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I helped my mom get a reverse mortgage to pay for the very expensive private-pay live-in aide plus additional daily aides she needed. It worked for us, she was able to stay in her home, on hospice for the final year, and die in her own bed as she'd wished. The horror stories you hear of are largely something of the past now because of new regulations on reverse mortgages. There's a limit on how much your total line of credit for the reverse mortgage can be relative to the value of the property, to prevent RMs from going underwater. The borrower now has to have in-person counseling from a HUD accredited counselor before taking the RM, so they understand the risks and obligations. Interest accrues, but just on the amount you've withdrawn, and it should be a reasonable percentage that you negotiate with the lender. The loan becomes due if the borrower dies, moves out of the house for more than 12 months, or fails to pay the property tax or property insurance. So unless there's another way to repay, the property then has to be sold and the proceeds used to repay the reverse mortgage. You should have 90 days to repay and this can be extended 3x so you have a year. one caution: If other people are living in the home and the borrower dies or has to move to a nursing home permanently, they will have to leave too so the property can be sold to repay the RM. Also you can't have another loan when you have a reverse mortgage. My mom had a previous loan, so she had to use an initial chunk of the reverse mortgage to repay that loan. The reverse mortgage was great for us because the value of my mom's property was relatively high - high enough that she wasn't eligible for Medicaid - and we already intended to sell the property when she died, and she wanted to stay in her home and needed care but not care that required her to be in a nursing home.
Please do a lot more research before considering this kind of loan. The reason given is to pay for long term health care - are you talking about a facility? This is not likely going to be the best method. Please read through this page:
Take aways from just a brief run through: *sounds like you won't get the total amount the home is assessed at *it states most people do this to REMAIN in the home as long as possible *you get to keep/live in the home for as long as one borrower lives there
I don't like what I have read and heard about these loans, and it certainly doesn't sound like this is the right method for financing LTC. When you say partner, are you married? The second link does indicate if a spouse or partner is a co-borrower and one of you has to move to LTC, the other can remain. If NOT a co-borrower, you'd have to pay back the loan (could be some serious interest!) or sell and move.
There is also the concern about housing markets - they are notorious for having ups and downs. So, what happens if you get a loan for say 80% of the value but at the time you need to sell and pay it back, house values have dropped, while interest has accumulated - would you have funds to cover the shortfall? (from the first link, it sounds like you won't get 100% - they have calculators for the actual loan value)
Then there is Medicaid....
"Reverse mortgage payments also may affect your eligibility for government benefits, including Medicaid. ... The unspent balance from a lump-sum reverse mortgage loan could put a borrower over the allowable asset limits for Medicaid or Supplemental Security Income (SSI) eligibility.Mar 2, 2017
Is a Reverse Mortgage Right for You? - Elder Law Answers www.elderlawanswers.com"
I would think LONG and HARD before considering this option. Tom Selleck may be a nice guy, but he's being paid to do that ad for RMs... Some people will do and/or say anything to get the ad money...
Shaggy, please please, If you are actually still mulling doing a RM, please make sure that if you are a “partner” and not an actual married to them traditional old-school spouse, that you have the ability to stay in the home without a “call in” of the loan should your partner die ahead of you OR they enter a facility and you do not that you are able to stay in the home till your own death or you too enter a facility, AND if you are somewhat younger so under the RM age minimum at time RM is signed that you can continue to live there. You gotta see that all these are in writing and then have an atty review the document to second verify.
& on a tangent to the “leaving house” so out of compliance which allows the RM to call in the loan. We went thru H. Katrina, couple of our friends had parents who lived in Lakeview area of New Orleans who had RMs. Very much slab on grade modest ranch-burger style 1 story 1960’s homes. Lakeview flooded big time... 8-15’ standing water for weeks, like needed a pirogue or canoe to get to areas. The RMs contacted the parents & required that they provide to the lender a repair and replacement plan in place with permits applied for and licensed contractor attached for work with a start date. And the date folks were to move back in. None of this was even remotely possible to do or figure out as it was chaos till spring / summer ‘06 unless you were in the sliver. Loans called in. Zero to their folks.
