A reader asked us “I am not sure if a reverse mortgage is right for me, what are some alternative options?”

Before getting a reverse mortgage, consider the following…

  • how much will your home be valued at? if the local real estate market is currently depressed you might be selling your home for a fraction of its value in a few years. if the local market is hot, a reverse mortgage may allow you to enjoy many of the benefits of selling without requiring you to leave your home.
  • do you want to pass the house on to family members? in some cases you may be able to get a loan from family members which helps keep you in your house without giving up the house
  • are you comfortable with where you live?or are there other places or living conditions (renting an appartment, assisted living communities, a smaller home in another area, etc.) that might be more comfortable for you?
  • consider family conditions. do other family members need capital which you can help them with? some reverse mortgages allow you to get a lump sum upfront, though in some cases you may be better off selling your home outright. another family related option is to consider having trusted family members live with you through your final days, and pass the house on to them.

If you want to avoid obtaining a reverse mortgage here are some alternate means to raise capital

  1. Work longer, and/or save more aggressively while you are working.
  2. Reduce your living expenses.
  3. Keep yourself in good health to minimize health costs and keep yourself self-sufficient for as long as possible.
  4. Sell your house and move into a smaller home or a home in a more affordable area.
  5. Take on a friend as a boarder who can help share expenses, but make sure they are trustworthy before asking someone to move in.
  6. Establish a home equity line of credit (HELOC), and draw out cash on an as needed basis, paying back the minimum interest only payments. While this can save you money in the short run, the risk with this strategy is if you end up borrowing more than you can afford to you may end up needing to sell your house while you are still living.
  7. Rely on family, friends, & charities. If you go with this approach make sure you have a safety net to minimize your stress level and maximize the enjoyability of your remaining years.

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