A Common Story – Aging Parents and Reverse Mortgages

As a grown man (I’m 42 in February), I’m not looking forward to retirement anytime soon.  However I’m in the stage in life that I need to start being concerned about my parents taking care of themselves in their elder years.  I’ve seen all the commercials for “reverse mortgages”, and while it may be a good option for those parents that don’t have sufficient retirement savings, it’s also complicated.  So in this article I’m taking you through some of the research I’ve conducted when my own parents decided to take on a reverse mortgage for themselves.

Hope this helps some of our readers that are in similar situations!

What is it exactly?

A reverse mortgage is a type of loan taken by seniors against their home equity and will be paid back once the last borrower passes away or move from the home for more than one year. In most the cases, the loan will not be paid back in increments but instead, the home will be liquidated, and the lender is paid back in full with interest.

There are various types of Reverse Mortgages for People with Aging Parents, but only a single one type is insured by the United States Federal Government and is available to the elderly through various lenders approved by the Federal Housing Administration (FHA).

What you need to understand about Reverse Mortgages for People with Aging Parents

As a “younger” generation of 40-somethings, we are now starting to deal with aging parents. Here’s some help from what we’ve recently went through…

Borrowers can only borrow amount less than the value of their homes and lenders are not allowed to force homeowners to out of their home. For seniors who don’t have enough saving or income to pay for their personal care, a reverse mortgage can be the best option. However, some family may be having some unique issues that make reverse mortgage unsuitable for them.

Elderly with Fair Health

Reverse mortgages are the best options for seniors who do not need immediate care. Most senior who are living independently in the home can purchase long term care insurance and make some modification to their homes to allow accessibility.

Single seniors in Need of Care

If an elderly is single and want to stay at home, a reverse mortgage can be a viable option to pay for in-home care or adult day care. However, if the care cannot be provided at home and the elderly must move to a nursing home for more than one year, then a reverse mortgage may not be the right option. This is because the law states that the home will be sold if the owner lives outside the home for over 12 months.

Couple seniors living in a Fair Health

If one of the seniors living as a couple requires immediate care and at least one of them will be living in their home, a reverse mortgage can be a good option for their case. In such situations, the couple may purchase insurance using the reverse mortgage or make their home more accessible in anticipation for future disability. However, some individual is concern that if they continue borrowing against their home value for many years, their loan may exceed their home value. However, the government assumes the risk, and homeowners will never owe more than the value of their home.

Married seniors with Both Spouses in need for healthcare

If both spouses are in need for health care, reverse mortgages cannot be the best option since it is likely that both seniors may move to a nursing home shortly. Reverse mortgages will be liquidated to settle the loan if the last spouse passes away or move from the home. Therefore, if both spouses move to a nursing home for more than one year, the home is likely to be sold. In such a case, renting or selling the home can be the best option. However, if the reverse mortgage can be used to pay for in-home care that allows the seniors to continue living at home, then a reverse mortgage can make the best option.