Any suggestions on taking a reverse mortgage or a home equity loan to take value out of parent's home to pay for home care?

RM are the devil. Not quite the devil that annuities r imo but still the devil.
On RMs - & I do think this is important!- if you r anywhere that has special insurance requirements associated for mortgages, getting a RM is going to be fraught with unforeseen problems, which if it hasn’t been an issue before will likely b in the future. Like if you have to have flood or windstorm or other hazard insurance atop homeowners policy as a requirement for a mortgage, that RM is going to get to be even more expensive. Why??? RM tend to have fine print ability to do force placement of hazard insurance from a select group of carriers (of their choice) and add it onto RM. This is happening along coastal areas for a number of reasons….OR & perhaps more scary….. RM are using insurance as a way to jettison continuing to have RM in coastal areas…. So if your parents are coastal please pls look at their RM to see exactly what is happening with property insurance especially when it’s policy renewal time.

If folks owned home outright, before doing that RM, they maybe only had a homeowner policy. Based on value from ages ago, maybe underinsured. Having a RM means they must be freshly insured for all perils, so flood, wind, earthquake, whatever path of peril they are in. So instead of State Farm HO @ $567 for $200K old home value, it’s now HO, flood, wind $2500 wrapped up into the RM on newly appraised $300K by a carrier RM arrange for & your folks never pay a premium directly. (RM was @ 45%, so 135K less 10% in initial fees)

Issue for anyone having a mortgage in coastal areas is all peril may not be available. Like for Louisiana coastal $2500 all peril policy is not available anymore, it’s now $8,000 & only 2 or 3 carriers & will not do flood; flood needs to be federal NFIP to its max of 250K and over than you find a private flood carrier (or you do private flood entirely). Coastal MS not quite as bad but less homes so less risk. FL kinda has same crisis as LA. If you have $, you self insure. If no mortgage & you like risk & can get away w/it, you don’t insure. But if you have a RM, RM force place it.

Your parents on a RM might not really notice this. Insurance often folded into the life of the loan. They continue to get their mo. income so ok. That the loan is increasing at back end & does not effect them, nor that it it truly must be paid back one way or another. Even if you wanted to find lower cost policies with better coverage, you probably cannot get those placed. RM tends to control underwriting as per terms of the mortgage agreement as they need to ensure insurance coverage is in force. RM does not take the chance to leave this up to you to do. Balance due on the loan could be way beyond what your folks or you thought was due to insurance costs.

I’d look carefully at the fine print on this.
ALSO
look on how RM evaluates “maintenance” on the property. Your elder is fully expected to pay property taxes and do all maintenance. Some RM have routine drive by / drone visuals done.

There is an OP Katsmihur from Dec/Jan whose mom had a RM and faced a Final Notice of Occupancy from her RM. Mom placed by county services to hospital. Was a sad situation…. delinquent prop taxes, utilities off, severe maintenance issues (front door nonfunctional). RM was within its rights as per terms of contract. The opposite end of Alva’s partner story of his moms RM experience. Imo RM benefit the RM as elder rarely has high enough mo income AND high value home to do a big enough mo pay out at 40/45% of prop value line of credit RM for 3-5 years of in home care b 4 they die. RM tend 2 b a band-aid to have them stay at home few months, care goes beyond at home level so go to a NH; & family home goes to the RM for abt 40/45% of its value; RM tacks enough fees & costs atop interest that family cannot afford to buy it back even at HUD 95% rate as family doesn’t have that much cash on hand. & final, if folks do a RM, do NOT spend a penny on the house, ever!

Whoops, another older post. This is now happening lots, almost as if the site is shuffling old questions and tossing them out at us again. You know me! Willing to answer twice. Or more!

