Comparing Cash Out Alternatives
Reverse mortgages provide some significant advantages; in particular, they do not have to be paid back until a home is sold by you or by your heirs. However, the alternatives to reverse mortgages may offer more benefits to the homeowner(s).
Life Insurance Policies - If you have life insurance policies that have cash value, you may be better off extracting the cash value from the policy. This option also helps protect the home's equity (which can still be used later) and the fees involved are generally lower;
Sell and downsize - Depending on the amount of equity that you currently have in your home, selling your home and moving to a smaller property is a good option. This allows the homeowner to pay for a new home with cash from the sale of the home and not have a mortgage to pay monthly. This may be helpful for those who wish to move to a more "senior centered" living arrangement such as an "over 50" community;
Refinancing your home - In some cases, since origination fees are lower on a traditional mortgage, the homeowner should consider refinancing the home. This is a good alternative if you have sufficient monthly income to maintain payments on a regular mortgage. Rates may also be lower than a reverse mortgage rate and may offer more flexibility. A home equity line of credit is another option worth exploring.
Additional options to a reverse mortgage include deferred payment loans and property tax deferrals. Deferred payment loans would work in some cases, similar to a standard mortgage, except that there would be a balloon payment due at the end of the note. Property tax deferrals are ideal if the reason you are considering a reverse mortgage is due to property tax burdens.