A Reverse Mortgage Isn’t for Everyone. Here’s What Else Is on the Table

Cash-Out Refinance: Trade Your Old Mortgage for a Bigger One

You refinance your current mortgage into a new, larger loan and pocket the difference in cash. This works if interest rates are favorable and you are comfortable adding—or restarting—a monthly mortgage payment.

Selling & Renting: The Clean Slate

If your home comes with mortgage debt, insurance costs, or deferred upkeep you can no longer sustain, selling outright and moving, into a rental or with family, can be the cleanest fix. You lose homeownership, but you trade the expenses for paying rent instead.

Tax Tip: Always consult a CPA or tax professional first to understand capital gains tax implications before selling.

Downsizing and Paying Cash for a Smaller Home: Zero Mortgage Payments

Sell your current property, buy a smaller home outright with cash, and start over with zero mortgage payments. It is straightforward, assuming you are comfortable locking all that cash back into the ground.

HECM for Purchase: Preserve Cash While Moving

A HECM for Purchase (or Reverse for Purchase) lets seniors 62+ buy a replacement primary residence with approximately 50%-60% down, and put the rest on a mortgage, with no mortgage payments. (You’ll still pay property tax, homeowners insurance, and maintain the property just like with any home loan.)

Home Equity Loan (HELOAN): A Lump Sum with a Catch

A home equity loan provides a lump sum upfront at a fixed interest rate, repaid on a structured monthly schedule. While simple, it requires mandatory monthly payments out of your fixed income for the life of the loan.

HomeSafe Second: Tap Equity Without Losing Your Low First-Mortgage Rate

A HomeSafe Second works like a second mortgage, but is structured as a reverse mortgage. You keep your existing low-rate primary mortgage exactly as it is, while taking a second loan against your equity that does not add a new monthly payment.

Traditional HELOC: Flexible, But Best for Working Years

A HELOC provides a credit line against your equity where you make interest-only payments during your draw period. After your draw period your payments increase to interest and principal, which can cause payment shock for those on a fixed income. Also, the lender retains the right to freeze or reduce your line at any time if market conditions change.

HELOC for Seniors: Interest-Only Options

This proprietary alternative works like a HELOC, but requires interest-only payments for the life of the loan (no principal payments required). While it still carries a monthly obligation, the payment is smaller and far more predictable than a traditional HELOC or home equity loan.

Home Equity Agreements / Investments (HEAs / HEIs): High Upfront Cash, High-Risk Equity Share

Home Equity Agreements (HEAs)—also called Home Equity Investments (HEIs), shared appreciation products, or option agreements—allow homeowners to receive upfront cash in exchange for a share of their home’s future value or appreciation.

The California Department of Financial Protection and Innovation (DFPI) highlights the following key points and concerns regarding HEAs/HEIs:

• No Monthly Payments, But High Future Payouts: According to the DFPI, while HEAs require no monthly payments, homeowners must repay a balloon sum later (typically when selling, passing away, or when the contract term ends—sometimes in as little as 10 years) that can equal up to 70% of the home’s total value or its price increase.
• Potential Forced Sale of the Home: The DFPI warns that unlike traditional lenders, HEA providers generally do not evaluate whether a homeowner can afford the eventual repayment. If the contract comes due and the homeowner cannot pay, the provider may have the right to force the sale of the home, creating a risk of loss of the property.
• Fewer Consumer Protections: The DFPI notes that HEA products lack key regulatory protections found in standard home equity loans or reverse mortgages. Specifically, HEAs do not require HUD-approved counseling, lack standard home loan disclosure requirements, and repayment is not automatically deferred until after a homeowner passes away.
• Unfavorable Equity Terms & Costs: As detailed by the DFPI, providers often use a reduced starting appraisal value to claim a larger share of equity, charge terms that heavily favor the provider over the homeowner, and utilize cost caps (often equivalent to 18–20% interest rates) that offer little actual protection. Additionally, placing a lien on the home under an HEA can hinder a homeowner’s ability to refinance or take out future financing.