Loved ones of elderly relatives often worry about their ability to pay for living expenses, medical care and other basic needs. Even if your loved one is eligible for government assistance, you may wonder if he or she may benefit from a reverse mortgage.
A reverse mortgage allows individuals to borrow against the equity in their homes while retaining ownership. To qualify for a reverse mortgage, a person must be at least 62 and either own a home outright or be able to pay off the existing mortgage with proceeds from the reverse mortgage loan.
What expenses may reverse mortgages cover?
Your elderly loved one can likely use proceeds from the reverse mortgage on virtually anything. Commonly, those who take advantage of this type of loan use funds for medical care and living expenses. If your elderly relative’s home is in disrepair, the reverse mortgage may also cover repair, improvement or accommodation costs.
How much does a reverse mortgage cost?
Reverse mortgages often have considerable fees and other upfront costs. These may include mortgage insurance premiums, service fees and closing costs. The loan may also carry a high interest rate. Additionally, reverse mortgages do not typically collect property taxes, insurance premiums or HOA fees through escrow accounts. Therefore, your elderly relative probably must set money aside to pay these.
When must one repay a reverse mortgage?
Unlike with traditional mortgages, reverse mortgages do not typically require borrowers to write monthly mortgage checks. Instead, payment on the loan is due when the borrower dies, sells the home or permanently relocates.
Whether a reverse mortgage is right for your elderly loved one likely depends on many factors. Still, if you are looking to improve his or her quality of life, exploring the pros and cons of a reverse mortgage may be worthwhile.