I had the opportunity to meet with a local Reverse Mortgage Consultant and discuss the varying reverse mortgage products which are available to homeowners these days. If you were to ask three different people what they think about reverse mortgages, odds are you would receive five different answers. The truth, however, is that reverse mortgages may be the most appropriate option for some homeowners and the absolutely inappropriate choice for other homeowners. Ultimately, the appropriateness of the decision rests upon the purpose behind creating the reverse mortgage and how the proceeds will be used.
If you are a senior who has relatively little to no savings and are living on a small social security benefit with little additional income (if any) and you want to remain in your house but cannot afford to continue paying the real estate taxes and insurance premiums on your home, a reverse mortgage may be an appropriate planning tool for you to allow you to remain in your home for the rest of your life. Moreover, if you are someone who is trying to sell your home during this real estate market downturn, but are unable to do so, a reverse mortgage may provide you with the liquidity needed to continue making home, tax and insurance payments until you are able to sell your home for a reasonable price (at which time the reverse mortgage would be repaid out of the sales proceeds).
However, if you are a senior who is facing significant health issues and you may need to move to a long term care facility (whether independent living, assisted living, or a skilled nursing facility) in the foreseeable future, taking out a reverse mortgage may be a very poor decision. Although the proceeds may be used to pay the monthly fees associated with the facility, it is very possible you could have left your home and its equity untouched and still have qualified for government benefits that would supplement your monthly payments to the facility. However, by taking all of the equity out of your home and placing it into your bank account, you have most certainly disqualified yourself from any government benefits that would have otherwise assisted you if you had left the equity in your home and you will have to spend all of that money in the bank on your cost of care before qualifying for government benefits (and you will no longer own your home).
Ultimately, in determining whether a reverse mortgage is a suitable option for you, the specific details of your particular situation will influence your ultimate decision. In fact, before entering into a reverse mortgage, you must meet with a counselor who will review your financial situation and educate you while also counseling you as to the appropriateness of a reverse mortgage in your situation. However, the counselor will only review your current financial condition in making such recommendations; they will not assess or take into account your health and potential need for long term care and government benefits assistance in the future. In order to receive proper counseling regarding availability of and eligibility requirements for different long term care government benefits, it is best if you also seek the counsel of an elder law attorney.
Choosing a reverse mortgage is an important decision which has many potential benefits or consequences. By seeking guidance from a reverse mortgage counselor (regarding your current financial status) and from an experienced elder law attorney (regarding potential future complications associated with the need for long term care), you can rest assured that you have taken some of the most important points into consideration in determining whether a reverse mortgage is right for you.