Lisa,
Simple: You are totally correct! Most of the general public are completely in the dark about the current reverse mortgage offerings.

Reverses are currently offering interest rates (including fixed rates) at or BELOW the conforming rates for forward mortgages. Further, reverse mortgages have closing costs about identical to forward mortgages (which used to be quite the opposite.)

Reverse mortgage use is exploding as the "baby boomer bubble" begins to gradually chase "the greatest generation" into retirement.... looking for ways to remain in their home yet no longer have any monthly payments to do so.

I wish you well in your career!

Cheers,
Dave Donhoff
Strategic Equity & Leverage Planner

I encouraged my mom to take out a reverse mortgage and it has worked very well for her. She, along with my aunt inherited my grandmother's house. My grandparents had built the house in 1945, and it is in a lovely area, a few blocks to a university campus and downtown. The house is currently worth around $400k. (California) At 77 my mother is quite active and enjoys going to the weekly farmer's market downtown and events on the campus so the location is ideal. My mother had been living in a MH park, which was a bit out of town. She was able to sell the MH for more than she paid for it, but did not come out with enough cash to buy out my aunt. My mother arranged to pay my aunt in installments, but was worried that she wouldn't be able to afford the upkeep on an older home and do the things that she enjoys - mostly travel.

So she took out a reverse mortgage and paid off my aunt, and also has a line of credit which she uses to maintain the house. She does not need the money to live on, her savings and pension provide for that. The way she looks at it, with the reverse mortgage the house sort of pays for itself. My siblings and I don't care about the value of the house when she passes. It is more important to us that she enjoys the rest of her life in a home that she loves.

Thank you for your comments. I would like to hear from anybody else that has a story (good or bad) on what a reverse has done for a loved one and (with your permission) I would like to print them off to show the seniors I am working with. There are so many of them out there that could be helped if they just understood more and the "fear factor" could be calmed.

Guess I better learn to spell it if im going to do it EH?

There are some problems with this concept for some people.

It's an expensive undertaking, sometimes not obvious because the expenses are rolled into the mortgage. The expense will outweigh the benefits if the Senior does not live long and stay put.

There is a rather low limit on reverse mortgages.

And, for some Seniors this is an ill-considered, last-ditch refusal to recognize that they cannot stop time -- that 'staying put' may not be their best option (for many reasons).

I would like to see the stats on how long Seniors live in their reverse-mortgaged homes. When I see a company start to promote a product heavily, I know it's a profitable one -- for the company.

I just want to let you all know that I have been working as an advocate for Seriors for many years now. Some are happy to leave the work and responsibilities of a house behind, those are usually the ones that can afford a nice place in an independent living community. Many can not and their options are mostly less than desireable. I see too many that have been forced to move to a facility that offers an income based rent and then only after they have spent themselves down to nearly no savings at all(forget leaving anything to their kids). These are usualy middle class Women that have lost their Husbands, their Husband's income and their insurance. I can't tell you how many I have worked with just this year that can not even afford decent health insurance to cover co pays, deductables and medications, (remember they have no savings to pay them either)in this county realy good insurance is as cheap as $114.00 a month. I find this really sad and am hoping to make a difference. I know the cost of this reverse mortgage is pretty steep but in my heart I feel the quality of life is definatly worth what it is costing them. Believe me I am on the lookout for those companies that are strictly profit based, but from what I can tell the Federal Government has pretty tight laws on how much can be charged. Those folks that are physically and mentally able to "stay put" should have a fair option to do so even if it is only a for a short while. After all, wouldn't you like to spend your last few years comforatable and happy after working most of your life? I thank you for your thoughts Chisue, do you have any suggestions or other options? I am definatly open to anything than can help my Seniors!

There's a lot of information out there on reverse mortgages but much of it leaves you wanting... by falling a little short of supplying some real nuts and bolts answers - leaving one to get good answers and advice from someone trusted and knowledgeable.

The reverse mortgage is actually a loan, with an interest rate, which allows senior citizens to convert part of their equity into cash without having to sell their home. Because it is a loan "in reverse" one receives a monthly sum as opposed to paying a monthly amount while living in the home.

