Reverse mortgages for income? The jury is still split

Even so, he says reverse mortgages may be more available than home equity lines of credit which he maintains are being impacted by tight credit.

Nicholas warns that any seniors applying for reverse mortgages should check the credentials of the broker. Many mortgage brokers have been forced to add on this line of business due to the housing crisis, but the brokers have never offered the products before, he explains.

Marta Shen, a certified financial planner with Spring Street Financial, Atlanta, offers a different perspective on reverse mortgages. "In my experience, a reverse mortgage is typically not the first priority. By and large, I'm not thrilled with them."

Shen says she would look into other options, including a home equity loan or assistance from family members, before recommending that a client apply for a reverse mortgage.

The reason is the cost, she says. And, Shen maintains, the nation is in the midst of a financial crisis, not the start of it, so home prices may be on the rebound. In such a case, if a reverse mortgage option was chosen by a client, then it might be better to wait if possible, she says.

Even, if a client did get a new reverse mortgage, there might be costs such as additional points that would apply, Shen contends. Costs add up, she says.

The only reverse mortgage she says she has seen in her practice is one that the parents of a client had taken out. Her client and their siblings expressed regret that the parents had not come to them first for help, Shen says.

Debra Neiman, a certified financial planner with Neiman & Associates Financial Services, LLC, Arlington, Mass., says that a reverse mortgage is an option if "someone doesn't have other sources of income and is literally sitting on an asset pool."

She too cites cost as the key issue, citing appraisal and initiation costs. Neiman says she has heard of families stepping up to help out and forming what amounts to a reverse mortgage established by the family. Such cases would not have application costs but rather just the appraisal cost, she contends. Neiman also points to the option of a home equity loan.

Concerning the idea of locking in a reverse mortgage and then taking out a new reverse mortgage when the housing market improves, Neiman says the need to create income and following housing prices are 2 different issues. "You can't time the market. You don't know when the market will bottom."

That issue is separate from the need and creation of an income stream, Neiman asserts.

Also, home prices very much depend on the area one lives in, Neiman points out. She says she has heard anecdotally from 2 sources that home prices in Cambridge, Mass. have actually increased.