Reverse Mortgage Alternatives: 6 Ways to Tap Equity Instead

If you looked at a reverse mortgage and it didn’t fit, you have real options. Maybe you’re under 62, maybe you still owe a lot on your first mortgage, or maybe you just don’t like a balance that grows every year. A home equity investment is the closest swap, and Point is the one I’d price first. It funds $30,000 to $600,000, and you can be under 62.

Below are six ways to tap your equity without a reverse mortgage, what each one costs you, and who each one is wrong for. Some of these are better than others, and a couple are only worth it in narrow cases. I’ll say which.

Reverse mortgage alternatives: why people look for one

The Consumer Financial Protection Bureau says the most common reverse mortgage, the HECM, is only for homeowners who are 62 and older, and the amount you owe goes up over time instead of down. The home has to be your principal residence, you need to own it outright or have a low enough mortgage balance to pay off at closing, and you have to get counseling from a HUD-approved agency first, per CFPB’s eligibility page.

Then there’s the back end. According to CFPB’s repayment page, a reverse mortgage typically has to be settled when you move out or die, and it can come due sooner if the home stops being your main residence or you fall behind on property taxes or insurance. Hoping to leave the house to your kids? That’s a lot to chew on.

So the three things that send people looking are age, an existing mortgage, and the terms. The options below handle each one differently.

Alternatives to a reverse mortgage at a glance

1. 1Home equity investment

   Cash now, no monthly payment, and the company shares in your home’s future value. Covered first because it fixes the most problems.

2. 2HELOC

   A credit line against your equity. Cheapest of the group if you can carry the monthly payment.

3. 3Sell or downsize

   The equity comes out as cash at closing and nothing is owed after. You have to move.

4. 4Sale-leaseback

   Sell to an investor and rent the home back. You stay, but you give up ownership.

5. 5Cash-out refinance

   Replace your mortgage with a bigger one. Usually a bad trade if your current rate is low.

6. 6Free help programs

   Not cash out of the house, but sometimes the real problem is a bill that a local program could cover.

Home equity investment vs reverse mortgage

A home equity investment, or HEI, is the alternative that lines up best with what people dislike about reverse mortgages. You get a lump sum, there are no monthly payments, and nothing accrues interest. In return the company takes a share of your home’s future value when you settle the investment. That share is the cost, and it’s a real one, so keep reading.

Point’s own comparison page makes a few claims worth knowing. It says its HEI is available to homeowners under 62, doesn’t need first lien position (so you don’t have to pay off your first mortgage), has no occupancy requirements, has no income requirements, and can be assumed by heirs. That’s Point talking about its own product, so confirm the details in your agreement. But it’s the opposite of a reverse mortgage on most of the points above.

Here’s how the three I’d check compare.

Check this one first if

you’re under 62, still have a first mortgage, or have a bruised credit score. Point takes scores from 500 and has no income requirements.

Amount$30,000 to $600,000

Credit scoreFrom 500

Term30 years

Upfront costUp to 4.9%, $2,000 minimum

Get My Point Offer

Check this one first if

you’re in one of its 17 states and have at least 25% equity. It asks for no income documents.

Amount$50,000 to $600,000

Credit scoreFrom 500

TermUp to 30 years

Upfront cost4.99% origination

Get My Splitero Estimate

Each button checks your state first. If the company you pick doesn’t serve it, you could land on another provider that does, so read the state list below before you click.

Hometap

Hometap could be a fit if you want a shorter commitment. It could fund $15,000 to $600,000 over a 10-year term, with credit scores from 575 and at least 25% equity, among other qualifying criteria, if your home is located in an eligible state. Hometap serves 26 states. Ask how and when you’d settle the investment before you decide. Check Hometap eligibility.

Reverse mortgage vs home equity investment: what each one costs

A reverse mortgage charges interest, and the balance grows. An HEI doesn’t accrue interest, but you give up part of your home’s appreciation. Point’s fee is up to 4.9% with a $2,000 minimum, plus third-party closing costs, and Splitero’s origination is 4.99%. Those come off the top of your cash.

So what’s the catch? The bigger number is the share of future value you hand over. If your home barely moves, an HEI can look cheap. If it climbs a lot, it can end up costing more than a HELOC would have. Ask each company, in writing, what the settlement would be if your home stays flat, rises 20% and rises 50%, and compare all three.

It’s also not for everyone. Point doesn’t work for manufactured homes, co-ops or homes owned by an LLC. Splitero wants a home worth $200,000 to $5,000,000, and Hometap wants that 25% equity cushion. Our Point review and Hometap vs Point go deeper.

Check your state first

Availability stops more people than anything. Point serves 30 states plus D.C. and Splitero serves 17.

Hometap’s list changes, so use its eligibility page. If your state isn’t on any of these, the options below still work.

HELOC: the cheaper route if you can carry a payment

A home equity loan or line of credit might be a cheaper way to borrow against your equity, the CFPB says, but these usually have monthly payments and qualifying depends on your income and credit. If your income is steady and your first mortgage rate is low, a HELOC is hard to beat on cost.

Figure is one to price. Its HELOC takes credit scores from 600 in most states (640 in a few), the rate check is a soft pull, and it can fund in as few as 5 days. There’s an origination fee of up to 4.99%, and you’ll make a monthly payment. If that payment would strain your budget, skip it. Our HELOC alternatives guide covers what else is out there.

Sell or downsize

Boring, but it works. Selling turns your equity into cash at closing, and nothing is owed afterward. The CFPB also lists downsizing as an alternative, since a more affordable home may be the best way to cut your overall expenses. The cost is moving and paying closing costs on the way out.

If you’re staying in the house for good, this isn’t your answer. If you’ve been half-planning to move anyway, run the numbers on selling before you take on anything with a fee attached.

Sale-leaseback

A sale-leaseback lets you sell the home to an investor and rent it back, so you get the equity and stay put. You’ll pay rent, you no longer own the home, and you give up any future gain. The lease is the whole deal, so read it closely, check how long it runs and what happens to the rent over time, and get more than one written offer. I’m not naming a company here because terms swing a lot from one buyer to the next.

Cash-out refinance

A cash-out refinance replaces your mortgage with a bigger one. That’s fine when rates have dropped. If you locked in a low rate, it’s usually a bad trade, because you’d reset your whole balance at a higher rate to get at a slice of equity. The CFPB warns that a new 30-year mortgage near retirement can become a hardship later. Compare it against a HELOC, which leaves your first mortgage alone.

Free help programs for older homeowners

Sometimes the real problem isn’t needing a lump sum. It’s a property tax bill, a roof, or a utility payment. State and local programs, the CFPB says, can help with utilities, fuel and home repairs. Many localities have property tax help, so check with your county or town tax office. The CFPB points to benefitscheckup.org for finding benefit programs. Ten minutes there could save you from borrowing at all.

Your options side by side

Hometap’s offer is subject to eligibility, and its availability depends on whether your home is located in an eligible state.

Which one fits you

Check your offers

Looking at a number is free, and with an HEI you can run the flat, 20% and 50% scenarios before you commit to anything. Request more than one and compare. Whichever way you go, talk to a HUD-approved housing counselor or a licensed advisor before you sign.

Your Point offerSee what Point would offer youPoint says seeing your number is a soft credit check only.Get My Point Offer

Your Splitero estimateSee what Splitero would offer youSplitero says you can see a number without a hard credit pull.Get My Splitero Estimate

Your Hometap checkSee if Hometap could work for youAmong other qualifying criteria, if your home is located in an eligible state.Check Hometap Eligibility

More to read: the best home equity investment companies.