RMs will do whatever to reduce their risk, which means they call in the loan, close out the RM and sell that sucker ASAP. It’s not just RMs who did this stuff post K, all the insurers did whatever to delay, lowball or deny Katrina claims. But for the RMs it’s different than a traditional mortgage co., as RMs don’t care if the loan looses $ as HUD pays the difference. RMs have no reason to ever work with property owner, it’s not in their favor to be flexible and gracious.
Yeah in theory one could go on vacay for 10 months, but that property has to be maintained & kept repaired.... yard cut, insurance & taxes paid, mail picked up, etc. or it’s out of compliance & if you do anything to show a new address, your out of compliance.
I’m one of 7 children & the only one caring for mom in her home. I own my own home & have my own life. After doing it alone for 6 months I had a brilliant thought that I was killing myself to save my siblings inheritance. I’m POA financial & Medical & successor trustee of her trust. I got the reverse mortgage. Hired caregivers, just 12 hours a day & 1 night a week. Her house was paid for but it’s a modest house in a modest area. I figured out I could provide 4-5 years this way. I’m 3 years into it & im so grateful I did it. When the funds are exhausted I’ll need to place her or take over full time. Right now I’m saving on payroll because of Covid I’m doing 24/7 again. I’m sure there’ll be no equity left but her equity is for her not my siblings to enjoy through her labor. If she’s gone from her home 12 months she forfeits the loan & if she doesn’t pay her taxes, insurance & maintenance. She had enough for all that with her income before the RM. it’s worked well for us.
It sounds perfect in come ways as a "spend down," but you don't have anything to lose and neither does she. There is no one else who needs to live in the house after she is gone. It might not be right for everyone, but it sounds good for you. Good to know it works sometimes.
Reverse mortgages traditionally have been very predatory. I'd consider a more traditional line of home credit before getting ensnarled with the escalating monthly balloon payment to pay it off of reverse mortgages. Dangerous territory, in my opinion.
OK, my input. I only have this story. My friend W was in his late 70's. His wife had cancer and he took out an RM to pay the medical bills. She died. About a year later he remarried another friend who was 60. He didn't want her to work, so she didn't. 5 years later, a few months ago, he had to go to the hospital, after calling the ambulance, she was hurrying downstairs to let the EMTs in. She fell downstairs breaking both ankles. He died 3 days later, She was in a wheelchair because of her injuries. Because she was on the deed but not on the mortgage, the RM company gave her 30 days to purchase the house, or get out. No job, 2 broken ankles, loosing her husband suddenly.
To make a long story short, she was able to purchase the house because it had gone up so much in value she had equity. W's SS helped her too. Remember, she was on the deed. She has found a job (at 66 years old). Her daughter and roommate moved in with her as renters, to help pay the mortgage. Don't know how long this will last, so far it is working out but it was very iffy there for a couple of weeks. If it wasn't for this pandemic with housing purchases at a low, and mortgage companies hungry, she could have been in a pickle.
Before he died, he was sorry he had taken out the RM. I looked into it at one time and the interest rates and fees were awful.
I would think several times about it. Personally, I think I am lucky I am not married to a house. Having moved a lot in my life, I know there is always another place on the horizon. I also worked in Fire and have seen too many people lose everything and have to start over to think a house is the end all.
Please consult with a local eldercare attorney before considering any reverse mortgage. What would happen if the RM recipient living in the home needs long-term care that requires him to move out to a LTC facility? Also, receiving RM cash income will affect Medicaid eligibility, so it is also best to consider your future health which enables you to stay at home; looking at your family health history, too. It is like looking through a Crystal Ball. What may be the outcome? What about the desire to leaving assets to his or her heirs? These RM businesses are reaching out for really one thing: to make money! Do carefully think things out before committing to an RM contract. As said by LittleOrchid, once the RM contract is signed, you are locked in and cannot change your mind.
