I like the options FHA reverse mortgages (HECM) provide homeowners 62+.

Say Joe retires at 62, draws a $1,000/month pension and $1,000 in early Social Security benefit.  Everything is going well, but then the economy hit a speed bump and he loses his part time job that was both fun and provided supplemental income.

Joe's home is worth $200,000 and he owes $100,000.  The Principle and interest payment is $1,000/month and that is just about what he was clearing in the part time job.

If new work prospects are grim the situation may appear to be unsustainable.  Many people would sell their home, use the $100,000 equity less selling expenses as a supplemental fund and rent an apartment or home.  At today's interest rates, and tapping $1,000/month to off-set rent, that $100,000 will likely be  depleated in 9 years or so.  The prospect of Joe using up the reserve by 71 is not too appealing.  Besides, he can't rent a place with a work shop:)

Too bad he didn't fund an annuity during his full employment years.  An annuity would have given him a steady monthly payment for as long as he lives!  And that could have made up for the diminished employment prospects.

Actually, Joe did fund the equivalent of an annuity.  The equity in his home can be converted into the equivalent of an annuity by a reverse mortgage!  In fact, the money received from a reverse mortgage has been deemed non-taxable, whereas, the annuity is taxable as it is paid out.

Joe inquires about a line of credit only to find out he doesn't have enough monthly income to qualify and his credit score is below average because he waited too long to solve this problem & missed a few payments.  But, he is delighted to discover that he can still qualify for a reverse mortgage! 

In this case, Joes new FHA HECM at age 62 would be approximately what is needed to pay off his mortgage and cover closing costs  (depending upon current interest rate, etc). The gain is no more principle and interest payment for as long as he resides in his home.  So, $1,000/Mo gap in expenses and income is covered, plus, Joe continues to own his home and enjoy living there!

But, some would say, the loan interest eats away at the equity and the relatives potential inheritance. My answer is that if he gets the reverse mortgage and 6 months later finds another part time job, Joe could choose to pay off the interest monthly with the money earned. 

That would make more sense in a situation where the homeowner had enough equity that the reverse mortgage proceeds were sufficient to pay off the old loan and also provide for, say, a $20,000 line of credit.  He could have drawn down $6,000 on the line of credit and then paid back the line of credit with proceeds from the new job.

Joe may have a son or daughter or a distant cousin that is counting on an inheritance when Joe passes. Joe may decide to help them build character by making a run at outliving all of them.  OK.  That is a bit tongue in cheek. However, many a will gets changed last minute to the animal humane society, an endowment to a college, etc. 

In this scenario, Joe solves his problem and fortifies his future in his own home.  It gives him a renewed feeling of control and independence, and blunts worry, mitigates an otherwise depressing situation.  The relatives are actually relieved, and are proud they are helping.  Because, one of them most likely started the conversation with Joe that allowed him to consider the option of a reverse mortgage.