Im considering a Reverse-Mortgage. My husband is 87 years old and I am 62. Jim has Parkinson's with Dementia. He might be going in to Assisted living group home in the next year or so. I don't know how I will be able to pay our current mortgage + all the other household expenses too. Would the R.M. cut out our monthly mortgage payment, and still allow me to stay in our house??
RM usually have to be the primary lienholder. So the $ from the RM will need to first & foremost go to pay off the old existing mortgage and then what else is left can be put onto a line of credit or lump sum paid to you. The amount lent tends to be at best 50% of property value.
Once you reach the max payout, that’s it for RM $ coming in. But you will not have to do any Mortgage payments. The RM debt is due either after both of you die (so your heirs have to deal with it) or you do something to place the terms of the loan to be out of compliance. You have to pay property taxes, insurance, maintenance. The insurance for a new mortgage may be more than you currently have. If your old mortgage is super old, it may be way underinsured for current replacement rebuilding costs and it may now need higher homeowners plus flood or other peril insurance that you all never had to get before. If these aren’t paid or property maintenance done, the loan can be called in.
How much is left on your current mortgage?
And what is likely the appraisal value of the home?
Like if old mortgage is 25k, but value is 300k, the RM might lend you 150k but 25k must pay off the old mortgage and your left with maybe 125k. Once the 125 is spent, that’s it for RM $. If in 5 years you can’t pay taxes, the RM will call in the loan. They will foreclosure.
RMs are beyond lousy debt to value ratios.
To me, RMs are often just a bandaid on a bigger problem..... that is you can not afford to live in your home. If hubs goes into a facility, why can’t you sell the place and move into something smaller & use the house sale $ to buy a smaller more affordable place? If he’s likely to go onto Medicaid, imo you’re better off selling house, buying a single newer more dependable care, buying a house with big diwnpayment, buying preneed funeral & burial for both of you, so there’s no assets from house sale to have to “spend down” & as the community spouse you get to keep a portion of his income to pay for the costs for you to live in the community, pay a mortgage and property costs, instead of it all going to the facility as his Medicaid copay.
I will say this, LTC medicaid for him and community spouse rules for you are not simple to understand. You are best off discussing what Medicaid is like for your state and what it can mean for a community spouse with an CELA or NAELA level of elder law attorney. Some states do not have recovery for Medicaid costs from the surviving spouse while other states do. Your income does not factor into his Medicaid eligibility, so if $ is moved to an income only source for you, not an issue for his Medicaid. It’s stuff like this that’s critical to know to come up with the better options for what to do. It’s not a DIY and there lots of too good to be true products being touted to elders. Really get with an atty.