Seniors who are house-rich but cash-poor, or who fear running out of money in their retirement years, have several options to save the day.

One, of course, is the much-ballyhooed Home Equity Conversion Mortgage, otherwise known as a reverse mortgage. But elder owners have other choices, including the financial ones described here last week. There are also a number of other alternatives:

  • Deferred payment loans (DPLs). Unlike the state-sponsored and local grant programs mentioned previously, in DPLs, a lien is placed against your house and the money must be repaid when you sell (or when you convert the property to a rental or refinance your first mortgage). But no payments are required and no interest is charged.

These loans, which are “probably more common than true grant programs,” ventures Rob Chrane of, usually come from state housing finance agencies and nonprofits.

  • Refinancing. If you have plenty of equity and a first mortgage with a low balance, you can refinance your house, pay off your old loan and put the remaining proceeds into your pocket to pay your bills. Of course, you have to pay back your new first mortgage, month after month, and the new payment may be more than you can legitimately afford.
  • Lines of credit. This option involves lines of credit that you place against your house, as well as home equity loans. Both are essentially second mortgages that must also be repaid monthly.

With a line of credit, you can remove your equity as needed to pay your utilities, taxes, medical bills and other living expenses. With a home equity loan, you borrow a percentage of your equity; lenders usually won’t let you have more than 80 percent.

  • Sell and downsize. Your place is probably too big for you and your spouse – not just in size, but in your ability to maintain it, and in monthly expenses such as utility bills – so consider selling it and downsizing to a smaller, less costly house or market-rate apartment.

Also worth a look-see is an apartment in a senior living center. It’s not a retirement home, per se, although you can live out your years there if you like. Rather, it’s a unit in an assisted living community where you share amenities, dining rooms and medical help as needed with other seniors.

These apartments come with full, though small, kitchens, so you can cook and eat in. But you also have the option of taking up to three meals a day in the dining hall – no muss, no fuss.

  • Sell to your offspring. If you are bent on passing your family home on to your children when you die, how about selling it to them now and letting them rent the house back to you at a fair market price?

This sale-leaseback arrangement allows your children to have some rental income, perhaps just enough to cover the cost of the mortgage they had to take out to buy the house from you. After all, they may not want to profit from your need for cash.

But at the same time, they may get to write off depreciation, property taxes and maintenance costs. And you get to stay in your house at a reasonable rent with a landlord you know well and love, and who will treat you right.

  • Rent a room. If you have the space, say an extra bedroom or a basement you never use, consider renting the space to augment your monthly income. But be careful: Choosing a tenant or roommate is tricky business. You don’t want to get stuck with the wrong person. Check out thoroughly any people you are considering, and make them sign a lease that gives you the right to evict them if they don’t fulfill lease requirements (such as keeping the place clean and limiting noise).
  • ECHO cottages. ECHO stands for Elder Cottage Housing Opportunity. If you have room in your yard – and if local zoning rules permit it – weigh the possibility of building a small accessory unit separate from your house. There are many so-called “tiny” houses on the market that include a kitchen, bathroom, bedroom and living space. Put one in your backyard and rent it out.

If your adult child has room in his or her own home’s yard, think about putting your ECHO cottage there. If the law says it’s OK, you can sell your house, move into the cottage and live near – but not with – your daughter or son.

Many zoning ordinances do not allow these kinds of outbuildings, so you might have to seek a variance for occupants age 55 or older. Contact your local zoning office to see what’s possible. If you get nowhere, try applying for a special-use permit, and solicit the aid of your local agencies on aging, senior centers or other groups with an interest in older folks.


Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at