Q. I am a retired geophysicist living in north Dallas with my wife. We are considering applying for a reverse mortgage on our home. I am 75 years old. My wife will be 71 in August. Our house is appraised at $320,000. We are both in good health.

The house has been paid off for some years. We have no credit card debt, we own two cars, and have no other debts. Our liquid assets in cash and investments amount to about $170,000. Our only income is from Social Security and our investments. I have a part time job at a local community college, which brings in $6,000 to $7,000 a year.

It seems to me that a reverse mortgage would help relieve the pressure of our limited income. I have an estimate from Reverse Mortgages of Texas that indicates we could receive around $103,000 in a lump sum or monthly payments of $774 for as long as one of us was living in the house.

Are there pitfalls?

---W.W., by e-mail from Dallas

  

A. Consider other avenues first. With your home equity accounting for two-thirds of your assets, you are "house poor."   This seems to be the destiny of most middle income Americans and a Reverse Mortgage is one--- but just one--- of the tools available to help alleviate the strain.

Before you do that, however, you should look into a program that will do almost as much for you. In Texas and many other states, senior citizens are allowed to defer real estate taxes on their primary residence. The terms vary from state to state, with some imposing income limits, but they are basically designed to help retirees cope with expenses and stay in their homes. In Washington, for instance, homeowners who are at least 61 with income below $30,000 are allowed to defer real estate taxes up to 80 percent of the equity in their homes. In Florida, seniors may defer property taxes in excess of 3 percent of household income.

In Texas, homeowners who are at least 65 can defer all property taxes on their homestead at a cost of 8 percent, simple interest. The interest cost is also deferred. The simple interest provision is important because the interest on reverse mortgages compounds. The difference isn't large in the first few years but it becomes significant over longer periods of time.

In your case, a $320,000 house probably has a tax bill of about $6,400 a year or $533 a month. With $170,000 in investments, deferring your real estate taxes would be like doubling your investment income. It would also save you the fees and commissions involved in establishing a new reverse mortgage.

While you are both in good health today, this can change at any time. I think being house poor is hazardous. It means the expenses of operating the house consume most, if not all, of your income. It means you are likely to defer maintenance, which will affect the value of your house when you go to sell it. And it means you will have to live with the anxiety that comes from knowing your expenses are gobbling up your savings.

I suggest you give serious thought to selling your house and moving to a less expensive house, townhouse or condo. With the median selling price in Dallas well below $160,000 you could sell your house, pay cash for a smaller property, and add $140,000 to your savings. Perhaps more. Operating expenses on your new place would be lower and you could lower them further by arranging for property tax deferral.

Readers in other areas can find the details of programs in their state with a Google search. A listing I have from the National Conference of State Legislatures lists property tax deferral programs for senior citizens in these states: California, Colorado, Florida, Georgia, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, New Hampshire, North Dakota, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin. Many other states, such as New York, have programs that give large exemptions to qualified senior citizens.