2. Look at reverse mortgages. In their book on the retirement crisis, "Falling Short: The Coming Retirement Crisis and What to Do About It," authors Charles D. Ellis, an investment consultant, and Alicia H. Munnell and Andrew D. Eschtruth of the Center for Retirement Research at Boston College, suggest that reverse mortgages could be an option for many Americans who can't afford to retire—though the products could be better, Ellis said in an interview. Reverse mortgages are fairly specialized products, so you have to look to see which financial services companies offer them, and "the cost of the transactions is relatively high."
With a reverse mortgage, no payments are due as long as you live in the house. When you leave it, the house is sold and the proceeds go to cover the loan, plus fees. You can get more information on the federal government's reverse mortgage program at the Housing and Urban Development website.
Reverse mortgages are sometimes criticized for high fees, which can be as much as 2.5 percent of what you borrow. Remember, the lender will try to ensure that at the end of the life of the loan, there will still be enough equity left to pay off the loan, which will limit the amount you can get. Sometimes, homeowners can't afford to pay the property taxes, a failure that then leads to foreclosure, though new regulations aimed at ensuring that homeowners can pay may mitigate that danger.
Another risk is that in an emergency, your equity is gone. So, for instance, if you need to go to a nursing home and need to tap your home for that cost, there may be nothing left to tap.
Rates vary by lender, but since most reverse mortgages are guaranteed by the government, the rates are typically as low as current mortgage rates or lower. In the rising rate environment that is now looming, reverse mortgages become more expensive.