Should my 86 year old mother consider a reverse mortgage?
My Mother is 86 yrs old and receives SSI. Her home is paid for and is appraised for taxes at 54,000. She needs more cash flow to pay bills, have plumbing repairs made, keep her car running, etc. Should she consider a reverse mortgage?
Reverse mortgages can be valuable tools for seniors trying to supplement their retirement incomes, especially in an age where pensions and social security may not cover living expenses.
In the US, the borrower of a reverse mortgage must be at least 62 years old - so your mother at 86 would qualify on age. Typically reverse mortgages end when the homeowner dies, sells the house, or moves out of the house for 12 consecutive months, or at the end of the Term on a Term plan. This could be any amount of time.
A healthy 62 year old could have a life expectancy of another 20-30 years so be sure to understand the terms of the reverse mortgage before signing. For example, is it a Tenure plan, which pays fixed payments until you die or move from the premises, or is it a Term plan, paying fixed monthly payments only for a fixed amount of time? If it is a Term plan, be sure you have a plan for what to do after the term runs out.
The amount you can borrow is determined by your age, the value of the property and the interest rate. If you are relatively young, you will not be able to borrow as much against your house in a reverse mortgage. What this means is that under a Tenure plan, the payments you receive may be very low. While under a Term plan, you may outlive the term.
Closing costs on reverse mortgages are high relative to home equity lines of credit; therefore if you are planning on moving within only a few years, the benefits of a reverse mortgage may not be worth the costs. In addition, it is not a good idea to use the proceeds of a reverse mortgage to invest in risky investments.
One other thing to consider is to be careful that the cash from the reverse mortgage doesn't affect your eligibility for any public/government benefits you receive. Talk to a financial advisor to make sure you are in compliance.
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I hope that his helps you make the right decision for your particular situation and helps you Find. Learn. Save!
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