reverse mortgage knowledge?

[CrazyLucky]

My mom died last year.  My dad turns 80 this year.  Their house is way too big for him, 4BR, 2 bath, but he wants to stay there.  It is not paid off.  He turns 80 this year, and still works because he cannot afford to keep the house if he doesn't work.  I have been trying to help him with some financial stuff.  Like, filing his taxes for the last four years, getting the ANCHOR tax rebate, getting the senior property tax freeze, adding him to my cell phone plan, etc. His tiny little pension and social security should provide most of what he needs, and I can help some, just not a whole mortgage payment. But there's no way for me to come up with enough savings for him to not have to work if he wants to be able to pay the mortgage.  I feel like there is a lot of conflicting info regarding reverse mortgages out there, and I'm wondering if anyone knows a lot about it, help me think through whether it would be good for him.  Based on his family history, he could easily live another 10-15 years.  

[Susie]

I also have a widowed dad living in a home that's way more than he needs, and personally it drives me kind of crazy, because I end up roped into helping to maintain it, which is a heavy lift from 5 hours away, with kids, pets, and a home of my own.  In his case though, it's at least paid off.  

I don't have personal experience with reverse mortgages, but I view them generally as kind of a last resort, and also something that would only be deployed in limited circumstances.  My understanding is that you can borrow maybe 40-60% of the value of the home, depending on a variety of factors, which means you need to have enough equity available to be able to borrow against.  You mentioned that he doesn't own it outright, but how much equity does he have?  Would it be enough to support borrowing enough to significantly improve his financial position over his likely lifetime?  I would be wary of it as an option if you think he might outlive its financial usefulness, since it would leave him with even less equity for whatever comes next.

Is there a plan in place for maintaining the house, especially as he gets older?  My dad is in his early 70s but definitely already needs some help.  If he's in a position to be talking about a reverse mortgage to meet living expenses, it doesn't sound like hiring it out is likely to be a solid plan.  I'd want to make sure that's considered too.  

Eventually it's likely that he won't be able to live alone for one reason or another.  What then?  Will that next step require financial resources?  Where would they come from?  If he reverse mortgages the house, the equity wouldn't be available for later use.  Could he and you swing what would come next?

These are more questions than answers, but things to maybe think about.  The bottom line is that I'd be pretty unsupportive of a reverse mortgage just because he "wants" to stay in the house.  I am dealing with that "want" too, but even without the financial considerations I've been encouraging downsizing and moving to be near me (or near my brother) because the current path doesn't feel sustainable.

[CrazyLucky]

Thanks for giving me those things to think about. Regardless of how much I encourage him to move out of the house, he's not going to. I don't know how much equity he has. Based on the price zillow gives it and what he owes, he has about $200k in equity. But I don't know how accurate that is, and even $200k isn't enough for a house in NJ. I'm not really trying to hard sell him right now on downsizing. Although he is of the generation that does not admit to having emotions, he is struggling with his grief. They were married 57 years, so it must be hard.
I don't know what his long term plan is. His grandfather lived until he was 95, but his daughter was a nurse and took care of him. His dad lived to 89 and his girlfriend took care of him. I'll be honest and say I don't really picture myself taking care of my dad, not to mention it may not even be feasible since our house has no showers that you don't have to climb stairs for. (He can go upstairs now, but who knows in five or ten years?)
Again, thank you. I feel so out of my element with all this stuff.

[quesyrah]

My parents had a reverse mortgage on their home. They didn’t need it financially, but there were a lot of reasons why they did it (stemming from my dad growing up dirt poor).

I didn’t really understand how it works until I had to sell their house to move them to memory care. I’m using actual numbers here to explain how it all worked out, because it was a stressful situation and if you ever have to sell before he dies, it would be helpful to understand how it works.

Reverse mortgage was taken out in 2014 when the remaining balance of their loan was $183,000.

In 2021 I sold their house for a little over 829,000. The reverse mortgage company got $463,000 and my parents got $366,000.

I never imagined a scenario where both of my parents would end up with dementia and in an emergency situation where they needed to be moved ASAP. Selling the house to pay for their facility was the only option.

Had the market not been absolutely crazy at the time, there is zero chance we would have sold it anywhere near that high (prior to the crazy Covid housing market their neighborhood typically sold in the $500,000-$600,000 range) and we would not have ended up having the money to pay their $16,000 a month bill.

We would have been absolutely fucked.

Now, if your dad lives in the home until he dies, there is really no downside to the reverse mortgage. When he dies, you sell the house and pay the RM and keep any profits over that amount. If the house happens to be underwater or you can’t sell it for what the RM is owed, it’s not your problem. You don’t make any profits but you just walk away and they deal with it.

[CrazyLucky]

Thanks quesyrah, that's helpful. If only I had a crystal ball! My mom had dementia for the last year or so, and it was hard. I can't imagine how much worse it was for you dealing with both parents at the same time.

[quesyrah]

May 17, 2023 13:01:12 GMT -5 CrazyLucky said:

Thanks quesyrah, that's helpful. If only I had a crystal ball! My mom had dementia for the last year or so, and it was hard. I can't imagine how much worse it was for you dealing with both parents at the same time.

Thanks, it was traumatizing to be completely honest. My mom had early onset dementia for a couple of years but it got worse after her stroke in early 2021.

Honestly, we all marveled at how my dad was basically fine one day and the next he couldn’t dress himself and was wandering the neighborhood at 2 am. In reality looking back there were signs that he was skipping but we brushed them off. I struggle with this because during the pandemic we went 4 months without seeing my parents thinking we were doing the right thing following the guidelines to keep them healthy, and then in early 2021 my mom was hospitalized then sent to skilled nursing and my dad was home alone for about a month. All that isolation really made an impact.

My biggest piece of advice to people is to not brush off little things and learn the difference between normal old age forgetfulness and dementia forgetfulness. Hindsight is always 20/20 but I wonder if we could have avoided some of the really hard moments and not ended up with an emergency situation.

[quesyrah]

Sorry, didn’t mean to derail the thread.

[CrazyLucky]

May 17, 2023 13:15:20 GMT -5 quesyrah said:

Sorry, didn’t mean to derail the thread.

I get it.  One time my pastor was like, "What's going on with your mom anyway?"  And I just unloaded everything that was going on with her.  You feel like you can't talk about it with your family, because they're under just as much stress as you are.  At the end, my pastor was like, "Wow.  I did not know all that."  LOL.  I didn't used to be scared of death.  I wouldn't say I'm scared of death, but I AM scared of losing all my faculties like she did.  I'm glad you at least were ok financially.

[simpsongal]

CrazyLucky , quesyrah , I'm sorry - I appreciate you sharing. As this board skews towards middle aged posters, this is all going to be our reality w/aging parents. I'm still grieving my dad but he spared us all this end of life and medical stuff by checking out unexpectedly in the middle of the night. I wish I knew how things would go w/my mom and in laws.

My mom is in South Jersey too - there's so much there for seniors and the cost of living is pretty decent compared to N Jersey. I know you're already managing a lot for your dad, but it's his decision right? I'd probably help secure him the reverse mortgage so he can stay in his home. It doesn't sound like the assets that are left are going to add up to much if he needs long term care or a facility - you may end up going the medicaid route. Also, is there an up side for him working? Like it gets him out, socializing with people? That's so so important, esp for a widower. My grandfather declined w/dementia and we all think it was due in large part to his isolation after losing my grandmother. If it's a physically taxing job, that's a problem - but sometimes jobs give people a sense of purpose and structure.