However, this loan must be repaid and repaid with interest should you sell, die, no longer live their as your principal residence or reach the end of the pre-selected loan period. You remain responsible to pay real estate taxes, insurance and all attendant maintenance expenses which, of course, you would have to pay with, or without, a reverse mortgage.

A reverse mortgage, cost wise, is like a non-reverse mortgage. The lender usually charges loan origination fees, closing costs, insurance premiums (for insured loans) and service fees which are all set by the lender.

The interest rates charged mirror the non-reverse mortgages. Just as with a non-reverse mortgage, an interest rate can be fixed or variable with variable rates tied to a financial index. This means the rate will change as the index changes.
There are three types of reverse mortgages:
Single purpose means exactly that. The proceeds may be used for only the purpose specified by the lender and generally are only made to people with low or moderate incomes. If you call your county, be sure to ask if their reverse mortgage is a single purpose and what are the limits.

The second type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). The federal government insures these mortgages and they are backed by the Department of Housing and Urban Development (HUD). The up front costs are generally high especially if you plan on staying in your home for a short period of time but they carry no income or medical restrictions and can be used for any purpose.

The third type is called a proprietary reverse mortgage. These are private loans backed by the companies offering them. In other words, they are NOT government insured. Like HECMs, the upfront cost could be high for a proprietary reverse mortgage.

Wow! Thanks, duluth! That's the kind of input that makes these forums so great! Do you know if there are any tables showing how long Seniors with reverse mortgages remain in the homes they've mortgaged?

lisa -- I'm a little confused by your example of Seniors (mostly single women) who are barely scraping by. If these Seniors own homes, couldn't they sell them outright and use the proceeds to move to a place that requires less maintenance and may be safer for them? (Or are you citing their problems separate from the reverse mortgage plan?)

I agree that Seniors should have the option to decide to 'stay put', but they should also weigh the pro's and con's and honestly assess their personal condition. This can be hard to do if you are in denial about your failing health and finances and your near-future needs -- if you are hunkering down out of fear of change or lack of knowledge of alternate solutions. Then staying put is not a 'decision'.

BTW, my small experience in this comes from years on the board of a visiting nurse association that served mostly Seniors, plus my own family -- and, lastly, I AM a Senior now!

My MIL was adamant about staying put (isolated in an apartment) despite suffereing from advanced rheumatoid arthritis. The illness finally forced her to need daily nursing, and she chose a home. She got a new lease on life and thrived once she was again 'in company'. She would have died much earlier had she stayed put.

"My siblings and I don't care about the value of the house when she passes. It is more important to us that she enjoys the rest of her life in a home that she loves"

Terriks, I wish more people thought like you do. That is exactly how I feel about my Mom. I also work with Seniors regarding the Reverse Mortgage and you would be amazed at the amount of children that talk their parents out of getting a RM. I worked with a 75 year old woman that wanted the RV and her son would not let her do it because he thought she should live on $1,200 a month. This poor woman is struggling to make ends meet and she cried over not being able to get the RM.

This is a wonderful program that allows seniors to remain in a home they love and have the opportunity to travel, fix up their home, have a sense of security of not wondering if they can afford their prescriptions, they can do what ever they want to with the money.

There are alot of really clever seniors that use the RV to make money. You can use the RM to buy another home and resell it. I have a customer that is getting a RV so he can buy a home in Florida.

There are only 2 requirements for getting a RV. 1) you have to be at least 62 and 2) you have to own your home.
There is no credit check and the money is tax free.

I don't think it's a cure-all. The loan origination fees can be very high, much higher than for a regular mortgage. And the low Federal limit really hurts homeowners in coastal states where RE can be valued in the millions of $$.

Frankly, I'm happy we convinced my MIL to sell her house. Her DH had worked assiduously on getting everything up to par before he died, because he knew he was dying from heart disease. She is a typical old-generation wife who has no idea how to maintain a home properly. Their home was an extraordinarily valuable 1920's Mediterranean, but they are extremely expensive both to maintain and upgrade.

Had she stayed there, the home would have inevitably declined and been worth much less in a sale. In fact, we were able to sell her house less than a year before the bottom dropped out of the market. The new owners are underwater by at least $200K right now.

