Already have a mortgage? Work out the cash left over.

An existing mortgage is part of the calculation

A homeowner does not necessarily need to be mortgage-free to explore a reverse mortgage. Existing loans secured by the property may need to be paid out and closed as part of the transaction. Ask how every mortgage, secured line of credit or other registered charge will be treated.

Paying out an existing loan uses part of the new borrowing. Replacing a monthly mortgage payment can improve cash flow, but that improvement is separate from the cash deposited in your account. It is also separate from whether the replacement costs more over time.

Build a net-proceeds worksheet

Use an illustrative $240,000 gross advance. Subtract a $125,000 existing mortgage payout and $5,000 of costs deducted at closing. That leaves $110,000 of cash. The new loan begins at $240,000, because the entire advance was used on your behalf.

If another $2,000 of fees is instead added on top of the advance, the opening balance becomes $242,000 while the cash remains $110,000. If you pay that $2,000 separately, the loan stays at $240,000 and your other cash falls by $2,000. The total cost is not erased by changing the payment method.

Do not estimate a payout from a statement alone

Your statement balance is a useful starting point, but a closing-date payout can include accrued interest, discharge costs or an early repayment charge. Ask for the actual payout calculation before relying on the cash available. Timing the transaction near an existing mortgage maturity may also be worth discussing.

Include a HELOC even if you expect not to use it again. Confirm whether it must be closed and what emergency borrowing access would remain afterwards. A plan that uses all available proceeds immediately needs a separate reserve strategy.

Test whether the monthly improvement lasts

Write the current budget beside the proposed budget. Remove only the payments that truly disappear. Keep property taxes, insurance, utilities, maintenance and condominium fees where applicable. Add the new cost of care or other spending that prompted the discussion.

If the remaining shortfall is still $1,000 per month, $110,000 would cover 110 months only in a simplified cash-only calculation with no inflation or unexpected spending. That is not a sustainable-income promise and does not describe the accumulating loan interest. Build a realistic annual budget and revisit it as circumstances change.

• Ask for gross advance, opening debt and cash in hand as separate written figures.
• Confirm the closing date used for each payout.
• List which credit facilities will close and what remains available.
• Keep a reserve for repairs and a change in living arrangements.