I do wonder what the OP decided on this matter and if he or she has explored the matter.
This is exactly what my partner's Mom did. He says, however, that the caregivers were so inexpensive back then, she didn't need them 24/7, and she had supplemental savings to help. For her it worked out, but he doubts it would today.
Problem with this plan is that if there isn't enough to pay caregivers, and if she goes into care, this "mortgage loan" comes due.
This is tricky stuff. I wouldn't do it without a copy of the contract, without looking into what care costs in the area, and without running this past an elder law attorney. Great care needs to be taken with things like reverse mortgages and LTC and such. Mistakes can be not only COSTLY but RUINOUS.
I wish you the very best.

One more opinion. If you have enough money to pay for caregivers to help you at home, you very likely
don't need an RM in the first place. Do not fall for those ads that seem so Easy Peasy! You can bet you cannot stay in your own home foreverwithout support, so sell it and get out, and move to a facility while you still can.

Sell the house. My in-laws bought a home in the SF area in the 50’s it cost somewhere in the $20,000 range.

my husbands parents talked with my husband and mentioned they were putting my SIL on the deed. My husband told them not to do that, begged them to leave it to her in a will. That didn’t happen.

a few years later they said they wanted to do a Reverse Mortgage and he told them that was probably not a great idea. They did it.

I am sure due to the stepped up basis and the reverse mortgage the home could possibly be under water when my SIL dies. If these things had not occurred and there was a will it would have gone eventually to my husbands niece's who deserve it.

I estimate the house would be close to a million dollars today

I've only read a couple of the other responses, but agree....please don't do the reverse mortgage. If there are no other options, it'd be better to sell the house and downsize (using the profits for care), or just sell the house and fund assisted living. If you do the reverse mortgage, it might help provide home care for a few years, but then there is no option to sell and go in to assisted living.

Ktrojano: Reverse mortgage loans do have to be paid back, of course. Some companies use a television ad with a popular actor attempting to sell the bill of goods. Do your research if you choose this route. It's not as cut and dry as the smooth talking actor portrays. Suggest that you see an elder law attorney.

If you don't have around $3 to $5 million cash to invest, an RM is not for you! It pays not only to stay in the residence but hopefully to carry out to your heirs. I have read that if the home sells for less than what the RM value is, it may still unqualify someone for Medicaid eligibility. Where is the cash to pay for care if stuck in a worthless home???

You are really better off getting into long-term care insurance, if eligible, and pay caregivers at home. Otherwise, sell the residence and go into a Medicaid approved facility.

If you are eligible for funding support, your local council could pay some or most of the fees. The council will carry out a care needs assessment. If this concludes you need care in a care home, they will carry out a means test to work out whether you qualify for help with the cost. This will look at your income and capital
If you are eligible for funding support, your local council must calculate the overall cost of your care and, using the means test, how much you have to contribute to the overall cost from your financial resources. The council must ensure that the overall cost figure it calculates, called the ‘personal budget’, is high enough to meet the cost of at least one suitable care home
You will be expected to pay towards the cost from your income included in the financial assessment, for example pensions, however you must be left a Personal Expenses Allowance (PEA). The PEA must be at least $25.65 per week. The council has discretion to increase this amount, depending on your circumstances. See below for more information about the means test.
Matilda

Reverse mortgages are only good if the owner is a savy investor who knows with the money from a reverse mortgage he/she can gain value in the investment be it stock, real estate, or business venure.

And that the house that has the reverse mortgage will also gain highly in value so that when the house is sold it will easily pay off the RM plus interest/fees.

It's complicated.

WAIT!!!!!! Don't do anything until you meet with an Elder Law Attorney in her area. My lawyer told me that a person's home is protected from Medicaid rules, so their rules that schedule a person's bankruptcy don't apply. If you take that cash out, Medicaid can force you to hand it over. (Married relationship)

If mom is single, the law might be applied differently. Get educated before making a move. If she has no cash available, then this is probably the best time to apply for Medicaid.

