What are My Loan Alternatives to a Reverse Mortgage?
First of all, just so you are aware, there are other types of reverse mortgages out there although the HECM is the only one that is insured by the government. The other types include a Deferred Payment Loan (DPL) which is a one-time, lump sum loan to be used for repairs or improvements to your home. A benefit of the DPL is that it does not have to be paid back for as long as you live in you home, similar to a reverse mortgage. Contact your state housing finance agency to find out if this is offered in your area and if you are eligible (common eligibility requirement is that you be a homeowner with a low to moderate income, some also have a minimum borrower age and a disability requirement, but these vary by each area.)
There is also a Property Tax Deferral program available with some state and local governments. This is a loan where you will be given an annual loan advance which may only be used to pay your property taxes. Like a DPL and Reverse Mortgage, no repayment is required for as long as you remain in your home. Eligibility requirements for this program vary greatly among states, most commonly though, they require that the homeowner is at least 65 years of age with a low to moderate income. To find out more about this program in your area contact the local government agency to whom you pay your property taxes they will be able to provide you with all the information for availability and eligibility in your area.
There is also a proprietary reverse mortgage available through some banks and lenders. This type of reverse mortgage generally gives you the most amount of money, but it is also the most expensive type of reverse mortgage available. These loans are backed and offered by private companies, whereas the HECM is offered by any lender that is approved by the Federal Housing Administration. If you live in a home that exceeds HUD’s home value limit of $625,500 you may be eligible to receive a larger loan with a proprietary plan than you would be able to receive from a HECM.
What are My Non-Loan Alternatives to a Reverse Mortgage?
First and foremost what we ask people to consider is whether or not they are willing to sell their current home and move to a home that will be more economical. Some questions to consider when thinking about this are:
- How much cash would you get from the sale of your current home?
- What the cost would be to buy (or rent) and maintain a new home, compared to your current home?
- How much money you could earn with the money left over from the sale of your current home, by investing, etc?
We understand that this may not be the most appealing idea for you, but consider whether it is actually the most logical. Perhaps just consider looking at your alternative home options, find out what’s available on the market either in your current area or closer to friends and family, you may be surprised and find something that you would enjoy. If you do look around and can not find anything that you be happy living in other than your present home, then at least you know that the only way you will be happy is by living in your own home, whether that means taking out your reverse mortgage to stay there or looking into some of the other alternatives we have presented here.
You have spent all of your adult life paying taxes, now it may be time for you to take advantage of some of the programs that you have supported for so long with your taxes.
Do you know whether or not you are eligible to receive Supplemental Security Income, if you are not receiving it already? Generally, you must be 65 years of age, your liquid assets must be under $2,000 ($3,000 for a couple) this usually does not include one car, a small burial fund, and your home equity may not exceed $500,000 ($750,000 in some states.) You can contact 1-800-772-1213 or visit www.ssa.gov to see if you are eligible.
You may also be eligible to receive Medicare to help cover your medical expenses such as prescription costs, you may contact www.aarp.com or the Medicare hotline at 1-800-633-4227, when you call say “Medicaid” or “drug coverage” to get more information on their programs.
Most states also offer some type of property tax relief program contact your local agency to which you pay your property taxes to see if they offer any assistance programs.
A great resource for seniors will be your Area Agency on Aging (AAA) which can provide you with information on most of the services and programs that are offered in your area. They will be able to provide you with information on services such as energy bill assistance, household chore services, home health care, prescription drugs, meal programs, housing, transportation and many others. Find your local AAA office by calling 1-800-677-1116, or by visiting www.eldercare.gov.
At the very least, look into the available programs in your area because while you may not be able to prevent getting a reverse mortgage completely you may be able to postpone getting one. This would mean that when you do get the loan you will be able to get more money out (the older you are, the more money you will be able to receive), and that you will not be paying interest on the loan for as long as you would if you got the loan now. Also, if you go through with a reverse mortgage now you may be jeopardizing your chances of getting any public benefits. For example, if you take the reverse mortgage now, you will probably have a larger balance in your checking account and if it were to exceed the limit for certain things such as Supplemental Security Income you would be ineligible to receive benefits from that program. These are just options to consider so that you may make the best decision for you and your financial future, and that of your loved ones.