The reverse mortgage my MIL was eligible for was peanuts compared to the $1M profit she walked away with. Plus, no hassles, no upkeep, no worries when she wants to go visit her relatives for a couple of months - which she can now do anytime she wants, now that she's no longer cash-poor/house-rich.

Mind you, she still misses her beautiful home where she was happy. But she admits now it was the right decision to make.

I'm a Boomer, and have already told my DH to sell the house if anything happens to me and find rental housing, or perhaps a condo. It makes absolutely no sense for him to keep this house when he doesn't enjoy home maintenance and has no interest in gardening (it's a small house on a large lot, completely landscaped). Since we live in an area where home prices have vastly overreached rental prices, this is possible. In other regions of the US, YMMV!

Anyone know if there are any reverse mortgage options available to younger people?
A friend is a widow on SSI with a monthly cash flow problem, but living in a fully paid-off house with substantial value. She would really, really like to stay there another 6-8 years until her children are grown, but can't afford to 'sit' on all of her equity. A reverse mortgage, if it's available, might be a great option.
Anyone know?

chisue - think the reverse mortgage concept was first introduced in 1989 and you'd think there would be a body of statistics by now, but I haven't run across anything even remotely comprehensive. The articles in AARP etc. just seem to focus in on people who are happy with the choices they made. No subsequent follow ups.

sweeby - You do have to be 62 or older, own your house outright or have a small mortgage to qualify. It's not a fix for someone younger with a cash flow problem regardless of how unfortunate the circumstances might be.

If a couple owns a home, both must be at least 62 in order to get a reverse mortgage, I think.

I was reading a newspaper article on reserve mortgages and they mentioned future needs to increase the rather low max dollar amt of reverse mortgages. If someone has a $600k home free and clear, I don't think a reverse mortgage will work for them, because the limit is below that. This means folks is high cost living areas, or folks with high value property, are left out of the loop. Lots of these folks are house rich and cash poor. So they would likely need to sell outright in order to get cash for living. Which defeats the purpose, because often they want to live out their lives in their home that they love (and use the equity for living expenses via the reverse mortgage.)

"Reverse mortgage use is exploding"

So what happens in ten or fifteen years when the homeowners have passed away and banks find themselves with all these homes on their books that they need to unload?

I don't think the banks will own the homes mfbenson -- It would be just like the homeowner dies owing a mortgage.

Hi Sweeby,

Anyone know if there are any reverse mortgage options available to younger people?
A friend is a widow on SSI with a monthly cash flow problem, but living in a fully paid-off house with substantial value. She would really, really like to stay there another 6-8 years until her children are grown, but can't afford to 'sit' on all of her equity. A reverse mortgage, if it's available, might be a great option.
Anyone know?

Yes, there are a couple ways for your friend to solve her problem;

A) She can set up a 30 Year Universal Line of Credit... which is basically a 1st lien Home Equity Line of Credit that has no monthly required minimum payment, and allows its monthly interest charges to simply be credited to the balance outstanding on the line. It would further provide her access to funds if needed for regular living costs of whatever she chooses without incurring monthly payment requirements. The only downside to this is that the line is only good to the appraised value of the home (minus any outstanding liens needing to be paid off... which it sounds like would not apply to your friend.) So she'd be able to "sip" on her equity as long as the equity actually lasts... as opposed to traditional reverse mortgages available to 62+ y.o.'s... which have an annuity component that guarantees interest coverage for life.

Alternatively, if she wants to secure income, and ownership, without payments for LONGER (even for life) although she's younger than 62+... she can have the following constructed;
B) Plan how much income she'll need above her subsidies, for how long into the future, until she decides to sell (or reaches 62 and decides to stay.) She can then use a Universal Line to fund a fixed income annuity that can grow tax-deferred, undrawn, for as far forward as planning allows... and will then "blossom" to feed out an income stream to cover the differentials when subsidies decline or stop.

Obviously, the key here is in very realistic planning... the dreaming and/or fog has to be cleared away. There is no "magic" nor "free lunch"... but the value of her PIF asset CAN be stretched to cover her needs without depleting it entirely, or giving away value to the tax man unecessarily.

Hi mfbenson,

So what happens in ten or fifteen years when the homeowners have passed away and banks find themselves with all these homes on their books that they need to unload?

