Is a Reverse Mortgage in My Future?

It wasn’t too long ago that the concept of a reverse mortgage would have drawn puzzled stares from a vast majority. Now, this type of arrangement, where homeowners can tap into their equity and receive a lump sum or monthly payments for as long as they occupy their home, has become commonplace.

Remember that even if you are receiving payments each month instead of making them, a reverse mortgage is a loan. Seniors can relax, secure in the knowledge that they will no longer need to make monthly payments, and can therefore use the money in other ways. Don’t forget, however, that you must continue to pay all taxes, insurance and repairs on the home.

This all sounds terrific, but is it too good to be true? That will depend on your state of health. Should the borrower(s) need to vacate the home for 12 months, for a prolonged hospital or nursing home stay, the mortgage will become due and payable immediately.

Keep in mind that monies received from a reverse mortgage may make it difficult, if not impossible, to qualify for Medicaid, as loan proceeds are considered assets. Before making a decision that could have far-reaching consequences, it would be wise to consult with an expert.

Seniors may find that family members are not especially thrilled with this program, as you will be effectively spending down their inheritance. The amount by which their inheritance is diminished depends on your longevity. It is quite possible that all the equity to which your children believed they were entitled will be gone by the end or your life and the mortgage company will own your home instead of your children.

Remember whose money it is. While you certainly can’t take it with you when you leave this life, you should be able to do with it as you choose while you're still here.