Proceed very carefully. There may be times when a reverse mortgage may be a good option, but there are also many times when it is not a good option. For one thing, once you take out a reverse mortgage you close out other options. You are betting that the owner will die before the need for a residential care option is needed. The fees (many of them hidden) will quickly use up the equity in the house. My MIL took out a reverse mortgage on her fully paid for house. In less than 10 years she was trapped in a house she could no longer care for but could no longer afford the assisted living option that would have been better for her.

If you decide to proceed with the reverse mortgage, read the contract very carefully and also have a qualified attorney or financial advisor study the contract for hidden fees and holes in the contract that could allow for additional fees. Be aware that most reverse mortgages are nullified if the owner spends more than 30 days not in residence. This means that an extended stay in hospital/rehab or at a relative's house could make the entire note immediately payable.

Please do not do that. If they need help paying for home care, look into programs in your state that will help them. We have one here called IRIS. They will do an evaluation to determine the amount of care needed and then they will allow your parent's to choose the caregivers (including family). They will help not only cover the cost of caregivers, but other things needed. Your parent's should not need to take out a loan. These programs are there to help.

You might trying searching, or posting, on bogleheads.org forum. It is a very active forum with some very financially-savvy posters.

Yet RM's are constantly advertised on television and websites, out to get more victims willing to fill their pockets.

My mother has a reverse mortgage on the home she inherited from my grandmother. She obtained the reverse mortgage approximately 15 years ago and the amount she currently owes is twice what she received. Each month over $400 is added to the amount she owes on the reverse mortgage for interest, fees, and mortgage insurance. There is no way she will ever be able to pay off the loan and the home four generations of my family have enjoyed will be gone because there is no way any of us can afford to pay off the amount that is owed.

Additionally, the cost of her maintaining homeowners insurance on the property has skyrocketed to the point where it takes 1/5 of her monthly income, leaving little funds for the maintenance the home requires. The reverse mortgage company requires her to maintain homeowners insurance on the home and keep up with the maintenance.

If/when we place her in an ALF she will lose the home due to a lack of residency. If we sell the home and pay back the reverse mortgage it will affect her medicare / Medicaid eligibility.

I, personally, think reverse mortgages are the worst legal scam around. They prey on the poor and elderly. I would wholeheartedly recommend you stay as far away from them as you can. If it is a choice between only a reverse mortgage and a home equity loan, I would strongly urge the home equity loan.

Don’t do it!!!
do you have a lady bird deed set up on the home? Are you the DPOA of estate?
First use up all cash assets, all monies including life insurance. Ya may take a hit on the life insurance. If cashing Life insurance out you can put 12,000 aside to funeral arrangements (you have to create a account with funeral home and set up) and use remaining for the cost of facility. State will want to see you used remaining $ for the facility.
when the person has depleted all the cash assets the state will place them on state Medicaid. If the person has a pension and or social security the state will pay the difference in cost. The state can not make you sell the home but you will have to maintain up keep and taxes.
if there’s no assets contact your department of health services (DHS) in your area get them on state Medicaid.
I am going through same situation but we’re going to sell the home and keep life insurance going.
good luck

Reverse mortgages take way too much in fees every month for the privilege of giving a person what they already own.
Take a second mortgage instead. It will cost less. Or better still, why not sell the house? Go into senior living instead and have money to hire help where needed. Many senior communities also have memory care and nursing home care right on the premesis if a person gets to a point where they need it.

I just checked into a home equity loan with our lender Wells Fargo to use the $ for a couple of things. We have about $80k in equity in our home. I was told they don’t do those any more & it would have to be a straight up refinance with cash out. Just over $3k in closing fees, a higher APR than we currently have & a higher mortgage payment on a new 30 year loan. No way! I’ll hold out until I can get my husband placed & sell the house. We have good credit & a decent income, so I was shocked it was such a crappy deal from what I considered a “legit” lender.

Home equity rules are easier to follow and the origination fees aren't as much.