The reverse mortgage banks never "own" the properties they are lending on... unless the owner's estate fails to sell the property at any price, which is extremely unlikely.

Luck!
Dave Donhoff
Strategic Equity & Leverage Planner

"The reverse mortgage banks never "own" the properties they are lending on... unless the owner's estate fails to sell the property at any price, which is extremely unlikely."

Whoa! Ok, count me in with the "not well informed" that the OP was writing about. I thought that the way these worked was that the bank got the house, not the estate when the homeowners passed away. So you're saying the estate keeps the house, but the estate also needs to settle the outstanding debt on the reverse mortgage? Hmm, doesn't sound like its really any different from a normal mortgage.

Maybe I've got a crucial misunderstanding about another important point on reverse mortgages: I've thought the big risk with them is what happens if you outlive the mortgage, because then the bank owns the house, evicts you, and sells it, leaving you with neither home nor monthly income. Is that all wrong?

Sweet tea, there is a Reverse mortgage called a "Jumbo Loan" for higher end homes. The people with higher prices home are not left out of the loop. They would not have to sell their home. They have the opportunity to live out their lives in the home they love.

Karen

mfbenson, the bank will never own your home, the home owner will never get evicted and the home owner can live in their home until they are 200 years old. This is what the Mortgage Insurance Protection fee is for.

Anyone with questions or concerns can contact Jay, a 26 year senior advisor, 800-295-6046

Hi mfbenson,

Whoa! Ok, count me in with the "not well informed" that the OP was writing about. I thought that the way these worked was that the bank got the house, not the estate when the homeowners passed away.

Nope, the bank gets the proceeds fromt he estate's selling of the house, and not a dime more (even if the bank ate a great deal more in interest charges over the borrower's lifetime.)

So you're saying the estate keeps the house, but the estate also needs to settle the outstanding debt on the reverse mortgage? Hmm, doesn't sound like its really any different from a normal mortgage.

DING! Good answer!

Maybe I've got a crucial misunderstanding about another important point on reverse mortgages: I've thought the big risk with them is what happens if you outlive the mortgage, because then the bank owns the house, evicts you, and sells it, leaving you with neither home nor monthly income. Is that all wrong?

Its impossible to "outlive" a reverse mortgage... the bank guarantees the terms (no further payments required) for the life of the qualifying borrower (or the later of the borrower and their spouse, if jointly qualifying,) as long as they remain as occupants.

Cheers,
Dave Donhoff
Strategic Equity & Leverage Planner

Dave says the bank guarantees the payments as long as the borrower (and possibly spouse) remain in the house.

I think he's just given me another reason to dislike this plan. You are STUCK there, whether it's still appropriate for you or not, whether the neighborhood has become gang territory or every other house has been abandoned or your children and support system have moved across the country. Or your RE taxes have tripled. Or...well you get my point. If you leave/sell, there's a penalty.

chisue, you are not "stuck" in your home. The RM loans are the same as any other loan. You can move for whatever reason be it medical (nursing home) or you want to buy a condo, all you do is sell your home and pay back the existing loan the balance you receive (the difference between the RM loan balance and what you sold your home for) is yours to keep. There are no penalties.

Just wanted to point out that not all reverse mortgages are the type where the homeowner receives a monthly payment. My parents did a reverse mortgage on their home, but it is like a home equity line of credit-they can write a check for something like buying a car, making home improvements, etc. They do not repay that money (plus interest) until the house is sold or they leave the house. They do not get a monthly payment. Their mortgage amount was limited I think to $200,000 and their house was valued at about $450,000. My parents have pensions, ss, etc. which meet their month-to-month expenses. This reverse mortgage was a way for them to access the larger amounts they might need. I believe the closing costs were high, though. They did this 3 years ago and it has worked well for their particular needs.

Dave - THANK YOU!

A program like this could be a real life-saver for her! I'll let her know the next time an appropriate opportunity comes up.

Chisue, I would like to point out one other thing I have just learned that I don't think has been covered. You take out an RV loan on a $100.000 home, the loan value is $65.000. The next year a gang moves into the area, (or a flood or a fire, ect.) Your property is now worth $55.000 and you want to leave. You would sell your property for $55.000 and THE BANK eats the $10.000 loss on the loan, you walk away with all your posessions,and leave an empty house. I am not positive (I am sure someone will confirm this).....I believe you also walk away with what ever you had tucked into saving from that loan and any interest it made. My point being you are NEVER stuck.

