The Best Reverse Mortgage Alternatives in 2023

Reverse mortgages allow homeowners to access the equity in their homes, receiving either lump-sum, monthly payments, or a line of credit. Homeowners receive payments up to the value of the reverse mortgage until they sell the home, move, or pass away.

For many people, a reverse mortgage makes a lot of sense, and a quick look at a reverse mortgage’s benefits reveals why:

• It can supplement retirement income
• You can use a reverse mortgage to pay for unexpected expenses like medical bills
• Reverse mortgages don’t have income or credit score eligibility requirements
• You get to stay in your home

Downsides to Reverse Mortgages

So what are the downsides to a reverse mortgage? The main one is eligibility, particularly when it comes to age restrictions — reverse mortgages are only available to people 62 or older.  Additionally, the loan balance may eventually exceed the value of the home, especially during economic downturns. Lastly, with reverse mortgages being fairly complex, the industry tends to be fraught with fraudsters and misleading advertising.

Nevertheless, just because you don’t meet the requirements for a reverse mortgage doesn’t mean that your need to access cash goes away. Here, we’ll take a look at the four best alternatives to reverse mortgages.

Alternatives to Reverse Mortgages You Should Consider:

1. Home Equity Program

Using a home equity program is an option that nearly mirrors a reverse mortgage, but has no age requirement. With it, you’re able to access equity in your home quickly with no credit check or income requirements.

Home equity programs are great for individuals who need access to cash for paying off medical bills, other outstanding debts, property taxes, and more. Part of this is because home equity programs often have minimal eligibility requirements. In fact, the only requirement for SKYDAN’s home equity program is that you have equity in your home.

2. Home Equity Line of Credit (HELOC)

If you have equity built up in your home, a home equity line of credit (HELOC) is probably the type of financing that you’ve heard the most about. With a HELOC, you’re extended a line of credit that’s secured against the equity in your home.

Unfortunately, HELOCs have some strict eligibility parameters. Your income, credit score, debt-to-income ratio, and more are accounted for when determining whether you’re eligible. Additionally, not only can it be difficult to qualify for a HELOC, but they’re also risky. If you can’t make the payments, you could potentially lose your home through foreclosure.

3. Mortgage Refinancing

Mortgage refinancing doesn’t allow you to access your home’s equity, but it might free up enough money to make it unnecessary to access your home’s equity. Refinancing your mortgage simply replaces your current mortgage with one with updated terms. This could lead to lower monthly payments and better interest rates.

However, mortgage refinancing requires a decent credit score and low debt. Therefore, if you’re looking for a solution that will help you pay off existing debt, it might be hard to qualify for refinancing with considerably more favorable terms. 

4. Rent Part of Your Home

Finally, an unconventional way to generate an income without using a reverse mortgage is renting it. While this could be a good way to generate consistent monthly income without selling your home, it comes with a share of challenges.

For one, your home may not be designed to be subdivided, which can make renting part of it difficult. Additionally, if your home is zoned for single-family housing, it may be illegal to rent part of it.

Side-by-Side Comparison of Alternatives to a Reverse Mortgage

* With a HELOC, you’re receiving a line of credit that’s secured against your home’s equity. So it’s only possible through your home’s equity, but you’re not directly tapping your home’s equity like you do with a reverse mortgage or home equity program. 

Additionally, while you stay in your home with a HELOC, your bank could potentially foreclose on your home if you fail to meet the payment requirements.

What’s the Best Alternative to a Reverse Mortgage?

After considering the alternatives, what’s the best alternative to a reverse mortgage for you? Well, like most financial choices, it really depends on your situation. For example, if you have a strong credit score and a healthy debt-to-income ratio, a HELOC could be a good choice for you. If equity-based financing isn’t a part of your requirement, a traditional mortgage refinance might be the right move.

However, if you have less-than-perfect credit, options like mortgage refinancing or a HELOC might be unavailable or too risky. In that case, working with a home equity partner like SKYDAN is a great choice, as our program gives you access to many of the features that a reverse mortgage does without the age requirement. We have no income requirements and no credit score requirements; all you need to be eligible is equity in your home. Here’s how our program works:

At SKYDAN, we’re neither a bank nor a lender. That means we don’t look at your credit score, your income, or your existing debts. As long as you have equity in your home, we may be able to help you. Ready to learn more and see if our program is a fit for you?

Contact our team today to get started.