Does a reverse mortgage makes sense in this situation?
I'm Mom's live-in caregiver for a year now, and in a couple months I'm heading home. Sisters 1 and 2 will step in to care for her. We'd discussed selling Mom's house with her moving in with Sister 1 with plenty of money to hire caregivers. Now, Sisters are discussing keeping Mom in her house and getting a reverse mortgage using the money for her care. They'd split moving in and caring for Mom. S1 lives outside of town on a farm and S2 has unpredictable and crazy work hours. Niece will fill in. I see no point to having Mom stay in her home. She doesn't know it's hers anymore. Plus, this arrangement wastes her money in taxes, utilities, insurance, and maintenance, not to mention Sisters' time and their own living arrangements. I don't understand what would happen with the RM and her house after she passes. I'm to be Mom's executor and I really don't want to have to mess with this when Mom passes. I spent a lot of time and energy getting Mom's estate set up to be easy to handle after she passes. Before I came here, when what they wanted to do I felt was wrong, I always told them that they're the ones in the trenches and I'd support them. I'll do so again with this. My mind's open. What do you all think? Suggestions?
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Anyway, I don't think there are many situations in which a reverse mortgage makes sense. The negative amortization almost guarantees that there won't be much equity left if the RM is in place for long enough to deplete the equity.
That would constitute a major problem for you as Personal Representative of the Estate. If there are no other assets, liquid or otherwise, there might not be enough money to pay the Estate's obligations. And forget about anything for you and your siblings.
I'm glad the meeting went well and the idea of an RM is now past tense, but I answered just to emphasize how disastrous these RM products can be.
I've learned a lot from your two responses. Should this ever come up again--which it may--I'll be much better prepared.
Reverse Mortgages can become very complex. If by chance Mom does move into a nursing home she would need to pay back the Reverse Mortgage, the interest, and fees, after one year of her living in a nursing home. If unfortunately Mom should pass, then the Reverse Mortgage becomes due, and payment would be requested immediately.
Would you or your sister be able to obtain a brand new loan to pay off the Reverse Mortgage? Some forget that is is an actual "loan". Thus the bank will require that the house be put on the market for sale immediately, with a Realtor, and be at a fair market price. So no low ball sales to relatives.
I would highly recommend that someone make an appointment with an Elder Law Attorney to see what he/she would recommend.
In my limited experience, once a home is RM, the bank essentially owns the home.
Really, don't talk to a banker--they'll assure you a RM is the way to go. Talk to an attorney.