Sale-Leaseback vs. Reverse Mortgage: Which Lets You Stay Home on Better Terms?

What is a reverse mortgage?

A reverse mortgage is a loan that lets homeowners, generally 62 and older, borrow against their home equity without making monthly mortgage payments ¹. Instead of you paying the lender each month, interest and fees are added to the loan balance, so the balance grows over time and the equity you have left goes down. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the federal government.

You stay the owner of the home, which also means you stay responsible for the costs of owning it. You must keep paying property taxes and homeowners insurance and keep the home in good repair; if you don’t, the loan can go into default and the home can be foreclosed ¹. The loan generally comes due when the last borrower dies, sells the home, or no longer lives there as a primary residence.

What is a sale-leaseback?

A sale-leaseback is two transactions in one. First, you sell your home, and your equity is paid to you as cash at closing. Second, you sign a lease and keep living in the same home as a renter. With StayFrank’s Sell & Stay, the sale is at fair market value set by an independent appraisal, your mortgage and any liens are paid off at closing, and you can lease the home back for up to three years, with about two years being typical.

Because it’s a sale and not a loan, there’s nothing to repay and no balance growing in the background. You pay rent based on the fair market rental rate for your home and area, and you can prepay the whole lease from your proceeds, prepay part of it, or pay monthly. When the lease ends, you decide what happens next: buy the home back at the price locked in at closing, or have it sold on the open market and keep every dollar above the agreed amount. For the full walkthrough, see our complete guide to home sale-leasebacks.

Sale-leaseback vs. reverse mortgage at a glance

How much cash does each one give you?

A sale-leaseback gives you your equity at closing. With Sell & Stay, StayFrank buys the home at fair market value, pays off your mortgage and any liens, and the rest of your equity is wired to you. The amount depends on your home’s appraised value and what you still owe, and you’ll see a detailed estimate before you commit.

A reverse mortgage lets you borrow part of your equity, not all of it. How much depends on factors like your age, your home’s value, and interest rates, and you can usually take it as a lump sum, monthly payments, a line of credit, or a mix ¹. Because interest keeps accruing, the cost of the money grows the longer the loan is outstanding.

What does each one cost?

A reverse mortgage carries loan costs: interest that compounds on the balance, plus fees and, for HECMs, mortgage insurance premiums ¹. You usually don’t pay these out of pocket each month; they’re added to what you owe, which is why the equity left for you or your heirs shrinks over time.

A sale-leaseback carries the costs of a sale and a lease. With StayFrank there are no agent commissions and nothing to pay to apply or to see an offer. Standard closing costs apply and are disclosed before you sign. During the lease you pay fair market rent and a standard, refundable security deposit, and you trade homeowners insurance for renters insurance, which typically costs much less.

What happens to your heirs?

With a reverse mortgage, the loan generally becomes due when the last borrower dies. Your heirs can repay it, often by selling the home, if they want to keep the property or settle the estate ¹. The longer the loan was open, the larger the balance and the less equity is left.

With a sale-leaseback, the equity was already paid to you at closing. There’s no lien or growing balance tied to the home, and the cash you received is yours to use, save, or pass on.

Which one fits your situation?

A reverse mortgage may fit if…

• You’re 62 or older and want to stay in the home for the long run, ideally for the rest of your life.
• You can comfortably keep paying property taxes, insurance, and maintenance.
• Keeping ownership matters more to you than leaving the most equity to heirs.

A sale-leaseback may fit if…

• You want your full equity as cash now, with no new debt and no balance growing over time.
• You’re under 62, or a lender has turned you down because of credit or income.
• You’re facing high-interest debt, a hardship, or foreclosure and need a fast, clean solution.
• You want time, up to three years, to plan your next move without having to move right away.
• You’d like the option to buy the home back later at a price you already know.

If you’d rather keep ownership and avoid a monthly payment altogether, a home equity investment is another route: cash today for a share of your home’s future value, with no loan and no interest. Our guide on how to get equity out of your home without a loan compares all the options.