Be very very very careful with this. While there are reputable companies there are many that are not. Both Reverse Mortgage Companies AND Long Term Health Care insurance can be very dicey. I would get a good elder law attorney and discuss with that person. A good accountant to go over contracts. To be very frank, many long term care insurance companies don't cover all the care needed and that is as good as worthless. Many will not cover ANY place that doesn't have a full time RN on staff. Guess what NO PLACE does. I think the house would be better kept as an asset, then sold when ready to enter assisted living. But that's me. Just take great care in this.
In general we have to remember that such products as RM and LTC insurance provide a considerable benefit to the companies that sell them such that the cards are stacked in their favour--this is their incentive for selling them. Buyer beware (especially when it comes to the "fine print")!
I just graduated from university with a Financial Planning degree. I am in Canada, but the basics of reverse mortgages are the same in both countries.
There are very few situations where they make good financial sense. I do not know your situation, so I cannot comment on it.
One issue is that the reverse mortgage becomes due when you move out of your home. So to use the funds to pay for long term care, if you are thinking of residential care may put you on the wrong side of the rules.
The home owner is still 100% responsible for insurance, property taxes and maintenance.
The interest on the line of credit account will not be the same as the interest rate the reverse mortgage is compounding.
I would look long and hard at all other options before signing up for a RM.
Good point about the loan being due when the borrower moves out. The partner needs to be aware that the home would need to be sold or refinanced at that time. A spouse may be permitted to stay in the home, depending on how the contract is written.
There is a thread on the forum now where all the funds from the RM have been spent and the owner needs a new roof and has no funds to pay for it. They can’t get the roof financed because the home has a RM on it. Part of the RM agreement is that the owner has to keep the home maintained. There are many threads on this forum about RM. It has probably worked out for some but we don’t seem to hear from them. It seems to usually be done out of desperation without researching alternatives. I admit I’m biased against it as a SIL lost her home after her husband died suddenly at 68. She was too young to sign the paperwork at the time RM was entered into. She signed a release of some sort acknowledging she knew about it but at that time, that was not enough to allow her to stay in the home past his death. They could have refinanced once she was 65 but the costs to do so were very expensive and so they didn’t. No one in the family knew they had entered into such an agreement. So she lost her husband and then her home. Even as a partner and not a spouse, if you live there, you might be asked to sign off on it. Beware.
If the person on the mortgage is out of the house for a specified period of time, check with the mortgage guidelines, the mortgage holder has the right to call the note. Be careful with this and please check into it thoroughly
OK, my input. I only have this story. My friend W was in his late 70's. His wife had cancer and he took out an RM to pay the medical bills. She died. About a year later he remarried another friend who was 60. He didn't want her to work, so she didn't. 5 years later, a few months ago, he had to go to the hospital, after calling the ambulance, she was hurrying downstairs to let the EMTs in. She fell downstairs breaking both ankles. He died 3 days later, She was in a wheelchair because of her injuries. Because she was on the deed but not on the mortgage, the RM company gave her 30 days to purchase the house, or get out. No job, 2 broken ankles, loosing her husband suddenly.
To make a long story short, she was able to purchase the house because it had gone up so much in value she had equity. W's SS helped her too. Remember, she was on the deed. She has found a job (at 66 years old). Her daughter and roommate moved in with her as renters, to help pay the mortgage. Don't know how long this will last, so far it is working out but it was very iffy there for a couple of weeks. If it wasn't for this pandemic with housing purchases at a low, and mortgage companies hungry, she could have been in a pickle.
Before he died, he was sorry he had taken out the RM. I looked into it at one time and the interest rates and fees were awful.
I would think several times about it. Personally, I think I am lucky I am not married to a house. Having moved a lot in my life, I know there is always another place on the horizon. I also worked in Fire and have seen too many people lose everything and have to start over to think a house is the end all.
And after a certain age you can't even get it. Plus you have to read the fine print - some longterm care insurance has very stringent conditions to meet before it takes effect. I had a friend whose dad had Alzheimer's severe enough for him to require memory care, but because he could still manage to eat without assistance - not prepare food, just eat it - his expensive longterm care insurance didn't cover his expensive long-term care.
Reverse mortgages are an expensive source of funds, sometimes suitable for people with a LOT of home equity who want to stay in their home as long as possible and are not concerned with leaving anything to their heirs.
The line of credit that I am familiar with refers to allowing the borrower flexibility in taking out money. Borrowing money to invest safely makes no sense. A senior in need of LTC borrowing to invest with risk is worse.
I equate these financial instruments with nothing positive and with few if any advantages. I see them as highly exploitive, and I condemn the public figures who are appearing in ads for them.
The only reason I would ever use one is if I knew I had a terminal condition, my family didn't need the money, and I planned to live life as richly as I could. Then I would travel, exploit the funds available, and leave the house and the unpaid mortgage to any of the sleazebag companies I chose. In others words, exploit them as they have exploited others. Payback.
On a serious note, I'd find out a lot more about this so-called line of credit account and the interest it allegedly receives. Actually, the entire mortgage could be considered a line of credit, but it's unlike a HELOC. And I'd like to know more about how it receives interest.
Typically revere mortgages are reversely amortized; they increase in obligations after any withdrawal, and monthly. Interest grows like weeds in a garden. But that interest isn't available to you. I think someone's handling your partner a "line" and misrepresenting the true nature of the role of interest in maximizing the return to the reverse mortgage issuer.
