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Is a reverse mortgage a good idea?

We are in the process of completing a reverse mortgage to free up $$ for care. Is this a good idea?
Status: Open    Aug 10, 2015 - 06:55 AM

Finance, Senior Real Estate

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Expert Answers

Aug 11, 2015 - 09:54 AM

without knowing your complete situation it is hard for me to give my recommendation. Home Equity Conversion Mortgages (HECM) are a good idea for many, depending on their situation and goals. They are government insured and recent changes to the product has put more safeguards in place for you, the consumer. You also will need to have mandatory counseling by an FHA approved counseling agency which can help you decide if it's right for you. If you would like to discuss further please feel free to contact me, please see my profile page for contact information.


Aug 11, 2015 - 12:23 PM

As an Elder Law attorney, I get this question frequently. A reverse mortgage is a tool but it is NOT a tool for everything. For the right person in the right set of circumstances, it can be a lifesaver but it is not for everyone. First, you have to be a senior. Second, you have to plan on living there after the mortgage is taken out. Third, you have to pay off any loans against the home with the proceeds. Fourth, you are not going to get but about 60% or less of the FMV of the home. Fifth, if you do have to move to a nursing home, you will have to pay back the loan within a year. Sixth, assume that there will be nothing left for the family when you are gone, so there is no inheritance value when a reverse mortgage is used.
Hope this helps.

Aug 12, 2015 - 01:33 PM

A reverse mortgage can be a great option for someone looking to pay for in-home health care, but everyone’s situation is unique and it will depend on individual circumstances. A reverse mortgage allows homeowners age 62 and older to convert a portion of the equity in their home into cash. With a reverse mortgage there are no monthly mortgage payments to make. Loans become due when the last borrower sells the home, moves out of the home for 12 consecutive months, or passes away. No debt can ever pass on to the heirs with a reverse mortgage, and you will never owe back more than what the home can sell for on the open market. The loan proceeds do not effect Medicare of Social Security proceeds.

When it likely makes sense for in-home healthcare:
- You want to stay in your home and plan to stay in your home for the near future.
- There are enough funds available from your reverse mortgage to cover the cost of in-home healthcare for an acceptable period of time.

When it might not make sense:
- You are planning to move into an assisted living facility within the near future.
- The money available from a reverse mortgage will only help pay for in-home care for a short period of time

Some individuals can benefit greatly from a reverse mortgage by using some of the proceeds to make their home more handicap accessible, by purchasing long-term care insurance, or by having access to funds to pay for in-home healthcare that can keep them in their homes for much longer than through other options. For others, the math might not make sense, and different options may be more viable.

With a reverse mortgage, the loan is not due and payable until the last surviving homeowner moves out permanently. So, if in the case of a married couple, if one spouse had to move to an assisted living facility, the other spouse could remain in the home as long as they continued to pay their taxes and homeowner’s insurance.

Again, whether a reverse mortgage makes sense for paying for in-home healthcare is dependent on your situation and unique circumstances, but it can be a good solution.

Aug 19, 2015 - 03:11 PM

The responses that you have received so far are accurate. However, the cost of the reverse mortgage wasn't addressed. Have you shopped around? Many lenders charge an origination fee at the maximum allowed by law. Most seniors don't know that different reverse mortgage lenders have different fees and interest rates. Price-comparing can save you many thousands of dollars.

Aug 31, 2015 - 10:46 AM

Reverse mortgages are used to help people stay in their homes. So using a reverse to pay for homecare may make sense depending on your specific needs. If you are a married couple and one of you is sick and require assisted living or nursing home care; you will learn that the income of the infirmed spouse will be used to pay for care. So the household income will be reduced and the healthier spouse that continues to live in the home may need funds to cover their expenses. The reverse mortgage can do this. I highly recommend that you meet with an eldercare attorney whom will advise you about programs like community Medicaid.

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