can actually borrow is set by a principal limit factor based on the youngest borrower’s age and current rates, so a 70-year-old couple might only be able to access a portion of that $1,249,125 figure, with older borrowers getting more. There are also proprietary or “jumbo” reverse mortgages from private lenders designed for high-value homes, and in our market they’re worth comparing, though they don’t carry FHA insurance and their terms vary widely.
Costs matter more than people expect. A HECM carries an upfront FHA mortgage insurance premium of 2 percent of the home’s value up to the limit, which is about $25,000 on a home at or above the cap. There’s an annual premium of 0.5 percent of the loan balance, an origination fee that can run up to $6,000, and the normal title and escrow costs. If you end up moving two or three years later, that’s an expensive way to have borrowed money.
From my practice: On one estate I handled, the owner’s reverse mortgage went into default after she passed away, the lender denied an extension, and a notice of default was recorded. The executor, her daughter, was living in the house and at first was weighing handing it back to the lender, which would have given up the estate’s equity. We sold for $700,000 all cash 101 days after the notice, before a trustee sale could be scheduled, with a free 21-day rent-back so she could move after the proceeds arrived. If a reverse mortgage is on the table, the family should understand how the payoff works before anyone signs.
Jumbo Reverse Mortgages for Homes Above the FHA Limit
Because the FHA cap leaves so much Silicon Valley equity untouched, private lenders have built proprietary reverse mortgages, usually called jumbo reverse mortgages, for higher-value homes. Longbridge Financial’s Platinum program and Finance of America’s jumbo products both lend up to $4 million, and neither charges FHA mortgage insurance, which removes the 2 percent upfront premium and the 0.5 percent annual charge that come with a HECM. Some of these programs also accept condos that were never FHA-approved, which matters here because plenty of people who want to tap equity already live in a condo or townhome complex that never went through FHA approval.
The trade-off is that you give up the federal standardization. Rates on jumbo loans are often higher than HECM rates since there’s no government insurance behind them, the line-of-credit growth feature that makes a HECM line attractive may be capped or missing, and the borrower protections depend on the lender and the loan documents rather than on FHA rules. Some products start as young as 55, but minimum ages vary by state and product, so confirm yours with the lender. California adds its own guardrails: lenders have to give you the state’s Reverse Mortgage Worksheet Guide, and counseling has to be completed at least seven days before a lender can charge fees or accept a final application.
My rule of thumb for clients is simple. If the home is worth meaningfully more than $1.25 million, get a HECM quote and a jumbo quote side by side and compare the net cash, the rate, and what the balance looks like ten years out, not just the headline loan amount.
When a Reverse Mortgage Makes Sense
I think a reverse mortgage is worth serious consideration when the homeowner is in good health, loves the house and the neighborhood, can keep up with taxes, insurance, and maintenance, and needs cash flow to cover a gap rather than a lump sum to fund a move. A line of credit can be a useful cushion for in-home care down the road, and it can let someone age in place who would otherwise be forced to sell. I cover the broader tradeoff in Aging in Place vs. Moving in Silicon Valley: A 10-Year Cost Comparison.
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When Selling Is the Better Move
Selling usually wins when the house has stopped working for the person living in it: stairs they can’t manage, a big lot they can’t maintain, isolation from family, or a care need that’s likely to mean assisted living within a few years. It also tends to win when the homeowner wants to help family now, rather than leaving a shrinking equity balance to the kids later. When you sell, you get all of your equity, not a fraction of it, and two rules soften the tax and property tax hit. The federal home sale exclusion can shelter up to $250,000 of gain per person, and under Prop 19 homeowners 55 and older can generally transfer their existing property tax base to a replacement home anywhere in California, up to three times in a lifetime. I explain that in Prop 19 Explained, and I walk through the downsizing math in How Much Money Will You Really Free Up by Downsizing?
The Middle Path: Selling and Buying With a HECM for Purchase
There’s a hybrid that most families have never heard of. A HECM for Purchase lets a buyer 62 or older use a reverse mortgage to buy the next home, so you sell the big house, put a large down payment on a smaller one, and finance the rest with a loan that never requires a monthly payment. You end up in a single-level home closer to family or services with a real cushion of cash left in the bank, which is something neither staying put nor a straight cash downsize gives you.
The rules come from HUD Mortgagee Letter 2009-11, and they’re stricter than a regular purchase. The down payment has to come from your own money, such as sale proceeds, savings, or a retirement account withdrawal, and you can’t cover it with a personal loan or a credit card advance. HUD prohibits seller concessions, so the usual credits for closing costs or repairs are off the table, and a major defect like a leaking roof has to be repaired by the seller before closing. You have to move in within 60 days of closing, the home has to be finished construction with a certificate of occupancy, and co-ops don’t qualify at all.
