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Should I Consider a Reverse Mortgage?

McNair Dallas Law

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Reverse mortgages continue to be one of the most misunderstood retirement and long-term planning tools. Many myths surround the reverse mortgage program.

As property values continue to rise many people are considering using a reverse mortgage to pay for in-home care.  If you already have one, you may want to look into refinancing the loan.

Patch’s recent article entitled “Is A Reverse Mortgage Right for You?” explains that reverse mortgages (RMs) permit homeowners who are at least 62 to borrow money on their house. The homeowner gets money from the lender based largely on the value of the house, the age of the borrower and current interest rates. The loan doesn’t need to be paid back until the last surviving homeowner dies, sells the house, or moves out permanently. Homeowners can use the money to pay for improvements to their home, to let them wait to claim Social Security, or to pay for home health care.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM). This is the only RM program that’s insured by the Federal Housing Administration (FHA). The national limit on the amount a homeowner can borrow is $822,375.

High end borrowers must look at a jumbo RMs. This type of loan has no loan limits. Jumbo RMs let a senior borrow millions of dollars. In fact, qualified borrowers can borrow up to four million dollars in loan proceeds.

Reverse mortgages are “non-recourse” loans. This means that even if the house eventually sells at a price below the amount of the reverse mortgage, the seller never owes more than the value of the home.

The amount of money seniors can qualify for, is based on their age and the home value. The older they are, the more money for which they can qualify.

A big reason to use a reverse mortgage is to pay for home care to stay out of a nursing home. By doing so to pay for home care, a senior may not be required to use their own retirement accounts, which can jeopardize their ability to pay for future healthcare needs.

A reverse mortgage may not be best for everyone. Consult with an experienced elder law attorney about whether it is right for you.

Reference: Patch (June 1, 2021) “Is A Reverse Mortgage Right For You?”

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