Reasons for Seeking Alternatives

• Reverse mortgages are an imperfect method for raising funds for people who own their homes. The closing costs alone on a reverse mortgage can be over $5,000 for a typical home. The income from a reverse mortgage can also take away eligibility for public benefits payments such as Social Security Income (SSI) or veteran's benefits, although it isn't subject to taxation as income. It also means that the homeowners lose a substantial portion of their ownership of the house. If the home value appreciates over the lifetime of the reverse mortgage, it can turn out to be a costly financial decision.
  
  

Public Assistance Alternatives

• Some states offer an alternative to a privately-run reverse mortgage called a "deferred payment plan." The name for this is not identical in all states. Contact your state Department of Housing for more information about whether or not it is available where you live. These loans can only be used for a few categories of expense, such as home maintenance and renovations related to energy efficiency and accessibility. In some states, you may also be able to get property-tax deferral loans from your state government, which lends you money to cover your property tax payments at a low interest rate.
  
  

Home Equity Loans

• Home equity loans and lines of credit use a proportionate amount of home equity to secure a loan or line of credit. This option is only really useful for people who still have access to significant income, as banks that provide these types of loans expect it to be repaid after the loan period has expired. Any interest payments up to the first $100,000 on such a loan or line of credit are tax deductible, however, making them an attractive alternative to reverse mortgages for certain buyers.
  
  

Selling the Home

• Selling the home and moving somewhere less expensive is the simplest alternative to a reverse mortgage, although the income from the sale of the home will be taxable as income. This also involves a significant life disruption, which can be troublesome for seniors. The advantage to this is that the payment comes all at once, doesn't require paying closing costs and doesn't create any obligations to a lending institution.