One more caution, if you can stand it. Bear in mind that once you have taken the RM you have locked in your choice. You cannot change your mind. The RM will significantly reduce the value of what is probably your biggest asset. The thing to keep in mind is that what seems to be your best plan for your later years at this point is bound to change. Now you think that you want to stay in your house until you move to residential care, with LTC insurance to fund it. That may change in 10 years. My MIL, as many others, thought that staying in her home as long as possible was what she wanted and took out a RM. Three years later her son and I moved to another state. We wanted her to move with us but the move was impossible for her due to her greatly reduced equity. Then her daughter purchased a house in California for a rental property (to protect their view across the property) and invited her to live in the house. Again, it would have been possible for her to try it out for a few months and kept the house on the East coast in case she wanted to return--except that the terms of the RM prevented an absence of more than 30 days. More things happened that might have been great options if she hadn't signed on to the RM.
In short, the one thing you can count on is change. You might want to keep your options open so that you can change your mind when other things change.
A RM requires you to not be out of the house for a year, not 30 days, before they can take action. You can travel for 11 months if you want, so long as you come back to occupy the house. And if you want to take off again after a few weeks, there are no repercussions. If you are gone 12 months, then it is considered abandoned and can be put up for sale. Any equity in the house is returned to the owner or heirs, not kept by the bank.
I would not use this option unless no other way to pay for care (i.e. if you go into nursing home either you will have to pay or if no money other than home - Medicaid will attach a lien on the house - if there is a spouse in the home - so that when it is sold Medicaid gets repaid). Also, if you are out of the house for over 30 days (most policies) loan holder can call the RM. And they do not give you the current market value of the house - most I've seen offer about half of what it is worth - so if you leave home for the 30 days they can take home, sell it and still make a profit. Equity loan or line of credit may be better - be sure to repay or they can call loan, too.
My parents did a reverse mortgage in their 70s. This was in the early part of ‘00. It worked well for them as they drew a payment each month against the RM. This gave them enough money that Dad was able to stop working his job. They both also drew SS and Dad received a Navy pension. Mom died first, I moved in with dad to take care of him. His house needed a new roof, as power of attorney for him I was able to draw on funds to have this done( they wouldn’t talk to me until they received proof of that) his payments dropped down $500 a month after we took money from the RM for the roof. This was a good thing for my parents but the house reverted to the mortgage company after dad died, we were given the option to purchase it, all of us declined as we each had our own homes. I had to move out when the bank foreclosed on the loan. So it can be a good thing if your are going to stay in your home until you die. Beware all the little rules in the loan, such as required maintenance, tax and insurance payments you must continue to do, reductions in payments if you are getting them and draw from the line of credit. I’m sure there are others in there but those were the things that we dealt with for our father, if I had not been there to take care of him he would have gone into a NH and the a MCU. I’m sure the issues then would have been different to some degree. I don’t believe that to have long term health insurance that I would recommend it, nor would I do it to pay for help to come in. Home health care is expensive, if there are other options available to you that is what I would look at first. It is important that you receive help as caretaking is a heavy load to carry for only one person. You also have to ensure that you are cared for as you age also, a reverse mortgage may be eaten totally up by your partners’ care so then you have nothing to help you.
If the person on the mortgage is out of the house for a specified period of time, check with the mortgage guidelines, the mortgage holder has the right to call the note. Be careful with this and please check into it thoroughly
This is not true: "once the owner dies the bank owns the house leaving your heirs nothing." You never give up ownership of your home and the remaining equity in the home belong to your heirs.
I think reverse mortgages can be dangerous, ESPECIALLY for people with spouses or significant others. You can end up homeless. I think in general, people are far better off moving to a smaller, easier to maintain home. Declutter, throw stuff out, give to kids, etc. All this while still competent. I am so grateful my mom did this.
