Reverse Mortgage Examples

When a reverse mortgage makes sense

Using a reverse mortgage to pay off
a mortgage balance is common.

Phillip, age 70, owns a $400,000 home with $50,000 remaining on his mortgage and $20,000 owed on his credit cards. Phillip's income from Social Security and pension are less than his monthly mortgage, credit card, and medical expenses. Phillip could use a reverse mortgage to pay off his mortgage and credit cards and still have $155,000 left over to pay for his medical needs.

Terri, 86, from Michigan, owned a $200,000 home with a $160,000 mortgage balance. Caught in the housing crisis, she found herself facing foreclosure because her payments increased and she fell six months behind. Terri was able to negotiate a "shortpay" with her bank to reduce her mortgage balance to $145,000. She was able to use a reverse mortgage to completely pay off her mortgage and keep her home.

When it doesn't

Maria was considering taking out a reverse mortgage on her $300,000 property to help her pay for a $35,000 accessible van. However, Maria expects to move in with her children in two years. Because of the short timeframe, Maria was better off financing the car and paying it off when she eventually sells her home.

Mark and Janice are aged 65 and 55. Mark wanted to get a reverse mortgage. However, because his wife is under age 62, she would have to be taken off the title to the property. This would mean that when Mark passes away, the reverse mortgage would become due even though Janice would still be living in the home. Mark decided that he did not want to risk not being able to refinance the loan in the future so he decided to wait until Janice turns 62 to get a reverse mortgage.