Before you decide that a reverse mortgage is the solution, make sure you understand how it works and what the total cost will be.
The basic concept of a reverse mortgage is that it lets you take equity out of your home so that you can afford to stay in the home. You have to be 62 or older to get a reverse mortgage and it is understood that the costs will be higher than a regular mortgage, but the need for cash, the ability to stay in the family home and tap equity that would otherwise be locked up, makes it a good solution for many seniors who own their homes. There are pitfalls to be aware of.
wfmz.com’s article, “Life Lessons: Reverse mortgages: When are they dangerous,” reports that Elder Law attorneys have had adult children come to their offices wondering how they were named in a foreclosure lawsuit, when it was the mother’s reverse mortgage.
When parents pass away, their homes are commonly inherited by their children. In the case of parents with a reverse mortgage, however, the children could also be named in a foreclosure. This can come as quite a shock to adult children. Seniors also may not understand that they have to keep paying for the upkeep of the home. If you’re married and there’s just the one name on the mortgage, it could also spell trouble for your spouse.
The rules state that if you’re out of the house for a year, the reverse mortgage company is allowed to foreclose. In addition, a reverse mortgage may not provide enough cash to assist you, especially if you need around-the-clock at-home care costing as much as $12,000 a month. Despite these dangers, a reverse mortgage still may be right for you.
A reverse mortgage would be a good option, if a person insists on staying in the home and they have a family caregiver.
There are also Medicaid programs that may help pay for nursing home care, as well as waiver programs through Medicaid that may help pay for assisted living and home care with the ability to keep your home and leave it to your children or spouse.
It’s very important for seniors and their children to speak with an Elder Law attorney before taking a reverse mortgage, so that they can develop a plan to protect the family’s assets, ensure eligibility for Medicaid, if necessary, and prevent any surprises, like a foreclosure notice.
Reference: wfmz.com (January 24, 2017) “Life Lessons: Reverse mortgages: When are they dangerous”