Seniors can end up homeless with traditional home equity loans too, especially if handled by a predatory finance company instead of a more regulated bank. If the home is owned as joint tenants then the RM can be setup to be due when both parties have moved out of the home. Selling a home with a RM is not much more difficult than selling any home with a mortgage, the primary difference being a defined time frame to sell the home and paid off the mortgage. There's a similar time frame with a traditional mortgage too unless the estate or someone is able to continue paying the monthly payments until the house is sold.
If a senior requires help to remain at home and is willing to lose the RM fees as the cost of remaining at home, I can see where the RM can be a better than selling the home so the senior/couple can afford AL fees. For the elderly couple I helped with an RM, TN Medicaid gave them a wavier so RM money used on in-home care or medical expenses didn't count as income toward state program quantifications.
Although I agree downsizing to reduce expenses and the effort required to maintain the home while increasing savings is usually a better financial plan, many seniors wait too long and may not be physically or emotionally able to downsize into another house. When you have a stage 4 cancer diagnosis and 6-24 months to live, downsizing into another house may be just too much to complicate. Others may be looking at an RM from that downsized home. If there will be a period for a number of years where in-home care is less expensive than AL/MC, then the RM can make financial sense too.
In short, I believe "buyer beware" with any loan, traditional or reverse, a senior may consider. Because a significant percentage of the home's value will be consumed by RM fees, an RM needs to be considered as the last option. Whether selling or RM, there needs to be a plan projecting how long the money will last for in-home care or AL and a plan for moving to Medicaid LTC when/if needed.
My father did a reverse mortgage some years ago. I moved him out of the home last week...I had to surrender the home and currently am waiting for them to take possession of the home...Haven't encountered any problems yet.. Procedure for returning property is clearly spelled out in paper work they sent me...
You will be required to keep up the homeowner's insurance and to maintain the house at YOUR expense. Home maintenance can eat up your income; anything to do with the actual building, plumbing or electric will gouge you. Consider the cost of storms and other natural disasters. Further, it will be virtually impossible to sell the house without another legal mess requiring estate lawyers.
Further it is counted as income so this can affect MEDICAID, and can make you ineligible or simply kick you off of it if you are on it.
Banks and government are crooked and I would only consider it if I were actively dying like in cancer -- and once the owner dies the bank owns the house leaving your heirs nothing.
I also would ***NOT*** entirely trust any articles AgingCare experts put out on the "benefits" of reverse mortgage--you do NOT know if the article has BIAS or not. Paid advertisers get all the benefits including biased articles. So get a good estate attorney and talk it over and yes you ****WILL**** need an estate attorney. Once you sign...you just signed your own enforceable warrant.
In general we have to remember that such products as RM and LTC insurance provide a considerable benefit to the companies that sell them such that the cards are stacked in their favour--this is their incentive for selling them. Buyer beware (especially when it comes to the "fine print")!
I would do a lot of research on all the options before I risked my house.
Does your partner have a social worker who can help direct you guys to available resources in your area? If not contact the local counsel on aging and they can help you with contact information for resources.
I helped an elderly couple arrange a RM on their home a few years back. They were both in their 80s, being treated for cancer, had small life insurance policies, and had exhausted all their savings. They were on Medicaid and the husband qualified for LTC but wanted to remain at home. SS benefits were not enough so the wife had been working cleaning houses to make ends meet until she became ill too. They took a lump sum plus monthly payments. The lump sum was used to add a master bath with a walk in shower, enlarge a couple of doorways, redo the front porch, add a ramp, and purchase a new two sided inclining bed. The monthly income allowed them to cover their bills and afford some in home help. They ran through almost half of the home equity in 19 months _but_ it definitely improved their quality of life for those months. The husband died first but his wife was happy she was able to tend him in their home. She was able to remain home until her death too.
RM worked for this couple who could not qualify for a home equality loan large enough to meet their needs because of their income but had a nice paid for house from their working years. Their children, all still working in their 50s, supported the parents using the house to provide for their care.
You lose some of the house's value due to the RM fees, but if it's the only way to cash in on the equity, then it might still be the right thing to do.
