PEARL RIVER, N.Y. -- Eleanore Higgins retired from her job as a secretary in 1987 expecting her pension and Social Security checks would sustain a comfortable retirement in the suburban home where she had raised a son. But about three years ago, rising healthcare costs, high property taxes, and $10,000 in dental bills left her wondering whether she could make it financially.
Now, Higgins pays her medical and other bills without worry. She is even thinking of making a trip to New Orleans next year for Mardi Gras.
She regained her financial security by doing what an increasing number of seniors across the country have done: They have taken out reverse mortgages that allow them to convert a portion of the equity in their homes into cash without selling their home. The mortgage is not due until they move or die, when proceeds from the sale of the property can be used to satisfy the loan.
Higgins netted $150,000 from her brick home in this Rockland County suburb 25 miles north of New York City.
''I am debt free, and I have peace of mind," said Higgins, 76. ''It definitely improved my quality of life, and I can't recommend it enough."
The number of seniors nationwide who took reverse mortgages in 2004 doubled from the previous year to more than 40,000, according to the US Department of Housing and Urban Development, which insures the loans. California, with nearly a third of the mortgages, ranked first, followed by Florida, Texas, and New York. Massachusetts ranked 11th, with 922 loans last year, up from 612 in 2003.
Under the program, the amount owed can never exceed the value of the house, because only a portion of the equity can be tapped.
Housing and aging specialists say seniors who have watched their homes appreciate in value while their fixed incomes fail to keep pace with rising costs are using money from reverse mortgages to upgrade their lifestyles. Beside paying off bills and taking care of necessary expenses such as prescription drugs, they are spending the money on trips and hobbies.
About 28 million homeowners who are 62 and older are eligible for the loans. The money can be taken as a lump sum, a line of credit, or monthly payments.
Many financial analysts caution that the loan program is not risk free and can be an expensive way to borrow money.
''I don't think it's a good idea. I think it's pretty terrible," said Ric Edelman, president of Edelman Financial Services in Fairfax, Va. The loans have high upfront costs, and interest rates can exceed those of conventional mortgages. ''It looks great, and I am looking forward to the day we start recommending them, but we are not there yet."
In addition, the homeowner is still responsible for taxes and insurance on the home and can face foreclosure if those expenses are not met.
According to HUD's data, only a few hundred seniors used the loans in 1997, nearly a decade after they began in 1989. John C. Weicher, federal housing commissioner for HUD, said many falsely believed they would lose their home.
''Only in the last three or four years has it really taken off," Weicher said. ''All this has happened without the baby boomers being eligible; we are dealing with the baby bust. We are just getting to the generation of wartime babies, so this will probably grow in the next 10, 15, or 20 years."
A detailed study this year by the National Council on the Aging said half of the eligible seniors would be good candidates for reverse mortgages and could receive, on average, $72,000.
Higgins said she was encouraged to take out the loan by her adult son and his wife, who assured her they did not want to inherit the family home. Higgins spent hours researching the mortgages on the Internet. Three years after first hearing about the program, and with bills mounting, she decided to take out the loan.
''It wasn't a decision I made casually," she said.
The increased value of real estate in states such as New York and California is one reason for the newfound popularity. Also, rising healthcare costs and the marketing campaigns of the federal government and respected organizations such as AARP, have helped attract interest, according to Peter Bell, president of the National Reverse Mortgage Lenders Association.
Officials at HUD and AARP said some adults are not only encouraging their parents to take out the loans, but also are doing much of the research and paperwork for them. They said many children would rather see their parents use the extra funds to improve their quality of life and help with healthcare costs.
Only 13 percent of seniors in the National Council on the Aging's study said they are likely to use the loans, but two-thirds of the adult children surveyed said the loans would improve their parents' lives.
Richard Jones, 67, of Edgewater, Md., said his children make good salaries and do not need or want the condominium where he lives with his wife, Nellie. Jones, who owns a small accounting firm, got a reverse mortgage loan three years ago.
''The biggest issue always is: 'I want to leave the house to the kids.' Nice thought, but the kids never want the house," he said.
Jones and his wife used a $150,000 reverse mortgage to pay off an existing mortgage, which eliminated their $1,000 monthly mortgage payment and gave them extra money for travel. Already, they have gone to Florida, California, and Canada, and plan to travel to Spain.
''What it has done is given me peace of mind," he said. ''If anything happens to me, my wife doesn't have to leave the condo. I didn't want that hanging over my head."
But Dale and Betty Mae VanAmberg of Berkley, Mich., said their children did not like the idea of their parents using the equity from the home.
''One son said, 'I like the house,' " recalled Betty Mae, 76.
The couple received a lump sum of about $50,000 and used some of it to buy a used car and fix up the home, which Betty Mae said had not been renovated since they moved in 50 years ago. They also helped two of their sons through difficult times.
''They were needing money," she said. ''My middle son lives in a mobile home, and they were tearing them down around the area. He needed a place to stay, and so we helped him. Another son got himself in a jam, and we helped him."
Dale, 80, said the couple no longer worries about bills. ''That was the big thing," he said. ''We don't worry about healthcare anymore because we got the money to pay."