When NOT to Get a Reverse Mortgage: Alternatives for Seniors [2026]

Situation #1: You Plan to Move Soon

Don't get a reverse mortgage if: You expect to move within the next 3-5 years.

Why It Doesn't Work

• Upfront costs are significant (MIP, origination, closing costs)
• These costs need time to be offset by benefits
• You must repay the loan when you move
• Short-term use rarely makes financial sense

Better Alternatives

• HELOC: Lower closing costs, can be closed when you sell
• Sell now: If moving anyway, sell and use proceeds
• Wait: Get reverse mortgage at new home if you'll stay long-term

Situation #2: Leaving Home Debt-Free to Heirs Is a Priority

Don't get a reverse mortgage if: Your primary goal is maximizing inheritance for your children.

Why It Conflicts

• Reverse mortgage reduces equity over time
• Interest compounds, growing the loan balance
• Less equity means less inheritance
• While heirs are protected (non-recourse), the inheritance shrinks

Better Alternatives

• Downsize: Sell, buy smaller, preserve the difference
• HELOC/HELOAN: Make payments to preserve equity
• Life insurance: Replace inheritance impact
• Other income sources: Part-time work, rental income, annuity

Important Caveat

Discuss with your heirs. Many adult children would prefer their parents live comfortably rather than preserve inheritance. This is a conversation worth having.

Situation #3: You Can Afford Monthly Payments

Don't get a reverse mortgage if: You can comfortably afford a HELOC or traditional refinance payment.

Why Other Options May Be Better

• HELOC typically has lower upfront costs
• Traditional refinance may offer better rates
• Making payments preserves equity
• More options available without age restriction

HELOC vs Reverse Mortgage for Seniors

Situation #4: Limited Home Equity

Don't get a reverse mortgage if: You have minimal equity and high costs would eat most of the available funds.

The Math Problem

• Reverse mortgage costs (MIP, origination, closing) are significant
• With limited equity, costs represent a larger percentage
• You may receive little after costs and paying off existing mortgage
• The juice may not be worth the squeeze

Better Alternatives

• Wait until you have more equity
• Explore other income sources first
• Consider downsizing to free up equity
• Look into assistance programs

Situation #5: You Can't Afford Property Taxes and Insurance

Don't get a reverse mortgage if: You're already struggling to pay property taxes and homeowner's insurance, and the reverse mortgage won't solve this long-term.

Why This Is Critical

• Failure to pay taxes/insurance can trigger foreclosure
• Reverse mortgage requires ongoing payment of these
• Financial assessment may result in LESA (set-aside) that reduces funds
• If LESA depletes, you're responsible again

Better Alternatives

• Property tax assistance programs for seniors
• Downsizing to lower-tax property
• Selling and renting (eliminating property ownership obligations)
• Family assistance or shared housing arrangements

Situation #6: Health Issues May Require Nursing Home Care

Don't get a reverse mortgage if: You anticipate needing nursing home or assisted living care in the near future.

The 12-Month Rule

• Reverse mortgage becomes due when you leave home for 12+ consecutive months
• Nursing home stays often exceed this threshold
• Loan would need to be repaid, likely through sale
• Upfront costs would be lost for short-term benefit

Better Alternatives

• Sell home and use proceeds for care costs
• Consult elder law attorney about Medicaid planning
• Look into long-term care insurance if you have it
• Consider home care options that allow you to stay home

Situation #7: Spouse Under 62

Think carefully if: Your spouse is under 62 and won't be a co-borrower.

The Risk

• Only the 62+ spouse can be the borrower
• Younger spouse can be "Eligible Non-Borrowing Spouse" with protections
• But loan amount will be based on younger spouse's age (lower)
• Protections have specific requirements that must be met

Better Approach

• Wait until both spouses are 62+ if possible
• Both as co-borrowers provides maximum protection
• Larger loan amount available
• If can't wait, understand Non-Borrowing Spouse protections carefully

Situation #8: Using Funds for Risky Investments

Don't get a reverse mortgage if: Someone is pressuring you to use the funds for investments, annuities, or other financial products.

Red Flags

• Financial advisor pushing reverse mortgage + investment combo
• Promises of returns that will "pay for" the reverse mortgage
• Pressure to make quick decisions
• Using home equity for speculative investments

The Reality

• Your home is your security—don't gamble with it
• Investment returns are never guaranteed
• This combination has been used in scams targeting seniors
• Legitimate reverse mortgages are for your benefit, not selling other products

Alternatives to Reverse Mortgages

HELOC (Home Equity Line of Credit)

• Best for: Seniors with income to make payments
• Advantages: Lower costs, preserves equity, no age requirement
• Disadvantages: Requires monthly payments, variable rate

Home Equity Loan (HELOAN)

• Best for: One-time need with fixed payment preference
• Advantages: Fixed rate, predictable payments
• Disadvantages: Requires monthly payments

Cash-Out Refinance

• Best for: Those who can benefit from rate improvement
• Advantages: Single payment, potentially lower rate
• Disadvantages: Requires monthly payments, resets mortgage term

Downsizing

• Best for: Those willing to move to smaller/less expensive home
• Advantages: Frees equity, reduces maintenance, may lower taxes
• Disadvantages: Requires moving, emotional attachment

Property Tax Assistance Programs

• Best for: Those struggling specifically with property taxes
• Advantages: Targeted help, often grants or deferrals
• Disadvantages: Varies by location, may have limits

Questions to Ask Yourself

Before pursuing a reverse mortgage, honestly answer these questions:

1. How long do I plan to stay in this home?
2. Can I afford a HELOC or traditional refinance payment?
3. How important is leaving this home to my heirs?
4. Do I have health issues that might require assisted living?
5. Is my spouse under 62?
6. Can I afford property taxes and insurance long-term?
7. Is anyone pressuring me to use the funds for investments?
8. Have I explored all other alternatives?

When a Reverse Mortgage DOES Make Sense

For balance, reverse mortgages are appropriate when:

• You plan to stay in the home long-term
• You can't or don't want to make monthly payments
• You need to supplement retirement income
• Inheritance is not a primary concern (or heirs agree)
• You have significant equity
• Both spouses are 62+ (or younger spouse protections are understood)
• You can afford ongoing property taxes and insurance

Next Steps

If you're unsure whether a reverse mortgage is right for you, the required HUD counseling session is an excellent opportunity to discuss your specific situation with an independent counselor. They can help you evaluate alternatives and make an informed decision.