The number of reverse mortgages originated from January to April increased from 37,020 to 40,068 year over year. But given the recent deflation of the housing bubble, many seniors do not like the idea of selling their home or getting a reverse mortgage based on current home prices. Some seniors and lenders are finding creative alternative ways to pay for rising healthcare costs during the economic downturn. The Wall Street Journal recently covered a number of strategies seniors are using, including…

• borrowing from 401K savings plans
• selling life insurance policies prior to maturation
• taking a one time payment for giving up 50% of the future increases in the price of their home

Here are a couple quotes from the WSJ article:

Life-settlement

Sheron Brunner signed what’s known as a life-settlement agreement with J.G. Wentworth, a company that buys life-insurance policies and other tough-to-sell assets. The contract transfers ownership of a life-insurance policy to a third party, which then pays future premiums and collects the benefit. Ms. Brunner received about $45,000 for her $250,000 term policy.

Selling Future Home Equity

The so-called REX Agreement, launched last year by REX & Co., a San Francisco real-estate investment company, offers a different strategy. Not technically a loan,it gives homeowners a cash payment, typically about 13% of the home’s value. Upon a sale of the home — or the owners’ death — the company pockets as much as 50% of any change in home value during the time the agreement was in force. To qualify, applicants need not have much equity in their home. The minimum is 25%.

Consumers need to consider how much cash they take out at any given time, as a large pool of cash may disqualify them from some cost-saving benefit programs they currently enjoy – like Medicaid.