My parents (87 year old dad has stage 5 parkinsons/ 84 year old mom who is mentally ill with extreme arthritis), who should have moved long before but stubbornly refused to, finally consented to 24/7 in home care, which would be great...if it didn't cost a fortune and the caregivers weren't calling me constantly. Still, I rested better knowing there was someone there. However, they only have two months of cash to pay for this care. My sister has arranged for a reverse mortgage. At this rate, that money will last them 2 years (assuming my mom doesn't need caregiving). I get why reverse mortgages exist, but they're a bad idea. Even the credit counselor said so during a meeting between my mom and her today. My mom can't do anything - she'd never be able to self-inititate to close the loan. She can barely get groceries (but refuses to have them delivered). If my sister just stopped replying to Omaha Mutual, my parents would be out of money in 2 months. No more caregivers. Falls and forced care would happen within 24 hours. I've been advised to let them fail many times on this board. I get why. If we just let the $ run out in two months, what happens when they end up in the hospital? Will they still end up losing all their $ and the house?
We tried to plan. We really did. We bought long-term care insurance 30 years ago. We thought then that with Social Security, insurance, plus savings we'd be able to finance care in our old age. However, the premiums for 2026 are almost $20K (yes, that's 20K!) and the benefits have been reduced as the cost of care has risen exponentially. And we've both lived longer than we ever anticipated. So far, we haven't needed care, but it's a huge elephant-in-the-room worry. Welcome to old-old age!
So if that is what’s going to happen, things you should be aware of:
- RMs tend to lend at 40-50% of appraised value.
- if they have a mortgage (!horrors!), RM $ must 1st be used to pay off that mortgage.
- if any other securitized lending using house as collateral, it too has to be paid off.
- property taxes are parents responsibility to pay
- property insurance is your parents responsibility. If they owned their home outright, they may have been underinsured. But with new mortgage, they have to update insurance. If where they Iive requires - in addition to standard Homeowners - Flood, Earthquake, Windstorm then their insurance coverage costs will be $$$. Some RMs do a fold over for insurance so they select coverage and add it as a cost.
- property must be maintained. It too is your parents responsibility. Something that is often glossed over, is that if this is an HECM RM (90%+ are), the lending is backed by FHA & HUD. This is very important as HUD has REAC aka Real Estate Assessment Center. Basically REAC checks as to condition and if below a certain point, the owner must do the repairs or gets a penalty placed. Fwiw REAC used to be pretty much only done on FHA loans on multi family housing units. But nowadays drones can do flyovers on individual property easily; and if they find something, then it gets a physical inspection by a FHA certified professional. Their report goes to FHA, HUD, RM lender, property owner. So LSS, your folks have to maintain their property. If you know house has serious deficiencies, think hard on what kind of answer you will have to your Sister when she calls asking you for help on this.
If taxes, insurance, repairs etc are not paid / not dealt with, lender will send a Notice of Deficiency and it nothing is done a 2nd Notice goes out and then they will start Foreclosure. If the house has serious safety or hoarding issues, APS may be asked to get involved.
- if the RM borrowing spouse goes into a NH or dies, the nonborrowing spouse can remain in the home till they die or move out. The RM loan is not yet “called in” for repayment in full. This is important for you all as it may be that Dad goes into a NH due to his Parkinson's but mom is able to stay living in the house. Should your mom move into a facility and if other family members live in the house (Sissy or her kids or other family), this protection does not apply.
- RM has to - HAS TO - be repaid eventually either by the owner repaying the loan + interest + fees or by family/heirs doing this or paying 95% of appraised value. Otherwise the RM acquires it and they will empty it out and sell it.
- Once a event happens that causes loan to be “called in”, the RM lender sends out a Notice and there is 30 days to get back to the lender as to what the intention is on the property with the expectation that if you are buying….. all can be done very very quickly & usually as an all cash sale.
