Below is a breakdown of a recently closed reverse mortgage loan that was used solely to fund in-home care and allow the senior to age in place.  This particular case was possibly the most complicated one that we have encountered due to the multiple moving parts.  Most cases have one or two moving parts, but this one seemed to have all of them.

Client: 92-year-old female dementia patient

Prior to her cognitive abilities declining, a power of attorney was established to allow for medical/financial decisions to be made on her behalf.  Power of attorney is not an uncommon scenario to encounter with these loans (as seniors of age 62 and older are the only ones who can obtain them).  This case had 2 powers of attorneys (son & daughter).  The structure of the POAs was such that it required both to execute any decisions, whereas in most cases, one or the other can act.  This would normally be a minor hurdle, but the son and daughter were at odds about the best path for their mother. 

Choosing the Right Program

Scott and I presented multiple educational presentations, power points, conference calls, etc., over the course of a couple months to both of them.  The primary disagreement between them was which program to choose.  The standard HECM (home equity conversion mortgage AKA reverse mortgage) program allows a maximum home value of $1,149,825.  The lender then bases the amount they will lend on a percentage of this value.  As our case had a home with a value of approximately 3.5M, and the subject needed more funds to ensure her continued in-home care than the traditional HECM program would allow, the Platinum Jumbo program was needed. 

This program allows for the use of the home’s actual appraised value, rather than capping that value at the aforementioned $1,149,825.  Clearing that hurdle to land both the son and daughter on the same page proved especially difficult.  We stuck to our approach of transparency, honesty, and empathy.  Some of those conference calls included an in-home care manager to discuss the approximate cost of the care needed, their elder care attorney to ensure the senior was being taken care of, and their financial planner so that the funds taken out were put to use in the best possible manner to see that the care would last as long as the projected need. 

Once the program type was settled on, the loan process officially started.  The timeline on that is generally 45 days from application to funding.  The months of education prior to that is not the norm, but is something we are happy to do to ensure all parties (the senior and their involved heirs) are fully educated and knowledgeable about the program. 

Most of the reverse mortgages that we do for the senior community are primarily to eliminate the current mortgage payment from their monthly budget.  In the case that there is abundance of equity, they may also have the option of pulling a lump sum of cash out at closing, taking a specific amount of a monthly disbursement for the remainder of their lives, or taking a monthly disbursement for a set period of time (5 or 10 years for example).  Seniors can also do a combination of these options, and have the ability to switch the options after funding.  Most of the programs also come with a line of credit attached to it.  This line of credit grows either at 1.5% per year (on the Platinum Jumbo program) or at the same rate as the loan’s interest (on the traditional HECM program).  This allows the senior or their heirs to access emergency funds in the event of an unforeseen health event, etc.  The line of credit is far and away the most popular feature of the program as it gives all involved peace of mind.

Hopefully this gives you a glimpse into the process and what is involved.  If you have any additional questions or want clarity on anything I mentioned above, please do not hesitate to ask!