Reverse Mortgages Must Be Used Responsibly

Dear Joel,
I am a widow in my late 80s and live alone. My income is relatively small and I’m starting to feel anxious as I may need home health care from a company such as Preferred Home Health Care & Nursing Services. I do not want to ask my children for money. That is not the way I was brought up and would be embarrassed to do that. Additionally, my children have their own expenses such as college tuition, mortgages and such. I have heard of a reverse mortgage but know nothing about it. – Margaret in Lakehurst

Dear Margaret,
Thanks for writing. I am a strong advocate of reverse mortgages for people such as yourself. Although I am not a financial planner or attorney, I will do my best to explain the process. A reverse mortgage allows for an individual to take money out of the equity in their home. These monies do not have to be paid back; however, if you or your heirs decide not to pay the monies back, the bank may end up owning the home when you pass. The majority of people who take out reverse mortgages do it so that they can remain in their homes and get quality home health care. The rule of thumb is that that you can borrow up to 80 percent of the equity in your home. For example, if you have a home worth $500,000 and a mortgage of $50,000, you would be eligible for 80 percent of $450,000. The bank will do an appraisal on your home before anything gets done. It then works similar to a home equity loan where you will write checks as needed.
Please know there are very strict rules that apply to reverse mortgages and you can feel safe applying for one. You will be explained everything in detail and can cancel should you change your mind. Once again it is a very safe product. It must be used responsibly and I get the feeling that is who you are. It is always best to consult with an attorney before making a move such as this. Best of luck and let me know how it works out.
If you need referrals, I can offer you a list of companies that handle reverse mortgages. Your attorney should be able to do the same.
All the Best,

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