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Reverse Mortgage, my personal experience.

As a mortgage planner, I am often called to help my extended family for advice on financial matters and try very hard to give family the same level of advice that I do my clients.

Last year, my wife's mom had an incident where she fell in her home. Nothing broken but she severely damaged her knee and her physician suggested a knee replacement which would require extensive home care or placement in a nursing home. At the time, she was 87, had lost her husband two years earlier and was adamant about not going into a nursing home. My wife and I live four hours away so we were really not able to provide care and both of my wife's sisters, while living closer are still working full time and could only help occasionally. Based on the doctor's suggested care the home health care was going to be approximately $2500 per month which was impossible for her and would have created a real burden for her 3 daughters.

Her situation was that she had lived in her home for 45 years, had a small mortgage balance taken out to remodel her home costing her about $900 per month but she had equity of approximately $400,000. She had some savings earning just enough to make the mortgage payment, Social Security, and a small pension from her years as a social worker.

When I began to look at her situation, it was immediately clear that using her savings to pay for her care was not a good idea as that would reduce her interest income quickly creating even more of an income issue than she already had. She was adamantly opposed to the idea of selling her home which I completely understand. I looked at refinancing her home to tap the equity but the monthly payments would have added to her income issues and frankly, given her meager income, I could not qualify her for enough of either a traditional mortgage or home equity line of credit to have solved the problem.

Time to do some research. One of the products I found was the FHA Reverse Mortgage, also known as a Home Equity Conversion Mortgage or HECM. I had heard some horror stories about seniors losing their homes when the loan was initially released and was VERY skeptical of it but remembered meeting a fellow Carteret Mortgage employee who was doing Reverse Mortgages several years ago and decided to call him to learn more. What I found was eye opening to be sure. He had transitioned from originating reverse mortgages into creating a reverse mortgage division in the company. We are now the third largest originator or reverse mortgages in the US! How that happened without me being aware of their growth is my fault. He offered a rather extensive training course in the product, required of any Carteret Mortgage loan officer originating them which I took and we mover forward with her Reverse Mortgage. Here are the results:

She was approved for the reverse mortgage as there is no requirement for income, credit, or health. She qualified for a reverse mortgage of $275,000 based on her age and equity in the home which paid off the existing mortgage eliminating her $900 monthly payment. She chose a line of credit for $149,000 which she was free to use at any time and for any purpose. Her other option would have been to get a check from the lender for $750 per month for as long as she was in the home, but given her age, the line made more sense. She still owns her home and has her title. When she passes, the home and her remaining equity will pass to her heirs. She got the care she needed and has regained her independence. As is her choice, she continues to receive some services at home which she can now easily afford.

Was this the right answer for her? Absolutely yes. However, every situation is different and may have a different answer. That is the reason I will not offer just forward or reverse mortgages but work with my client to find the "right" answer for them.

For more information please take a moment to view my Reverse Mortgage Presentation

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