FYI On a reverse mortgage you have the choie as to how you would like to receive your money, in monthly payments, a lump sum, a home equity or a combination of the above. It is entirely up to the borrower.

Also, for the home owner that doesn't need the extra cash, it is still a very good idea to obtain the loan. With the housing market the way it is right now, with property values going down instead of up, what better way to protect your investment. If you secure the loan and then let the money stay in the account, the value of the money will increase according to th T_Bills that they are tied in with. You can't get that type of interest sitting in any bank anywhere. If you feel that you don't need the cash then you need to talk to a savvy Financial Advisor that can point out all of the pro's and con's. Don't just go by here-say because honestly, most people are just repeating what they heard from someone else. And usually it is all negative feed back

Another thing is that to obtain a RM the borrower must talk to an approved counselor to make absolutely sure that you understand the program. This will protect the senior from any type of scams.

Thanks guys, this is great. Chisue, hearing your concerns and seeing them addressed has been very helpful to me. This is a great way to learn. Do you have any other comments or concerns? I am sure there are many,many more out there and I would love to see them addressed here. Thank you all for sharing your knowledge, you are a great bunch of folks!

I was reacting to Dave's comment that the borrower cannot outlive the payments. Let's say Mr. Borowwer has already exceeded the value of the mortgage and the market value of the house has gone down. Mr. B. is frail or can no longer maintain his house or pay his taxes out of the RM payments. What now?

This is very different from Allison's parents, who use the RM as a 'cushion'. Reminds me of the old saw about banks only loaning money to people who can prove they don't NEED it. BTW, how much did it cost to obtain this cushion? More/less than home equity loan or other loan?

Maybe we will find the stats about length of residency post-RM.

Hi Chisue,

Let's say Mr. Borowwer has already exceeded the value of the mortgage and the market value of the house has gone down. Mr. B. is frail or can no longer maintain his house or pay his taxes out of the RM payments. What now?

That's a great question, one that Mr. B and/or his family will have to explore.

The answers, however, have nothing to do with whether they've used a reverse mortgage. A reverse takes nothing AWAY from your Mr. B, and in reality provided him the ability to remain in his comfortable surroundings far longer than any other foreseeable alternatives.

BTW, how much did it cost to obtain this cushion? More/less than home equity loan or other loan?

Roughy equal to less... and that is ASSUMING Mr. B could have even qualified for forward financing in the first place, and been able to afford (and maintain) the monthly out-of-pocket payments for as long as he would otherwise survive with a reverse.

Cheers,
Dave Donhoff
Strategic Equity & Leverage Planner

Very interesting discussion, I am the product manager for Reverse Mortgages at my bank.

A few facts:
The FHA HECM Reverse Mortgage is the most widely used product.

Almost all reverse mortgage products require the borrower to have counsleing from a third party, usually a non-profit, counseling agency. For an FHA loan, there are HUD approved counselors.

And potential borrowers are encouraged to bring their children/attorneys/financial counselors with them when they apply for a reverse mortgage or go to counseling.

Reverse mortgages don't fit all situations, and yes, sometimes it is better for the property to be sold.

There is a new reverse mortgage for a borrower who is 60 years old, remember though, the younger the borrower, the less money they will get since the loan is based on their life expectancy (acqurial tables).

I saw a study recently that said reverse mortgage borrwers average time they had the loan was in the rnage of 5 to 7 years. I can't get my hands on the exact number at the moment.

Borrowers are not be be encouraged or sold annuities with a reverse mortgage, that's not responsible lending.

Borrowers can receive a lump sum at closing to pay off existing debt, they can receive monthly payments and/or a line of credit.

People involved in reverse mortgages think that there will be lots of growth in this product as the baby boomers age. The baby boomers are used to living a specific lfestyle and will use a reverse mortgage to afford that lifestayle.

