Why a Reverse Mortgage?

By
Real Estate Agent with 1
My brother and his wife have entered into a situation that nobody would want to be in, they have a neighbor who has fallen very ill and they are the only ones who are there to "take care of him".  This is not something that they have to do but more like something that they feel compelled to do, the elderly neighbor is old and is totally alone.  At this point, he is unable to fully take care of himself and Medicare has made it clear that they will absorb and drain any money that he has in his name. 

Its a sad fact to watch a man who served our country more than once, not get the proper care because he has "too much".  Yes, he has "too much" but not enough to get him around the clock care.

Questions were raised and could only be answered by an Elder Care Attorney.  This attorney advised the elderly man to take a reverse mortgage to help pay for his care.  There is not enough cash in the bank to last more than two short months and there will be funds that need to be spent to ensure proper care. 

So after I looked up some information about Reverse Mortgage, I can totally see how an elderly couple could fall into the pitfalls of the product.  But, what other options do most elderly have.  They have worked all their lives and they have become house rich but cash poor. 

What is a Reverse Mortgage?

In short, a reverse mortgage is taking the value of your home and turning it into cash.  The cash you get from a reverse mortgage can be paid to you in several ways:

  • one lump sum
  • as a regular monthly cash advance;
  • as a "credit line" account that lets you decide when and how much of your available cash is paid to you; or
  • as a combination of these payment methods.

Now the creative part of this whole product is the repayments.  No matter which way you chose to have this loan paid to you, you don't have to pay anything back until you die, sell your home or actually just move out of the home, permanently.  Keep in mind - the only way you would be  eligible for most reverse mortgages is you must own your home and be 62 years of age or older.

Any Thoughts? 

 

Comments (4)

Stacie Jordan
Retired - San Antonio, TX

Christine, it is expensive to get a Reverse Mortgage, however the alternatives are few for the elderly.  If someone is truly wanting to stay in their home and be independent or the family feels that the move will put too much strain on their health, then it is a great option.  And if they out live the projected stats then the lender loses.   I just wish we could come up with a plan that allowed for an insurance policy that could be tied to the transaction and help restore the equity position, but I don't see that happening.  I think we need better information sources and education on the topic. 

Jul 06, 2007 10:01 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Christina, I have a seller right now who took out a reverse mortgage about 4 years ago. They hate it. For some reason they didn't realize it would slowly eat up their equity. I reviewed her documents recently and it looked like a pretty good deal to me. It is a good product for some folks.

Good to see you today.

Jul 06, 2007 10:36 AM
Joe Adams
Major Mortgage USA/Branch Manager - Montrose, CO
This is a product that I don't have warm fuzzy for, but I do think after attending a little seminar on them that they do have a place for those that are in situations where they have no family and/or terminal ill
Jul 06, 2007 11:01 AM
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA
Every situation is different.. it may be the only choice for some folks who have no family.. but truthfully I owuld rather see them sell and move to a retirement community where they can use interest from their funds to supplement their income..
Jul 23, 2007 09:07 AM