This is so similar to my Partner's Mom's experience. She got to stay home. THat is what she wanted, even when she was bedbound. We, family, were not there.She could stay in her home with care she could afford ONLY with the reverse mortgage. I mention it above. I think these are the cases where this really works. It doesn't leave a whole lot left in the home to "inherit" but to my mind that is a GOOD THING if it keeps the person whose asset it is in comfort in latter years.
I equate these financial instruments with nothing positive and with few if any advantages. I see them as highly exploitive, and I condemn the public figures who are appearing in ads for them.
The only reason I would ever use one is if I knew I had a terminal condition, my family didn't need the money, and I planned to live life as richly as I could. Then I would travel, exploit the funds available, and leave the house and the unpaid mortgage to any of the sleazebag companies I chose. In others words, exploit them as they have exploited others. Payback.
On a serious note, I'd find out a lot more about this so-called line of credit account and the interest it allegedly receives. Actually, the entire mortgage could be considered a line of credit, but it's unlike a HELOC. And I'd like to know more about how it receives interest.
Typically revere mortgages are reversely amortized; they increase in obligations after any withdrawal, and monthly. Interest grows like weeds in a garden. But that interest isn't available to you. I think someone's handling your partner a "line" and misrepresenting the true nature of the role of interest in maximizing the return to the reverse mortgage issuer.
Your partner should also consider whether compromising an asset such as a house could jeopardize qualification for Medicaid if it's needed.
These can work for some, but to my mind, and from what I have personally heard, success in this is rare as hen's teeth. This worked VERY WELL for my partner's Mom. She had a home in the quite precious Carefree, AZ. She got a reverse mortgage, and the monthly funds from it, combined with her savings and income allowed her to stay in her home with first minimal care, then more constant care. She wishes never to go into care and she did not have to. When she died, the Reverse Mortgage loan was paid off, and the remainder of the sale was inherited by my partner. So for her this was wonderful. I think, as I said, that is rare.
There is a thread on the forum now where all the funds from the RM have been spent and the owner needs a new roof and has no funds to pay for it. They can’t get the roof financed because the home has a RM on it. Part of the RM agreement is that the owner has to keep the home maintained. There are many threads on this forum about RM. It has probably worked out for some but we don’t seem to hear from them. It seems to usually be done out of desperation without researching alternatives. I admit I’m biased against it as a SIL lost her home after her husband died suddenly at 68. She was too young to sign the paperwork at the time RM was entered into. She signed a release of some sort acknowledging she knew about it but at that time, that was not enough to allow her to stay in the home past his death. They could have refinanced once she was 65 but the costs to do so were very expensive and so they didn’t. No one in the family knew they had entered into such an agreement. So she lost her husband and then her home. Even as a partner and not a spouse, if you live there, you might be asked to sign off on it. Beware.
Just a question about LTC insurance. Is there a time limit from the day you purchase to the day you need it? Like you have to pay into it for a certain number of years before you can use it. Seems its not in the best interest of the insurance company to sell you a policy and in two years you need it. So at 72, with already having health problems, would a LTC insurance company even give u a policy.
Reverse mortgages are an expensive source of funds, sometimes suitable for people with a LOT of home equity who want to stay in their home as long as possible and are not concerned with leaving anything to their heirs.
The line of credit that I am familiar with refers to allowing the borrower flexibility in taking out money. Borrowing money to invest safely makes no sense. A senior in need of LTC borrowing to invest with risk is worse.
And after a certain age you can't even get it. Plus you have to read the fine print - some longterm care insurance has very stringent conditions to meet before it takes effect. I had a friend whose dad had Alzheimer's severe enough for him to require memory care, but because he could still manage to eat without assistance - not prepare food, just eat it - his expensive longterm care insurance didn't cover his expensive long-term care.
Be very very very careful with this. While there are reputable companies there are many that are not. Both Reverse Mortgage Companies AND Long Term Health Care insurance can be very dicey. I would get a good elder law attorney and discuss with that person. A good accountant to go over contracts. To be very frank, many long term care insurance companies don't cover all the care needed and that is as good as worthless. Many will not cover ANY place that doesn't have a full time RN on staff. Guess what NO PLACE does. I think the house would be better kept as an asset, then sold when ready to enter assisted living. But that's me. Just take great care in this.