As with any loan product, there are good loan originators and not so good loan originators. Most of our reverse mortgage originators are seniors who have been involved in finance in one way or another, but usually not in mortgages. We find that orginators who have sold regular or "forward" mortgages, can't grasp the concept that they may have to walk away from a "sale" of a reverse mortgage to a customer, if that is truly not the best option for that customer.

I think that Reverse Mortgages have their place, but as usual, people need to educate themselves about what they are getting into.

Hi Pam,

We find that orginators who have sold regular or "forward" mortgages, can't grasp the concept that they may have to walk away from a "sale" of a reverse mortgage to a customer

Gawd... that is SO true!

Can't wait for the day we finally flush out the last of the "push-sale" hucksters....

Dave Donhoff
Strategic Equity & Leverage Planner

My mom is 70 and receives a total of $700 a month from SS and a small pension. Even with a paid off house, no consumer debt, and living in a relativly low cost of living area, she can't live on that. So I send her several hundred dollars a month to bridge the gap of what gets and what she needs, plus I pay to fix anything big, like the new roof late last year.

Her house and acre lot are only worth about $65K, so I don't know what monthy amount she might be able to get via a reverse mortgage, but I wish she would look into it. But she won't consider it, because she wants to "leave something to you kids". A good deal for my four siblings, but not such a good deal for me. But I love her and can afford to help, so I don't push it. If the time comes when she can't live by herself she'll move in with my sister (I live too far away from the rest of the family) and I'll pay for daily help to help with her care.

thetews, now we are getting into my area of expertise. I STRONGLY suggest that you look into long term care insurance while she is still fairly young and in good health. Yes it is expensive but no where near as expensive as in home care. If your Sister works outside the home and your Mom could not be left alone you are looking at around $3000.00 a month just to cover full time work hours, that does not include respite time to give your Sister a break or to do things like grocery shop or go to Church. Many Children have to quit their jobs to care for a parent, either way it is big loss of income. If your Sister does not work outside the home having someone come in to care for your Mom just 8 hours a week would still be over $500 a month. Many families are determined to keep their parents out of nursing homes until it is medically necessary but they have no idea how much strain it puts on the primary caregiver and the family budget until they bring them into their homes. This is another excellent reason to look at the RM. It can pay for the high cost of LTC insurance. You should tell your Mother she would be doing you all a favor if she were to take a RM to cover the cost of her care.

thetews: many seniors have the same aversion to Reverse Mortgages - my neighbors mother is an ideal candidate for a reverse mortgage, widowed, $250K home free & clear, and not enough money coming in for daily expenses, let alone to keep the house up. She's 'realtively' young for a senior, mid-70's and in good health. She won't think of selling her home, or getting a reverse since she don't want the 'bank to own the home'. A popular misconception.

Sometimes you need to do the tough love thing and show her how much it's costing you now to support her.

There are all kinds of Reverse Mortgage calculators out there. I recommend looking at the AARP website, they show the pros and cons of a reverse mortgage.

Here is a link that might be useful: AARP

thetews, another idea is signing an agreement with your mother that you are loaning her the money (monthly and repairs) Get it notarized, then keep a record of all your payments to her, when she dies, submit it to her estate before disbursing the remainder to your siblings.

thetews, your posting reminded me that it took us quite a bit of persistent "no, we don't want or need your house" before we could convince my MIL to sell her home. In our case it was a little easier since my DH is an only child! My MIL would bring up the "we want to leave you the house" argument and it took a number of years before she finally believed us. Yes, it's a lovely house, but I HATED the kitchen and it would have cost us over $100K to remodel it.

That amount remodeled our entire cottage when we bought it, LOL.

She still finds it hard to understand that even though we are not rich, we are still better off than she is, even having sold her house. Her help is appreciated but not needed, something she does not grasp emotionally. We continue to hammer in a consistent message: her assets and money are best used to keep HER living well, because that reduces OUR worry about her.

Working through these issues adult-to-adult rather than children-to-parent is always difficult. Keep plugging away - you may want to talk to your siblings and keep the messages consistent.

jkom51 brings up one really important message:

"the best way you can help us, mom, is to arrange your life so it does not become an undue burden or a major source of worry or drain on US. That means, using YOUR money to care for YOUR health, YOUR enrichment, YOUR enjoyment, YOUR comfort. And not for OUR later enrichment. How selfish would we have to be, to want to get rich because you died, even if it meant that your life was poor."

