Reverse Mortgages from an Eldercare Perspective

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Reverse Mortgages from an Eldercare Perspective

  1. 1. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Boston Elder Law Attorneys<br />Specializing in Medicaid Planning<br />Cohen & Oalican, LLC<br />617-263-1035- Boston<br />508-821-5599 – Raynham<br />978-749-0008 - Andover<br />
  2. 2. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Elders often struggle to find the resources to stay out of nursing homes, and stay in their home, but still need In Home care. <br />A reverse mortgage can be used to help make that happen.<br />
  3. 3. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Medicaid can be used to pay for nursing home care, but stay at home care can be difficult under Medicaid.<br />A reverse mortgage is not a panacea and should be evaluated with the help of an elder care attorney or elder care financial advisor.<br />
  4. 4. Introduction to Reverse Mortgages from an Eldercare Perspective<br />What is a reverse mortgage?<br />A reverse mortgage is a loan designed specifically for elders (62 years of age or older) to take money out of their home either in payments, a in lump sum, as a credit line, or as any combination of the three. <br />
  5. 5. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Repayment of a Reverse Mortgage<br />A Reverse mortgage is a LOAN, and that loan has to be repaid.<br />The loans do not have to be repaid until any of the following 3 events occur.<br />1. the last surviving borrower dies.<br />2. the home is sold.<br />3. the borrower moves out permanently.<br />
  6. 6. Introduction to Reverse Mortgages from an Eldercare Perspective<br />What is the purpose of the Reverse Mortgage?<br />One must never forget that the first purpose of any financial instrument, is to make money for the lender.<br />The intention or motivation for a reverse mortgage was to give seniors that were real estate rich, but cash flow disadvantaged, fast and easy access to the equity in their home for any purpose, including home based elder care.<br />
  7. 7. Introduction to Reverse Mortgages from an Eldercare Perspective<br /> How much can I borrow?<br />1. The age of the borrower. <br /> The older the borrower, the more that can be borrowed.<br />2. Current Interest Rates<br /> The lower the interest rate, the more that can be borrowed.<br />
  8. 8. Introduction to Reverse Mortgages from an Eldercare Perspective<br />3. The equity in the home.<br /> The greater the value of the home, the more that can be borrowed.<br />4. The location (county) of the home<br /> AARP has a very effective calculator that can help you determine how much money you might be able to take out of your home.<br />
  9. 9. Introduction to Reverse Mortgages from an Eldercare Perspective<br />http://rmc.ibisreverse.com/rmc_pages/rmc_aarp/aarp_index.aspx<br />
  10. 10. Introduction to Reverse Mortgages from an Eldercare Perspective<br /> How is the Reverse Mortgage paid off?<br />Typically, the reverse mortgage is paid off by the borrower's estate.<br />The reverse mortgage can also be paid off from the proceeds of the sale of the house if the house is sold before the borrower is deceased.<br />
  11. 11. Introduction to Reverse Mortgages from an Eldercare Perspective<br />What if I owe money on my home?<br />If you do not own your home outright (if there is an existing mortgage) you must pay off that mortgage, however, it can be paid off with the proceeds of the Reverse Mortgage.<br />
  12. 12. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Reverse mortgage Pro's<br /> Fast access to your equity.<br /> The mortgage is typically not paid until you die.<br /> Proceeds can be used for in-home care if you do not qualify for, or cannot get adequate in-home care, keeping you out of a nursing home for as long as possible.<br />
  13. 13. Introduction to Reverse Mortgages from an Eldercare Perspective<br /> If you have great need for the cash flow from a reverse mortgage, and preserving your estate for your heirs is not the primary objective of your financial plan, this can be an effective way of supplementing your cash flow.<br />
  14. 14. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Reverse Mortgage Con's<br />High Closing costs.<br />• Closing costs for Reverse mortgages can be as much as double what is charged for a conventional mortgage.<br />Potential impact on eligibility for government benefits.<br />
  15. 15. Introduction to Reverse Mortgages from an Eldercare Perspective<br /> Reverse mortgage payments are not typically counted as income, if the proceeds are spent in the month they are received. If the proceeds from the reverse mortgage however are not spent and accumulate in a bank account, they could push you over the allowable limits for Medicaid of SSI. Certain states may also consider the proceeds to be income, even though it is your own equity, as you receive a monthly check.<br />
  16. 16. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Spending your children's inheritance.<br /> If you are trying to preserve your estate for your heirs, the mortgage will be paid off through your estate. Your inheritors can receive the difference, however, between what you owe on the reverse mortgage and what the home actually sells for if there is an excess.<br />
  17. 17. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Moving Out.<br />• Under certain circumstances, if you end up moving to a nursing home, it could be construed as having “permanently moved out”, as there may be a presumption that an elderly person leaving their home for a nursing home would not be returning. If this were the case, it could force the sale of the home.<br />
  18. 18. Introduction to Reverse Mortgages from an Eldercare Perspective<br />Resources<br />• AARP - has an excellent section dedicated to reverse mortgages, including a reverse mortgage calculator then can give you an idea before you apply of how much money you might be able to take out of your home.<br /> www.aarp.org/revmort <br />
  19. 19. Introduction to Reverse Mortgages from an Eldercare Perspective<br />The National Center for Home Equity Conversions - has greater detail, and many supplemental materials.<br />www.reverse.org<br />
  20. 20. Introduction to Reverse Mortgages from an Eldercare Perspective<br />The names of FHA insured lenders can be requested from the Federal National Mortgage Associations (800) 7-FANNIE (Fannie Mae)<br />
  21. 21. Introduction to Reverse Mortgages from an Eldercare Perspective<br />The attorneys at Cohen and Oalican would be pleased to assist you in evaluating all of your financial options, including reverse Mortgages.<br />www.cohenoalican.com<br />
  22. 22. If you have any further questions please contact, Cohen & Oalican LLP, elderlaw attorneys in Boston, Andover and Raynham<br />Boston Elder Law Attorneys<br />Specializing in Elder Law<br />Cohen & Oalican, LLC<br />617-263-1035- Boston<br />508-821-5599 – Raynham<br />978-749-0008 - Andover<br />

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