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Life Lessons: Reverse mortgages: When are they dangerous

A reverse mortgage is a mortgage you can secure when you’re 62 years or older so you can stay in your home as you age. The Federal Trade Commission explains it as turning your equity into cash without having to sell your home. But the FTC warns they can be tricky so you need to do your research. Here’s more about the dangers of reverse mortgages.

You don’t usually have to pay back a reverse mortgage until after you die, but at what real cost?

Heather Kirson, an elder law attorney based in Florida, says, “I’ve had quite a few children come to my office crying saying ‘how did I get named in this foreclosure lawsuit when it was my mother’s reverse mortgage?’”

Kirson said in many cases when you die your property becomes your heirs and they will be named in the foreclosure, and most of them have no idea. Senior citizens also may not realize they have to keep paying for the upkeep of the home. In addition, if you’re married and only one name is on the mortgage that could be trouble for your spouse.

“If you’re out of the house for a year, then the reverse mortgage gets to foreclose on the house,” said Kirson.

Another danger is the reverse mortgage may not be enough. For example, around-the-clock at-home care can cost up to $12,000 a month. Although there are dangers, it may still be right for you.

Kirson said, “It would be a choice if someone is adamant about staying home and they had a family caregiver I would recommend that if we could pull enough equity out.”

Kirson said some other options include Medicaid programs to help pay for nursing home care, and there are waiver programs through Medicaid that help pay for assisted living and home care. Also, under these rules you’re allowed to keep your home and can leave it to your children or spouse.

If you have more assets you can speak with your elder care attorney to develop a plan and protect those assets. In some states you can pay a family member to be your caregiver.

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