Your partner should also consider whether compromising an asset such as a house could jeopardize qualification for Medicaid if it's needed.
These can work for some, but to my mind, and from what I have personally heard, success in this is rare as hen's teeth. This worked VERY WELL for my partner's Mom. She had a home in the quite precious Carefree, AZ. She got a reverse mortgage, and the monthly funds from it, combined with her savings and income allowed her to stay in her home with first minimal care, then more constant care. She wishes never to go into care and she did not have to. When she died, the Reverse Mortgage loan was paid off, and the remainder of the sale was inherited by my partner. So for her this was wonderful. I think, as I said, that is rare.
You will be required to keep up the homeowner's insurance and to maintain the house at YOUR expense. Home maintenance can eat up your income; anything to do with the actual building, plumbing or electric will gouge you. Consider the cost of storms and other natural disasters. Further, it will be virtually impossible to sell the house without another legal mess requiring estate lawyers.
Further it is counted as income so this can affect MEDICAID, and can make you ineligible or simply kick you off of it if you are on it.
Banks and government are crooked and I would only consider it if I were actively dying like in cancer -- and once the owner dies the bank owns the house leaving your heirs nothing.
I also would ***NOT*** entirely trust any articles AgingCare experts put out on the "benefits" of reverse mortgage--you do NOT know if the article has BIAS or not. Paid advertisers get all the benefits including biased articles. So get a good estate attorney and talk it over and yes you ****WILL**** need an estate attorney. Once you sign...you just signed your own enforceable warrant.
There are very few situations where they make good financial sense. I do not know your situation, so I cannot comment on it.
One issue is that the reverse mortgage becomes due when you move out of your home. So to use the funds to pay for long term care, if you are thinking of residential care may put you on the wrong side of the rules.
The home owner is still 100% responsible for insurance, property taxes and maintenance.
The interest on the line of credit account will not be the same as the interest rate the reverse mortgage is compounding.
I would look long and hard at all other options before signing up for a RM.
A spouse may be permitted to stay in the home, depending on how the contract is written.
It has probably worked out for some but we don’t seem to hear from them. It seems to usually be done out of desperation without researching alternatives.
I admit I’m biased against it as a SIL lost her home after her husband died suddenly at 68. She was too young to sign the paperwork at the time RM was entered into. She signed a release of some sort acknowledging she knew about it but at that time, that was not enough to allow her to stay in the home past his death. They could have refinanced once she was 65 but the costs to do so were very expensive and so they didn’t. No one in the family knew they had entered into such an agreement. So she lost her husband and then her home.
Even as a partner and not a spouse, if you live there, you might be asked to sign off on it. Beware.
To make a long story short, she was able to purchase the house because it had gone up so much in value she had equity. W's SS helped her too. Remember, she was on the deed. She has found a job (at 66 years old). Her daughter and roommate moved in with her as renters, to help pay the mortgage. Don't know how long this will last, so far it is working out but it was very iffy there for a couple of weeks. If it wasn't for this pandemic with housing purchases at a low, and mortgage companies hungry, she could have been in a pickle.
Before he died, he was sorry he had taken out the RM. I looked into it at one time and the interest rates and fees were awful.
I would think several times about it. Personally, I think I am lucky I am not married to a house. Having moved a lot in my life, I know there is always another place on the horizon. I also worked in Fire and have seen too many people lose everything and have to start over to think a house is the end all.
PS: just looked at ur profile. If your the same age of your partner I don't think I would invest in LTC insurance.
Plus you have to read the fine print - some longterm care insurance has very stringent conditions to meet before it takes effect. I had a friend whose dad had Alzheimer's severe enough for him to require memory care, but because he could still manage to eat without assistance - not prepare food, just eat it - his expensive longterm care insurance didn't cover his expensive long-term care.
The line of credit that I am familiar with refers to allowing the borrower flexibility in taking out money. Borrowing money to invest safely makes no sense. A senior in need of LTC borrowing to invest with risk is worse.
The only reason I would ever use one is if I knew I had a terminal condition, my family didn't need the money, and I planned to live life as richly as I could. Then I would travel, exploit the funds available, and leave the house and the unpaid mortgage to any of the sleazebag companies I chose. In others words, exploit them as they have exploited others. Payback.
On a serious note, I'd find out a lot more about this so-called line of credit account and the interest it allegedly receives. Actually, the entire mortgage could be considered a line of credit, but it's unlike a HELOC. And I'd like to know more about how it receives interest.
Typically revere mortgages are reversely amortized; they increase in obligations after any withdrawal, and monthly. Interest grows like weeds in a garden. But that interest isn't available to you. I think someone's handling your partner a "line" and misrepresenting the true nature of the role of interest in maximizing the return to the reverse mortgage issuer.
Your partner should also consider whether compromising an asset such as a house could jeopardize qualification for Medicaid if it's needed.
Further it is counted as income so this can affect MEDICAID, and can make you ineligible or simply kick you off of it if you are on it.
Banks and government are crooked and I would only consider it if I were actively dying like in cancer -- and once the owner dies the bank owns the house leaving your heirs nothing.
I also would ***NOT*** entirely trust any articles AgingCare experts put out on the "benefits" of reverse mortgage--you do NOT know if the article has BIAS or not. Paid advertisers get all the benefits including biased articles. So get a good estate attorney and talk it over and yes you ****WILL**** need an estate attorney. Once you sign...you just signed your own enforceable warrant.
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