I just graduated from university with a Financial Planning degree. I am in Canada, but the basics of reverse mortgages are the same in both countries.
There are very few situations where they make good financial sense. I do not know your situation, so I cannot comment on it.
One issue is that the reverse mortgage becomes due when you move out of your home. So to use the funds to pay for long term care, if you are thinking of residential care may put you on the wrong side of the rules.
The home owner is still 100% responsible for insurance, property taxes and maintenance.
The interest on the line of credit account will not be the same as the interest rate the reverse mortgage is compounding.
I would look long and hard at all other options before signing up for a RM.
Good point about the loan being due when the borrower moves out. The partner needs to be aware that the home would need to be sold or refinanced at that time. A spouse may be permitted to stay in the home, depending on how the contract is written.
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The horror stories you hear of are largely something of the past now because of new regulations on reverse mortgages.
There's a limit on how much your total line of credit for the reverse mortgage can be relative to the value of the property, to prevent RMs from going underwater.
The borrower now has to have in-person counseling from a HUD accredited counselor before taking the RM, so they understand the risks and obligations.
Interest accrues, but just on the amount you've withdrawn, and it should be a reasonable percentage that you negotiate with the lender.
The loan becomes due if the borrower dies, moves out of the house for more than 12 months, or fails to pay the property tax or property insurance. So unless there's another way to repay, the property then has to be sold and the proceeds used to repay the reverse mortgage. You should have 90 days to repay and this can be extended 3x so you have a year.
one caution: If other people are living in the home and the borrower dies or has to move to a nursing home permanently, they will have to leave too so the property can be sold to repay the RM.
Also you can't have another loan when you have a reverse mortgage. My mom had a previous loan, so she had to use an initial chunk of the reverse mortgage to repay that loan.
The reverse mortgage was great for us because the value of my mom's property was relatively high - high enough that she wasn't eligible for Medicaid - and we already intended to sell the property when she died, and she wanted to stay in her home and needed care but not care that required her to be in a nursing home.
https://www.newretirement.com/retirement/new-reverse-mortgage-calculator-how-to-assess-your-suitability-for-these-loans
Take aways from just a brief run through:
*sounds like you won't get the total amount the home is assessed at
*it states most people do this to REMAIN in the home as long as possible
*you get to keep/live in the home for as long as one borrower lives there
Another site:
https://www.consumerfinance.gov/ask-cfpb/what-happens-if-i-have-to-move-out-of-my-home-into-a-nursing-home-or-assisted-living-and-i-have-a-reverse-mortgage-en-243/
I don't like what I have read and heard about these loans, and it certainly doesn't sound like this is the right method for financing LTC. When you say partner, are you married? The second link does indicate if a spouse or partner is a co-borrower and one of you has to move to LTC, the other can remain. If NOT a co-borrower, you'd have to pay back the loan (could be some serious interest!) or sell and move.
There is also the concern about housing markets - they are notorious for having ups and downs. So, what happens if you get a loan for say 80% of the value but at the time you need to sell and pay it back, house values have dropped, while interest has accumulated - would you have funds to cover the shortfall? (from the first link, it sounds like you won't get 100% - they have calculators for the actual loan value)
Then there is Medicaid....
"Reverse mortgage payments also may affect your eligibility for government benefits, including Medicaid. ... The unspent balance from a lump-sum reverse mortgage loan could put a borrower over the allowable asset limits for Medicaid or Supplemental Security Income (SSI) eligibility.Mar 2, 2017
Is a Reverse Mortgage Right for You? - Elder Law Answers
www.elderlawanswers.com"
I would think LONG and HARD before considering this option. Tom Selleck may be a nice guy, but he's being paid to do that ad for RMs... Some people will do and/or say anything to get the ad money...
