In Senior Market Advisor‘s 2011 Senior Survey, participants were asked if they had done or would they ever consider doing a reverse mortgage. The response was overwhelmingly negative: 76 percent said no.
Perhaps they should have spoken to Don, 62, a Florida resident who recently concluded a reverse mortgage secured by his father’s Northern New Jersey home.
The process began last year, when Don’s 92-year-old father became bedridden and needed full-time home care in his three-bedroom, two-and-a-half bath home. He first contacted BLS Elder Care Financial Solutions in Livingston, N.J., headed by Barbara Steinberg, for help in getting his World War II veteran father money from the Veteran’s Administration to pay for in-home care. When the application procedure got bogged down in the VA and the bills started to mount, Don took Steinberg’s advice and looked into a reverse mortgage to extract some equity from his father’s house.
He contacted two banks, settled on one and within 60 days, he had a check for $115,000. (The entire reverse mortgage was for $215,000, but $100,000 was used to pay off an existing mortgage on the home Don’s father bought in 1987.)
“It [the reverse mortgage] was a godsend,” Don said. “It really gave me a cushion to cover expenses that were significant monthly outlays.” The reverse mortgage was in his father’s name, with proceeds used to fund his care.
Don considered other options, such as selling the home and moving his Dad and a caregiver into a rented assisted-living facility. “But I knew the sale up here was going to be difficult,” he said. “And I didn’t know what I could come up with in the way of a rental that would accommodate him and the caregiver. Yes, it was an alternative, but not a very attractive one. The only real alternative was the reverse mortgage and I credit Barbara, because I would not have done the legwork without the help of Barbara and her staff.”
Making the deal ever more attractive is the fact that fees have come down. “I probably wouldn’t have done it two years ago because the fees were so astronomical, but they’ve come down so it became a logical way to go,” Don said.
Sadly, Don’s Dad passed away in February. As the executor of his Dad’s will, Don had six months to sell the home; if it wasn’t sold during that time period he would have been given two 90-day extensions.
Fortunately, the house went under contract in April for $265,000 (above the $229,000 price his father paid) and Don expects to close this month.
In Don’s view, a reverse mortgage is most beneficial for seniors age 80 and above. It wouldn’t work for a younger senior, like himself.
“It does not make any sense whatsoever if the person is below that age group,” he said, “because you just don’t get enough out of it. My father was probably one of the oldest people that had ever accessed a reverse mortgage.”
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Maria Wood is the managing editor for Senior Market Advisor.