I hope your folks and Sissy realize that their RM lender has the ability to call-in the loan in full if the owners status has changed (died or moved into a facility), if taxes are not paid, if property insurance is not paid, if repairs and upkeep are not done. If communication from the RM lender is ignored, they really do not care as they totally have the ability to do a foreclosure.
Unless this house is worth a good bit of $ (800-900K) and is in well maintained condition, doing an RM is only putting a bandaid on a more serious issue. I hope that they and Sissy realize that one of the parents has to remain in the home otherwise the loan will be called in. Either mom or dad can go into a facility but not both. 800-900K value home gives them maybe 350-500K to use (in addition to their SSA income & savings) for facilty care and inhome health care.
Their home is an asset to use on their behalf, but a better use may be to move them to assisted living or memory care, then sell the house to pay for the care.
Moreover, interest is often very high.
A reverse mortgage worked wonderfully well for my MIL in her last year or so. She had a valuable property in Carefree, AZ which was quite a highly prized community at that time. She got a good monthly payout. And she was able to stay home with care 12 hours a day for the duration, watching her little back yard oasis formed with slow dripping hose, and the wild pigs, coyotes coming to drink. A room with a view.
When she died in her home the home was sold, the reverse mortgage paid, and the remainder of profit on the home was her son's inheritance.
So for some it works.
HOWEVER it's a huge gamble. Because if someone has to leave the home to go into care they both have too high an income to get help, too low to pay for in facility care AND the mortgage quickly comes due because they are no longer in the home. So the home must be sold, thus repaying the reverse mortgage AND raising their income again so that they must spend down everything.
Yes, the home is likely now to be lost.
You aren't the POA and it wasn't your decision. So there is little to do. It cannot be undone at this point. I sure wish all the best.
If their house is paid for, take an old-school bank loan out on the equity in it. Many people take these kinds of loans when to do home improvements and renovating on their house. The interest on what you pay back is very low. 2% and 3% some of them. That's almost nothing.
Friends of ours did this recently. The parents' home needed some adjustments to meet their needs and the rest is being used to pay for their caregiving. The parents also make payments on it out of their income every month.
Go to your parents bank and ask to sit down with a loan officer and ask them about an equity loan on the home. Don't do a reverse mortgage. The fees on those are crazy.
These mortgages, as by example I gave of my MIL, can work well for some. Under some few circumstances. But for all the reason I give below they are VERY DANGEROUS to your average person, and they shouldn't be done without a whole lot of expert advice, I agree. And I surely do agree with the advice of a good banker. Problem here is that as elders they will not be getting a loan I am thinking. They are apparently out of money, and the bank knows the likelihood of their being able to pay any kind of loan. Sure is worth the time to get some answers though.
You can't do anything about this. I would say one more time why this is a bad idea, and then leave it at that. You have little power over any of this. I'm sorry. It's frustrating.
What I see as a bigger problem is when the in-home care is not sufficient for their needs. Either one or both of your parents could require a skilled nursing facility soon, and when the loan money runs out, the house will have to be sold.
If both of your parents die, at home, with in-home care within the next two years, then it seems the reverse mortgage will have served its purpose.
Considering your scenario of just letting their money run out in two months, they could then apply for medicaid, which will pay for Home Based Community Services, allowing them to continue living in their home, with in-home care, although it will likely not be 24 hours a day. The house is exempt as long as they are living in it. But, if they get moved to a care facility, and Medicaid is paying for their care, the home will need to be sold, and that money spent down, or Medicaid could try and recover funds from the sale of the home after they die.
I have to agree with the sister in this case, that a reverse mortgage may be the best solution for now. Best case scenario, both parents die in their home with full time care before the money runs out in 2 years. If the money runs out and mom is still living, then she will need to be moved to a care home and the house will need to be relinquished to the lender, or sold, and she would apply for Medicaid assistance at that time. No matter what you choose to do, the house will end up being lost. This is the only asset they have and it is going to be used to pay for their care one way or another.
See All Answers