& on a tangent to the “leaving house” so out of compliance which allows the RM to call in the loan. We went thru H. Katrina, couple of our friends had parents who lived in Lakeview area of New Orleans who had RMs. Very much slab on grade modest ranch-burger style 1 story 1960’s homes. Lakeview flooded big time... 8-15’ standing water for weeks, like needed a pirogue or canoe to get to areas. The RMs contacted the parents & required that they provide to the lender a repair and replacement plan in place with permits applied for and licensed contractor attached for work with a start date. And the date folks were to move back in. None of this was even remotely possible to do or figure out as it was chaos till spring / summer ‘06 unless you were in the sliver. Loans called in. Zero to their folks.
RMs will do whatever to reduce their risk, which means they call in the loan, close out the RM and sell that sucker ASAP. It’s not just RMs who did this stuff post K, all the insurers did whatever to delay, lowball or deny Katrina claims. But for the RMs it’s different than a traditional mortgage co., as RMs don’t care if the loan looses $ as HUD pays the difference. RMs have no reason to ever work with property owner, it’s not in their favor to be flexible and gracious.
Yeah in theory one could go on vacay for 10 months, but that property has to be maintained & kept repaired.... yard cut, insurance & taxes paid, mail picked up, etc. or it’s out of compliance & if you do anything to show a new address, your out of compliance.
To make a long story short, she was able to purchase the house because it had gone up so much in value she had equity. W's SS helped her too. Remember, she was on the deed. She has found a job (at 66 years old). Her daughter and roommate moved in with her as renters, to help pay the mortgage. Don't know how long this will last, so far it is working out but it was very iffy there for a couple of weeks. If it wasn't for this pandemic with housing purchases at a low, and mortgage companies hungry, she could have been in a pickle.
Before he died, he was sorry he had taken out the RM. I looked into it at one time and the interest rates and fees were awful.
I would think several times about it. Personally, I think I am lucky I am not married to a house. Having moved a lot in my life, I know there is always another place on the horizon. I also worked in Fire and have seen too many people lose everything and have to start over to think a house is the end all.
Please consult with a local eldercare attorney before considering any reverse mortgage. What would happen if the RM recipient living in the home needs long-term care that requires him to move out to a LTC facility? Also, receiving RM cash income will affect Medicaid eligibility, so it is also best to consider your future health which enables you to stay at home; looking at your family health history, too. It is like looking through a Crystal Ball. What may be the outcome? What about the desire to leaving assets to his or her heirs? These RM businesses are reaching out for really one thing: to make money! Do carefully think things out before committing to an RM contract. As said by LittleOrchid, once the RM contract is signed, you are locked in and cannot change your mind.
In short, the one thing you can count on is change. You might want to keep your options open so that you can change your mind when other things change.
I don’t believe that to have long term health insurance that I would recommend it, nor would I do it to pay for help to come in. Home health care is expensive, if there are other options available to you that is what I would look at first. It is important that you receive help as caretaking is a heavy load to carry for only one person. You also have to ensure that you are cared for as you age also, a reverse mortgage may be eaten totally up by your partners’ care so then you have nothing to help you.
If a senior requires help to remain at home and is willing to lose the RM fees as the cost of remaining at home, I can see where the RM can be a better than selling the home so the senior/couple can afford AL fees. For the elderly couple I helped with an RM, TN Medicaid gave them a wavier so RM money used on in-home care or medical expenses didn't count as income toward state program quantifications.
Although I agree downsizing to reduce expenses and the effort required to maintain the home while increasing savings is usually a better financial plan, many seniors wait too long and may not be physically or emotionally able to downsize into another house. When you have a stage 4 cancer diagnosis and 6-24 months to live, downsizing into another house may be just too much to complicate. Others may be looking at an RM from that downsized home. If there will be a period for a number of years where in-home care is less expensive than AL/MC, then the RM can make financial sense too.
In short, I believe "buyer beware" with any loan, traditional or reverse, a senior may consider. Because a significant percentage of the home's value will be consumed by RM fees, an RM needs to be considered as the last option. Whether selling or RM, there needs to be a plan projecting how long the money will last for in-home care or AL and a plan for moving to Medicaid LTC when/if needed.
