Reverse mortgages 101

August 3, 2018

You may have heard the phrase, “house rich and cash poor” before. It’s a state of affairs that means you have a roof over your head, but you’re strapped for liquid cash to pay for things such as food or medical prescriptions. Enter the reverse mortgage.

A reverse mortgage is a loan available to older homeowners as a way for them to use the accumulated wealth in their homes to cover basic living expenses or health care, including long term care. Over the years, the reverse mortgage industry has dealt with a few bad apples that soured the solution for many. However, today, the Federal Housing Administration regulates the process.

This mortgage is termed a “reverse” because in one of three ways it allows the built up home equity to be given back to the homeowner.

The three ways you can get funding from a reverse mortgage are:

1. A monthly payment for life to meet daily living expenses
2. A lump sum of cash for immediate needs or emergencies
3. Establishing an equity line of credit to address future cash needs

Unlike a traditional mortgage, when you receive these funds there is no new monthly expense or payment created. All three options are provided to homeowners who meet criteria, including:

  • Minimum of 62 years of age
  • Have sufficient home equity
  • Have enough income to cover the taxes, insurance, and maintenance of the residence

Needless to say, this information is just scratching the surface of the aspects of a reverse mortgage. It is very important to evaluate this potential financing option in relation to your entire financial picture. Its use could potentially disqualify you for some government assistance programs such as Medicaid or VA Aid and Attendance (though its use will not affect qualifications for your pension, annuity, and Social Security or Medicare benefits.)

To learn more about reverse mortgages, consider speaking with a Certified Senior Advisor®, Aging Life Care professional®, elder law attorney, or reverse mortgage specialist for more information.

Register for Iona's free presentation on ways to afford the costs of long term care

Join Rick Gow, a Certified Senior Advisor® and Wealth Management Advisor from Lara, May and Associates LLC, to learn about different options.

Topics covered during the presentation include:

  • How to put the pieces together for a more secure LTC financial plan for the future.
  • Medicaid: Hidden gem or fool’s gold when it comes to paying for LTC.
  • Reverse mortgage: myths and realities of using it to pay for LTC.

Learn more and register for the class here.