Alternative Solutions

There are many circumstances under which a reverse mortgage can be very advantageous; however, there may also be situations where a different solution may be best.

Depending on your financial situation, you may wish to simply obtain a standard equity mortgage if you are in need of a single lump sum. This option won’t provide you with monthly payments, like a reverse mortgage, but can address specific needs for immediate cash.

A standard equity mortgage, however, does require you to make monthly payments with interest, and the interest rate may be high, depending on your credit qualifications. If you have a substantial enough income, and making the additional monthly payment would not present a hardship, this option may be less expensive overall, depending on the interest rate for which you can qualify. Note that a reverse mortgage does not depend on your creditworthiness.

There are also other specialized loans available that may meet your needs, for example, a loan that provides you with funds, but does not require any payments until the maturity date, at which time the principal and all accrued interest are due at once. This is called a zero coupon loan. It is typically used only for commercial or high-value property. It is not designed as a senior citizen loan, and as such, there is no lifetime benefit available. However, under special circumstances, such as if the borrower expects a large payment of some sort in the future, it may be desirable.

Local redevelopment agencies may offer a deferred payment loan for renovation or repair. Favorable elements associated with these loans include the fact that often they carry a low interest rate and, sometimes, they carry no interest at all. Plus, moneys borrowed are not due unless the borrower dies or someone new buys the home. These aren’t suitable for providing a monthly payment to yourself, but can be cost-efficient for getting funds to make needed repairs on a home. Costs and fees are very low, but there are usually income qualifications, and are usually available only to low-income seniors.

Some states also have property tax deferral programs to avoid where a senior citizen loses a home because of past due property taxes. Under this type of program, the state lends money to the borrower to pay property tax; and the amount, plus interest, is due only when the person who has borrowed the money dies, moves away or sells the home.