Alternatives to getting a reverse mortgage
As always, we recommend taking a very close look into your financials before making any big decisions. Whether you are deciding between a reverse mortgage or a home equity line of credit, or if you should just sell your home to make the equity and live off that, the numbers must add up. It can be very difficult to see how everything works out so if you do have a financial planner or somebody in your family that can help you out, by all means take advantage. Loans have always been a bit scary and they can often work in the best interest of the banks rather than you. Make sure you understand exactly why you are doing what you do since the banks can always spin things and even though they are regulated, they might not communicate everything in the right way to you.
Figure out why you are looking into a reverse mortgage. Here are some of the most common reasons homeowners check into reverse mortgages:
- Need to do some repairs or maintenance on the home
- Need extra monthly cash to pay for expenses
- Unforseen medical expenses
- Difficulty paying for property taxes
Reverse mortgages can be used to pay for any of the above expenses and depending on the program they might just work perfectly. However, do not hesitate to look into other alternatives to reverse mortgages. Often, the least expensive reverse mortgages are the ones offered by state or local governments. However, these can generally be used for only a specific purpose and sometimes limited to low to moderate incomes. If you can qualify however, the low cost on these programs make them very attractive alternatives.
Deferred Payment Loans (DPL’s)
Local and state government agencies may be able to offer deferred payment loans for improving or repairing your home. This type of reverse mortgage gives you a lump sum advance (one time) and no repayment is required for as long as you live in your home.
To find out if these programs are available to you, contact your city or county housing department, area agency or office on aging, or the nearest community development agency. These programs go by a variety of names and descriptions so you may have to dig around.
Some repairs included in these programs might be limited to:
- Roof
- Wiring
- Heating
- Plumbing
- Floors
- Stairs
- Porches
Some programs will cover accessibility improvements or energy efficiency and may include:
- Installation of ramps
- Rails
- Grab bars
- Storm windows
- Insulation
- Weatherstripping
The benefits of a DPL are due to their low cost: They may they have no insurance premium, low closing costs, no origination fee, and little or no interest.
Property Tax Deferral (PTD)
If one of your main reasons for obtaining or looking into a reverse mortgage loan or home equity line of credit is to pay for property taxes, there may be some alternative programs available to you. Some state and local government agencies offer “property tax deferral” or PTD loans. This type of reverse mortgage provides annual loan advances that can be used only to pay your property taxes. No repayment is required as long as you live in your home.
According to an AARP study, some type of PTD program was available during 2007 in parts or all of the following states:
| Arizona | California | Colorado | Florida |
| Georgia | Idaho | Illinois | Iowa |
| Maine | Maryland | Massachusetts | Michigan |
| Minnesota | New Hampshire | North Dakota | Oregon |
| Pennsylvania | South Dakota | Tennessee | Texas |
| Utah | Virginia | Washington | Wisconsin |
| Wyoming | District of Columbia |
If you live in any of the above states, contact the local government agency to which you pay your property taxes. They can tell you if the program is available to you and what you must do to qualify.
There are limitations to this program including the actual amount of the advance and more restrictive programs only allow the loan to be used to pay for special assessments. Most programs also limit the amount you can borrow over the life of a PTD loan and you may not be eligible for the same thing or more money in the future.
Similar to deferred payment loans, PDT loans may not have origination fees or insurance premiums. They also most likely have low closing costs.