If you or your loved one owns a home outright or is close to paying it off, a reverse mortgage might be the solution you're looking for. A reverse mortgage allows you to cash out the value of your home equity, either in full or in a series of monthly payments. The bank decides on a value based on what the home is worth, interest rates, the applicant's age, and other factors, and the loan balance gradually increases over time. (If a bank holds a mortgage on the house, it must be paid back before you can begin receiving payments). The borrower can stay in the home until death even if the loan balance exceeds the home's worth. Upon death, the loan balance must be repaid, which usually requires selling the home.

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Reverse mortgages were originally developed to help widows remain in their homes after the breadwinner passed away. Today, they work best when one parent needs assisted living but the other can remain in the home. To apply for a  reverse mortgage, one homeowner must be over the age of 62 and one person must continue to live in the home.

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Be sure to spend time researching the pros and cons of reverse mortgages, as they aren't for everyone. For example, it's probably not a great choice for a beloved property you want to keep in the family.

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Finally, a reverse mortgage is a big commitment, so its important to work with a reputable company. Make sure you understand the terms and read the fine print, as there are many rules about homeowner's insurance and mortgage insurance and keeping the property well maintained. There may also be high fees involved or clauses that make it easy to lose the home. The Consumer Financial Protection bureau recently reported that reverse mortgage scams and foreclosures are on the rise.

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Disclaimer: The Parkinson Association of Alabama provides education and awareness so that you may discern your own planning. Our information is never intended to be guidance or replace that of a financial advisor or expert. We simply want to provide enough information as a conversation starter as you work with your respected financial advisors for mapping out your financial budgeting plans for community living. The PAA cannot be held liable for any financial decisions you make regarding your own planning.

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Sources:

The Davis Phinney Foundation.  Chapter 15 - Long-term Care and Financial Planning. Every Victory Counts.  Page 249. "Manual." Sixth Edition, 2021.

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