The same FHA cap applies, and that’s the part that surprises people locally. The loan is based on the lesser of the price, the appraisal, or $1,249,125, so on a $1.4 million single-story home the reverse mortgage covers well under half the price and you bring the rest in cash. When I represent a buyer using one, I make sure the listing agent understands the 60-day occupancy rule and the no-concessions rule up front, because a seller who doesn’t know the program can get nervous halfway through escrow.
Side by Side: One $2.4 Million Home, Four Paths
Here’s how the math can look for a hypothetical homeowner who is 75, owns a $2.4 million house free and clear, and is weighing a $1.4 million replacement home. I’m using a 2026 principal limit factor of 43.8 percent for a 75-year-old at a 5.875 percent expected rate, the 2 percent upfront mortgage insurance premium on the $1,249,125 cap, the $6,000 maximum origination fee, and about 6 percent in selling costs. These are round illustrations rather than a quote, since rates move the principal limit constantly and your own numbers will be different.
| Path | Approximate cash available to you | What you keep and what you give up |
|---|---|---|
| Stay with a HECM | About $516,000 (a principal limit of roughly $547,000, less about $31,000 in upfront mortgage insurance and origination, before title and escrow) | You stay in the home with no monthly payment. The balance grows with interest and the 0.5 percent annual premium, and roughly $1.85 million of equity remains locked in the house. |
| Stay with a jumbo reverse mortgage | Varies by lender. Because it isn’t limited to $1,249,125, it can be meaningfully more than the HECM. | You stay and skip FHA insurance premiums, but rates are often higher and protections depend on the lender. |
| Sell and buy a $1.4 million home with cash | About $856,000 (roughly $2,256,000 in net proceeds less the $1.4 million purchase) | You move and carry no loan. At 55 or older, Prop 19 may let you bring your current property tax base with you. |
| Sell and buy a $1.4 million home with a HECM for Purchase | About $1,372,000 (you bring roughly $884,000 to the purchase and the reverse mortgage covers the rest) | You move with no monthly mortgage payment, but a reverse mortgage balance grows against the new home. |
Both selling rows are before capital gains tax. Under IRS Publication 523 you can exclude up to $250,000 of gain, or $500,000 for a married couple, and on a Silicon Valley house bought decades ago the gain often runs well past that, so bring your CPA in early. The pattern in the table is the important part: staying with a HECM puts roughly a fifth of this home’s value to work, while selling, with or without a HECM for Purchase, puts far more of it to work. If you want to run the numbers on your own home, book a call with me and I’ll walk through each path with you.
What Happens to the Kids
When the last borrower dies or moves out permanently, the loan comes due. Heirs can sell the house and keep anything left after the loan is paid, or keep the house by paying off the loan. A HECM is non-recourse, so the family never owes more than the home is worth, and heirs can typically satisfy the loan for 95 percent of the appraised value if the balance has grown larger than the house. The timelines are tight, though, and I’ve written a separate guide on what happens when your parent dies with a reverse mortgage because families are so often caught off guard.
Sources and Further Reading
- Consumer Financial Protection Bureau: Reverse Mortgage Loans
- NRMLA: HECM Loan Limit Increasing to $1,249,125 for 2026
- California State Board of Equalization: Proposition 19
- IRS Publication 523, Selling Your Home
- HUD: Find a HECM Counselor
- HUD Mortgagee Letter 2009-11: HECM for Purchase
- HECM Academy: 2026 HECM Principal Limit Factors by Age
- Longbridge Financial: Platinum Jumbo Reverse Mortgage
- Finance of America: What Is a Jumbo Reverse Mortgage?
- Finance of America: Reverse Mortgages in California
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Frequently Asked Questions
What is the reverse mortgage limit for 2026?
For FHA-insured HECM reverse mortgages, the maximum claim amount is $1,249,125 for case numbers assigned on or after January 1, 2026.
Is a reverse mortgage a good idea in Silicon Valley?
It can be for a healthy homeowner who plans to stay in the home long term and needs cash flow. Because the FHA limit is below most local home values and upfront costs are high, selling or downsizing often unlocks far more equity.
What happens to a reverse mortgage if I move to assisted living?
The loan generally becomes due if the last borrower lives outside the home, such as in a care facility, for 12 consecutive months. The home is then usually sold or refinanced to repay it.
Can my kids keep the house if I have a reverse mortgage?
Yes, by paying off the loan. Because HECMs are non-recourse, heirs can typically satisfy the loan for 95 percent of the appraised value if the balance exceeds the home’s value.
Is selling better than a reverse mortgage?
Selling unlocks all of your equity and, for homeowners 55 and older, Prop 19 can often keep your property tax base low on a replacement home. A reverse mortgage lets you stay but only unlocks part of your equity at a significant upfront cost.
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