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My mother has a reverse mortgage on the home she inherited from my grandmother. She obtained the reverse mortgage approximately 15 years ago and the amount she currently owes is twice what she received. Each month over $400 is added to the amount she owes on the reverse mortgage for interest, fees, and mortgage insurance. There is no way she will ever be able to pay off the loan and the home four generations of my family have enjoyed will be gone because there is no way any of us can afford to pay off the amount that is owed.

Additionally, the cost of her maintaining homeowners insurance on the property has skyrocketed to the point where it takes 1/5 of her monthly income, leaving little funds for the maintenance the home requires. The reverse mortgage company requires her to maintain homeowners insurance on the home and keep up with the maintenance.

If/when we place her in an ALF she will lose the home due to a lack of residency. If we sell the home and pay back the reverse mortgage it will affect her medicare / Medicaid eligibility.

I, personally, think reverse mortgages are the worst legal scam around. They prey on the poor and elderly. I would wholeheartedly recommend you stay as far away from them as you can. If it is a choice between only a reverse mortgage and a home equity loan, I would strongly urge the home equity loan.
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LittleOrchid Feb 2023
I agree. When my husband and I read the statement from the lender after my MIL died we were shocked at the fees and compounded interest (She had made the decision herself and did not show us the contract). In less than 10 years her previously fully paid for house had more debt than it was worth. We cleaned out the house and offered to give the keys to the lender. For some reason they refused to take the keys and insisted on full payment. MIL had little left beyond keepsakes, so we let them go to foreclosure. They got nothing but the house, which they sold at a loss after 9 months of standing unheated and uncooled. Naturally, there was some deterioration of the interior and growth of mold, etc. What a waste of a once-beautiful 4-square that had been in good condition when she took out the RM.
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I would use an elder law attorney or a Licensed Fiduciary to go over things with regarding all assets, and all choices. These things sometimes work out to the detriment for a senior. You see, this is basically a loan (often a high interest one) against the value of the home. There are often stipulations that the person must remain IN the home, and if they leave the home for care in LTC facility they must repay the loan almost at once. This often forces sale of the property. The other way this can go bad for seniors is that it bumps up their income so that they are unable to qualify for medicaid. Say they are getting 2,000 a mo social security and another 2,000 a month from the mortgage loan, they now cannot qualify for medicaid, but neither is this enough to pay for LTC.
So you can see the ways in which this can be a problem.
For some it works well. It did for my partner's Mom who took one out and was able to remain in her home with some caregivers on a cleaning, cooking, shopping help basis. She was able to die at home. The mortgage was paid after her death and my partner inherited whatever remained.
So answer is that it DEPENDS but what you MUST have is a good company with a very reliable and long history, and you must know all the facts, all the positives and all the negatives, and then make the decision that hopefully works for you (or your parent.)
I wish you luck. Just a few things to think about.
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ClairJ Feb 2023
I found your post very helpful.
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I personally think that reverse mortgages/home equity loans/equity release schemes are a bad idea in principle. They allow people to maintain a home, or in some cases a lifestyle, beyond their income - right up until the moment when they run out of cash and find themselves living in the same home that they still can't afford, but now without capital assets either.

Is the house you're thinking of remortgaging to pay for care the family home that your parents raised seven children in? And your father is now living there alone?
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Ktrojano: Reverse mortgage loans do have to be paid back, of course. Some companies use a television ad with a popular actor attempting to sell the bill of goods. Do your research if you choose this route. It's not as cut and dry as the smooth talking actor portrays. Suggest that you see an elder law attorney.
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Reverse mortgages take way too much in fees every month for the privilege of giving a person what they already own.
Take a second mortgage instead. It will cost less. Or better still, why not sell the house? Go into senior living instead and have money to hire help where needed. Many senior communities also have memory care and nursing home care right on the premesis if a person gets to a point where they need it.
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againx100 Feb 2023
Exactly - sell the house and have him move into the appropriate level of care. Independent living with a caregiver or maybe assisted living as he obviously needs care.
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I just checked into a home equity loan with our lender Wells Fargo to use the $ for a couple of things. We have about $80k in equity in our home. I was told they don’t do those any more & it would have to be a straight up refinance with cash out. Just over $3k in closing fees, a higher APR than we currently have & a higher mortgage payment on a new 30 year loan. No way! I’ll hold out until I can get my husband placed & sell the house. We have good credit & a decent income, so I was shocked it was such a crappy deal from what I considered a “legit” lender.
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ChoppedLiver Feb 2023
Hi, I have found that credit unions, mortgage companies, and smaller banks (e.g. regional and local banks) give much better rates and closing costs than Wells Fargo. You don’t have to be a member of the credit union until the day you close on the loan. However if you refinanced during the period of low mortgage rates, getting a loan for that rate is hard to find
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Don’t do it!!!
do you have a lady bird deed set up on the home? Are you the DPOA of estate?
First use up all cash assets, all monies including life insurance. Ya may take a hit on the life insurance. If cashing Life insurance out you can put 12,000 aside to funeral arrangements (you have to create a account with funeral home and set up) and use remaining for the cost of facility. State will want to see you used remaining $ for the facility.
when the person has depleted all the cash assets the state will place them on state Medicaid. If the person has a pension and or social security the state will pay the difference in cost. The state can not make you sell the home but you will have to maintain up keep and taxes.
if there’s no assets contact your department of health services (DHS) in your area get them on state Medicaid.
I am going through same situation but we’re going to sell the home and keep life insurance going.
good luck
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Proceed very carefully. There may be times when a reverse mortgage may be a good option, but there are also many times when it is not a good option. For one thing, once you take out a reverse mortgage you close out other options. You are betting that the owner will die before the need for a residential care option is needed. The fees (many of them hidden) will quickly use up the equity in the house. My MIL took out a reverse mortgage on her fully paid for house. In less than 10 years she was trapped in a house she could no longer care for but could no longer afford the assisted living option that would have been better for her.

If you decide to proceed with the reverse mortgage, read the contract very carefully and also have a qualified attorney or financial advisor study the contract for hidden fees and holes in the contract that could allow for additional fees. Be aware that most reverse mortgages are nullified if the owner spends more than 30 days not in residence. This means that an extended stay in hospital/rehab or at a relative's house could make the entire note immediately payable.
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Yet RM's are constantly advertised on television and websites, out to get more victims willing to fill their pockets.
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Reverse mortgages are only good if the owner is a savy investor who knows with the money from a reverse mortgage he/she can gain value in the investment be it stock, real estate, or business venure.

And that the house that has the reverse mortgage will also gain highly in value so that when the house is sold it will easily pay off the RM plus interest/fees.

It's complicated.
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