5 alternatives to a reverse mortgage

Many older adults use reverse mortgages to help finance their retirement by converting home equity into accessible cash. And while it's true that reverse mortgages can indeed benefit some homeowners, they aren't the right fit for everyone. As there's no one-size-fits-all solution, another route could be a better choice.

If you find yourself in a situation where you need the money from the equity in your home, knowing your options can help you make the best decisions for your needs, preferences, and living and financial situation. It's a good idea to explore all the possibilities to land on the best one for you. Note that Rocket Mortgage® does not offer reverse mortgage loans.

What is a reverse mortgage?

A reverse mortgage is a loan for homeowners 62 or older that lets them convert their home equity into cash.

And similar to a traditional mortgage, you can borrow money against the equity built in the home. Plus, the title to the home stays in your name. However, you won't make mortgage payments. Instead, the home loan is repaid once the owner no longer lives there – either after they move permanently or they pass away.

Here's how it works: The loan first pays off the existing mortgage balance. Then, the homeowner can use the remaining funds however they choose but is still responsible for paying property taxes and homeowners insurance.

Let's take a look at the prequalification requirements for a reverse mortgage:

• You must be 62 or older.
• You must have enough equity in the home.
• The home must be your primary residence.
• You must have enough funds to be able to pay expenses to the property, as you're still responsible for taxes and insurance.
• If you get a home equity conversion mortgage (HECM), which is the government-insured reverse mortgage, you’ll need to attend a counseling session and undergo a financial assessment.

Pros and cons of a reverse mortgage

Weighing the pros against the cons of a reverse mortgage can help you better understand its ins and outs and help you decide whether an alternative is best for you:

Pros

Let's look at the handful of pluses that come with getting a reverse mortgage:

• Eliminating monthly mortgage payment, while still paying property taxes, insurance, and home maintenance
• Consolidating debts
• Making home improvements
• Supplementing income
• Increasing savings
• Paying for in-home care

Cons

Now, let's mull over some of the drawbacks of getting a reverse mortgage:

• They often come with higher costs, including counseling fees, and greater closing costs.
• If you don’t continue to pay your property taxes and homeowners insurance and maintain the home, you could lose your home.
• The loan could impact your ability to qualify for such government programs as Medicaid or Supplemental Security Income (SSI).
• Because these are complicated loans, financial scammers often use them to prey on older adults.

Since reverse mortgages are complicated – and reverse mortgage scams abound – it's worth figuring out whether the risks are worth it.

Reverse mortgage alternatives

Are you considering a reverse mortgage to boost income, pay for care, consolidate debt, or make home improvements? If so, there are indeed other ways to reach these goals. Here are some of the best alternatives to a reverse mortgage: 

Sell and downsize your home

Putting your home on the market and buying a smaller, less expensive one can be a good way to tap into your home equity without needing to take out a loan. By going this route, you'll have less space to maintain and potentially lower utility costs. Plus, you might be saving on property taxes – depending on where you live.

You can also consider the option of a leaseback agreement with a family member. With such an arrangement, you would sell your home to a family member, and can rent it back. This could be a short-term solution while you look for a new, smaller home.

Refinance your current mortgage

Instead of a reverse mortgage, you can also bring down your monthly payments by securing a lower interest rate or by changing the loan terms.

If you refinance for a shorter-term mortgage, you could pay off your home sooner. If you do a cash-out refinance, you apply for a new mortgage that pays off your existing home loan. Plus, you can borrow against your home's equity to get extra cash. However, you'll still be financially responsible for monthly payments on your mortgage.\

Take out a home equity line of credit (HELOC)

You can also take out HELOC, which is a second mortgage that gives you access to your home equity. And similar to a credit card, it gives you access to your home equity through a revolving line of credit. Instead of getting a lump sum, you can borrow as needed up to your credit limit, and continue to repay and borrow against it for years.

One important thing to keep in mind: HELOCs come with closing costs, which are typically 2% to 5% of the total loan amount. So if you take out a HELOC for $20,000, you're looking at closing costs of $4,000 to $10,000.

The money you borrow must be paid back. If you're unable to keep up with your payments, you risk losing your home. So you'll want to feel confident that you can comfortably make your mortgage payments.

Note that Rocket Mortgage does not offer HELOCs at this time.

Apply for a home equity loan

Another option is to apply for a home equity loan, which is another type of second mortgage that allows you to borrow a lump sum from your home's equity. Your home's equity serves as collateral. Unlike a HELOC, you'll get all the funds at once. You'll make fixed monthly payments until the loan is paid back, usually 10 – 15 years.

While with a lump-sum reverse mortgage you'll get all the proceeds from a loan in a single, upfront payment, a home equity loan does require monthly payments. Putting your home up as collateral can be risky if you end up falling behind, so you'll want to carefully mull over this option and look at your finances to make sure you can afford your monthly loan payments.

Currently, Rocket Mortgage offers Home Equity Loans for primary and secondary homes.

Rent your space to others

Another alternative is house hacking, where you generate income from your house. In other words, renting out part of your home can be a solid way to rake in extra income or save on living costs. For example, renting a room or an entire space for short-term stays or maybe for long-term tenants.

If you're thinking of renting part of your home, screening renters, drawing up proper legal agreements, and updating your insurance policy can protect your safety and finances.

When trying to figure out how much to charge, do a comparative analysis and poke around to see what similar units or rooms are going for in your area.

Steps to take before committing to a reverse mortgage alternative

If you're mulling over a reverse mortgage to increase income, pay for care, consolidate debt or make home improvements, there are other ways to reach these goals.

Determine your home equity

Before taking out a new loan or refinancing, it's important to get your head around how much home equity you have. That way, you know how much you'll be able to borrow.

To calculate your home equity, subtract your current mortgage balance from your home's current estimated market value. For example, if your home is valued at $500,000 and you owe $350,000, you have $150,000 in equity. So your home equity is 30%.

Shop for the best rates

To secure the best deal, it's a good idea to compare rates and terms from a handful of lenders. Lenders may offer different types of loans, have varying qualification requirements, and charge different fees. When you get quotes from several lenders, be sure to get quotes for the same amounts, then compare them side-by-side. Look closely at the interest rates, repayment terms, and other fees and costs.

Consult with a qualified professional

Talking to a qualified real estate attorney, tax specialist or financial adviser before you apply for a new loan or financing can help you understand how a loan fits with your financial goals. A seasoned, reputable professional can break down complex financial details and spot financial scams.

The bottom line: Consider all available options

So what options might be better than a reverse mortgage? Whether it's downsizing, refinancing, taking out a home equity loan or line of credit, or renting out your home, these might be strong alternatives for you to decide on.

You'll want to put on your researcher hat to do some homework and make heads or tails of which route is the best choice for you. If you're curious about refinancing your options, you can start an application today.

Refinancing may increase finance charges over the life of the loan.

Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend. 

Refinancing may increase finance charges over the life of the loan.