Also, if mom arranges her money and assets properly now, it can reduce the chances that her old age will COST her children money.

Thanks for posting the responses to my post about my mom.

Lisa, I hadn't even thought about long term care insurance; I had pictured it being for someone younger. I will definitely look into it; I'm sure my own insurance agent will be happy to provide more data. If she's made to understand that it could provide for someone to come take care of her part time at her house, or at my sister's, she'd maybe even consider getting a RM to help pay for it. Thanks for the suggestions.

Pam - I also hadn't realized that there were calculators for reverse mortgages. (I feel like I should say a big DUH! to myself for that!) I'll plug in her info and see if it seems to be a good possible option for her.

cmarlin - thanks for the suggestion, but I have to admit that I made it sound like I was the only one who helped my mom at all. I am the only one sending her money on a monthly basis, but my 3 brothers have all helped out off and on. Not in the amounts that I have, but according to their ability. And my sister helps just by being there with mom - they're only two houses apart and Sis helps mom with major cleaning, yard work, etc. So it wouldn't be fair or right to try to re-coup the money I give from the estate. After re-reading my post, I'm ashamed for making it seem like my siblings did nothing.

jkom and talley_sue, I agree with the sentiments, but it sure is hard to make my mom understand. She's sensitive about needing financial help now, but she also wants to assume that she will be able to live independently until one day she ups and dies.

Thanks again for the feedback.

FYI On a reverse mortgage you have the choie as to how you would like to receive your money, in monthly payments, a lump sum, a home equity or a combination of the above. It is entirely up to the borrower.

My mother took part of her RM as a lump sum in order to pay off my aunt, and she has the rest available as a line of credit that she uses for any repairs needed to the house.

Almost all reverse mortgage products require the borrower to have counsleing from a third party, usually a non-profit, counseling agency. For an FHA loan, there are HUD approved counselors.

It's too bad that similar counseling isn't required for people getting into subprime ARM loans.

terriks, i totally agree with you.

"It's too bad that similar counseling isn't required for people getting into subprime ARM loans."

What happens if a senior citizen takes out a reverse mortgage....time passes, senior can't maintain self or property and needs either assisted living or a long term care facility (nursing home). Nursing home needs to be paid (Medicare won't pay for residence, but this is obviously going to become the senior citizens last dwelling).

Now, the Medicaid look back period is what? 3 or 5 years... the person has this house but is not living there, now they need Medicaid to pay for the nursing home, et al. They no longer live in the house with the reverse mortgage, but can't give it to the kids, either.

Am I correct that if the house is sold, the proceeds go to pay the bank back, NOT the person's new living quarters at the nursing home. So the person is poor now and has to get on Medicaid, but they won't qualify due to the look back period?

Are they FORCED to stay in the house with the reverse mortgage when they can no longer be independent?

Hi Acey,

What happens if a senior citizen takes out a reverse mortgage....time passes, senior can't maintain self or property and needs either assisted living or a long term care facility (nursing home). Nursing home needs to be paid (Medicare won't pay for residence, but this is obviously going to become the senior citizens last dwelling). Now, the Medicaid look back period is what? 3 or 5 years... the person has this house but is not living there, now they need Medicaid to pay for the nursing home, et al. They no longer live in the house with the reverse mortgage, but can't give it to the kids, either.

Sure they can. A reverse mortgaged owner can take up to 12 months after departing the residence to either sell the home or transfer to others in the family (or anyone, really) who can then refinance to pay off the outstanding balance, or the fair market value of the home, whichever is less.

Am I correct that if the house is sold, the proceeds go to pay the bank back, NOT the person's new living quarters at the nursing home.

That's true, but no different than if they had a forward mortgage... or if they had no mortgage at all but drew down their savings instead of tapping a reverse.

So the person is poor now and has to get on Medicaid, but they won't qualify due to the look back period?

I believe the look-back is on net worth, assets minus debt... not simply assets only.

Are they FORCED to stay in the house with the reverse mortgage when they can no longer be independent?
Newp, they can move out at anytime.

Cheers,
Dave Donhoff
Leverage Planner