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There are good and bad points for reverse mortgages. They are certainly not for everyone. They are ideal for seniors who need cash (for example, for home care, so they can stay at home while ill/declining in health), and have limited income, and aren't primarily concerned with leaving a paid off house to their heirs. I'm not an advocate for reverse mortgages by any means, but if it prevented having to go to a nursing home, you bet I'd do it.
There are other means to get some of the value out of your home. In many counties, you can get your taxes reduced. In my county, if you are 65 and have been a resident for the previous 10 years, you are given a credit on 1/2 of the taxes up to 200,000 assessed value. You can also qualify as a senior to have your taxes not come due until the house is sold by you or your estate. This would accrue interest and a tax lien would be placed on the house.
In my county a $200,000 home would be about $2000 in taxes, so if you can qualify for at least $1000 in tax exemption and the remainder $1000 tax paid at the sale. Or, the whole $2000 tax paid at the sale, if you were not a resident for 10 years, previous. Now this is not much money, but $2000/yr. may be enough for some people who are just living on the edge.
Also a reverse mortgage may work in your favor when you have to go into a nursing home. You could qualify for medicaid, long term care, if you had very little assets and your home is exempt. However, if you sell your home to go in a nursing home and get the money; now you will have too much assets that will prevent you from qualifying for Medicaid, until those assets are exhausted.
My understanding of these reverse mortgages is that the property must be owner occupied, so once you enter a nursing home, the home will go to the bank, you will get no assets or little assets and then you could qualify immediately or soon after for medicaid.
So, it would be better to use the assets of the house for a better quality of life than having it be sucked up by nursing home costs, before you qualify for medicaid.
I have a friend whose husband (both seniors)had to go into a long term care, benefits had run out so he was sent home.
They have a very limited income, house needed some repairs plus a new heating system.
The house was in a good area for selling but she adamantly wanted to stay in the home and not move.
A reverse has provided the money for repairs plus cash for living on less than a frayed shoestring.
Recently it also provided the money to put him back in care while she is undergoing cancer treatments and can't care for him.
Financially, they would have done better with an outright sale.
In every other way, this worked better for them than any of the other options.
I have a friend whose husband (both seniors)had to go into a long term care, benefits had run out so he was sent home.
They have a very limited income, house needed some repairs plus a new heating system.
The house was in a good area for selling but she adamantly wanted to stay in the home and not move.
A reverse has provided the money for repairs plus cash for living on less than a frayed shoestring.
Recently it also provided the money to put him back in care while she is undergoing cancer treatments and can't care for him.
Financially, they would have done better with an outright sale.
In every other way, this worked better for them than any of the other options.
If the benefits ran out then they were on Medicare which only provides, I think 100 days of nursing care in a benefit period. If they had limited income, they may have qualified for Medicaid which pays for Long term care. The house value is exempt from that determination. However, once they received cash from the house in a reverse mortgage, that value would be counted against their qualification for Medicaid. They would then have been forced to pay for the care out of their resources.
It would have been better to stay in the care; do not go home; and consume most of your cash and get down to the limit where they would qualify for medicaid which would have paid for all the long term care. They would then be able to keep the full value of the house to themselves. In addition, they would qualify for much more help because they would be below the level of money and be able to get their part B Medicare paid and qualify for prescription drug help.
It is one those issues, where it is better to be house rich and cash poor.
Yes Livecontent
She certainly looked into that.
But she would have only gotten 1/2 his SS benefit to live on.
That would not have given her enough income to keep a house, much less any money to do needed repairs on it.
I believe there is only a requirement to be in the home when you obtain the mortgage, no requirement to stay. (AFAIK)
HUD Reverse Mortgages, requires that it be owner occupied but it can be a multiple dwelling, up to 4 units--but you got to live in one. Of course there are other bank types--but I am willing to bet that you have to occupy the premise.
You certainly have to stay alive. Part of the risk to increase the probability of the lender getting their money back, is that elderly people do go into nursing homes. That is all written in the contracts.
Getting the mortgage, moving and renting it out---sure, that is what we need in this country--more real estate fraud. The best way is to honor the contract. Yea, move out, rent, and take a depreciating asset on your rental, as a deduction on your taxes--that may not qualify--nothing like adding tax fraud---more greed, more greed....we in this country are some pieces of work
I would not want to get a reverse mortgage for fear that I'd need to sell the house later for an upfront payment to assisted living. If I thought I'd stay in the house my whole life to the end, I'd consider it. Will see how the health thing goes.
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The best way is to honor the contract. Yea, move out, rent, and take a depreciating asset on your rental, as a deduction on your taxes--that may not qualify--nothing like adding tax fraud---more greed, more greed....we in this country are some pieces of work 