Further it is counted as income so this can affect MEDICAID, and can make you ineligible or simply kick you off of it if you are on it.
Banks and government are crooked and I would only consider it if I were actively dying like in cancer -- and once the owner dies the bank owns the house leaving your heirs nothing.
I also would ***NOT*** entirely trust any articles AgingCare experts put out on the "benefits" of reverse mortgage--you do NOT know if the article has BIAS or not. Paid advertisers get all the benefits including biased articles. So get a good estate attorney and talk it over and yes you ****WILL**** need an estate attorney. Once you sign...you just signed your own enforceable warrant.
Does your partner have a social worker who can help direct you guys to available resources in your area? If not contact the local counsel on aging and they can help you with contact information for resources.
RM worked for this couple who could not qualify for a home equality loan large enough to meet their needs because of their income but had a nice paid for house from their working years. Their children, all still working in their 50s, supported the parents using the house to provide for their care.
You lose some of the house's value due to the RM fees, but if it's the only way to cash in on the equity, then it might still be the right thing to do.
https://www.agingcare.com/search?term=reverse+mortgages
Check out some of the other threads and answers; this will help expand your knowledge about these financial products and give you different insights.
The only reason I would ever use one is if I knew I had a terminal condition, my family didn't need the money, and I planned to live life as richly as I could. Then I would travel, exploit the funds available, and leave the house and the unpaid mortgage to any of the sleazebag companies I chose. In others words, exploit them as they have exploited others. Payback.
On a serious note, I'd find out a lot more about this so-called line of credit account and the interest it allegedly receives. Actually, the entire mortgage could be considered a line of credit, but it's unlike a HELOC. And I'd like to know more about how it receives interest.
Typically revere mortgages are reversely amortized; they increase in obligations after any withdrawal, and monthly. Interest grows like weeds in a garden. But that interest isn't available to you. I think someone's handling your partner a "line" and misrepresenting the true nature of the role of interest in maximizing the return to the reverse mortgage issuer.
Your partner should also consider whether compromising an asset such as a house could jeopardize qualification for Medicaid if it's needed.
It has probably worked out for some but we don’t seem to hear from them. It seems to usually be done out of desperation without researching alternatives.
I admit I’m biased against it as a SIL lost her home after her husband died suddenly at 68. She was too young to sign the paperwork at the time RM was entered into. She signed a release of some sort acknowledging she knew about it but at that time, that was not enough to allow her to stay in the home past his death. They could have refinanced once she was 65 but the costs to do so were very expensive and so they didn’t. No one in the family knew they had entered into such an agreement. So she lost her husband and then her home.
Even as a partner and not a spouse, if you live there, you might be asked to sign off on it. Beware.
I believe the original post referred to LTC expenses not LTC insurance.
The line of credit that I am familiar with refers to allowing the borrower flexibility in taking out money. Borrowing money to invest safely makes no sense. A senior in need of LTC borrowing to invest with risk is worse.
PS: just looked at ur profile. If your the same age of your partner I don't think I would invest in LTC insurance.
Plus you have to read the fine print - some longterm care insurance has very stringent conditions to meet before it takes effect. I had a friend whose dad had Alzheimer's severe enough for him to require memory care, but because he could still manage to eat without assistance - not prepare food, just eat it - his expensive longterm care insurance didn't cover his expensive long-term care.
There are very few situations where they make good financial sense. I do not know your situation, so I cannot comment on it.
One issue is that the reverse mortgage becomes due when you move out of your home. So to use the funds to pay for long term care, if you are thinking of residential care may put you on the wrong side of the rules.
The home owner is still 100% responsible for insurance, property taxes and maintenance.
The interest on the line of credit account will not be the same as the interest rate the reverse mortgage is compounding.
I would look long and hard at all other options before signing up for a RM.
A spouse may be permitted to stay in the home, depending on how the contract is written.