Get a complete consultation. If the owner needs to permanently move into a nursing home when family can no longer care for him, the reverse mortgage, or RM becomes payable. May force selling the home. What if the home requires fixing to make it hard to sell? Real estate is not like a bank saccount the owner can draw from as it is very illiquid. So much homework to consider. That's why I do not like RM'S.

How much are you paying for home care now? If the average for one person is $27/ hr and you need a staff of several in a new scenario that you cannot event get 100% staffing, the cost should be well over 200K/ year. I doubt that a reverse loan would even cover that.

As said parent needs to be competent to sign any type of contract. I always felt reversed mortgages were only good for those with no family or who were not worried about leaving the home to family. But they seem to very complicated.

The POA is going to have to put some time into learning a lot about reverse mortgages, then if it still seems like a good idea, go on to pay for appropriate legal and financial advice. If no POA, guardianship will require additional self education and expense.

The MPOA (agent who is handling medical affairs) will need to provide guidance regarding current needs assessment, future prognosis, and life expectancy.

I would suggest starting with:

https://www.theretirementandirashow.com/podcast/updated-rmd-rules-reverse-mortgages-edu-2114/

https://www.theretirementandirashow.com/podcast/reverse-mortgages-continued/

Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement (The Retirement Researcher Guide) 
https://www.amazon.com/gp/aw/d/194564012X

Note that the reverse mortgage doesn’t have to be on this home. It can be used to acquire a smaller, accessible, more conveniently located replacement and the current one can be sold.

Reverse mortgages have a lot of fees up front, so they are a better value if you expect to stay in the home for an extended period.

Home equity loans are less expensive up front but require monthly payments.

Both require that the taxes and insurance be kept up.

If anyone in the family would like to acquire the property, consider a fair market value sale and leaseback after similar self education and professional advice seeking by the POA. Basically, assume the home will be sold.

I personally think that reverse mortgages/home equity loans/equity release schemes are a bad idea in principle. They allow people to maintain a home, or in some cases a lifestyle, beyond their income - right up until the moment when they run out of cash and find themselves living in the same home that they still can't afford, but now without capital assets either.

Is the house you're thinking of remortgaging to pay for care the family home that your parents raised seven children in? And your father is now living there alone?

I would use an elder law attorney or a Licensed Fiduciary to go over things with regarding all assets, and all choices. These things sometimes work out to the detriment for a senior. You see, this is basically a loan (often a high interest one) against the value of the home. There are often stipulations that the person must remain IN the home, and if they leave the home for care in LTC facility they must repay the loan almost at once. This often forces sale of the property. The other way this can go bad for seniors is that it bumps up their income so that they are unable to qualify for medicaid. Say they are getting 2,000 a mo social security and another 2,000 a month from the mortgage loan, they now cannot qualify for medicaid, but neither is this enough to pay for LTC.
So you can see the ways in which this can be a problem.
For some it works well. It did for my partner's Mom who took one out and was able to remain in her home with some caregivers on a cleaning, cooking, shopping help basis. She was able to die at home. The mortgage was paid after her death and my partner inherited whatever remained.
So answer is that it DEPENDS but what you MUST have is a good company with a very reliable and long history, and you must know all the facts, all the positives and all the negatives, and then make the decision that hopefully works for you (or your parent.)
I wish you luck. Just a few things to think about.

First...
Cameras are allowed in areas where a person would not expect privacy. So no cameras in a bathroom or if the caregiver has a bedroom, no cameras there.
Audio is also allowed but some states you need consent from the other person. Check your States regulations.
Second...
If dad owns the house and you are not on the deed and dad has dementia unless you have POA he probably could not get a reverse mortgage as he is not competent to sign a contract.
You should discuss this with an Elder Care Attorney.
If dad is a Veteran please contact the Veterans Assistance Commission (each County has at least 1 office) and they can help determine if your dad would qualify for any help from the VA.
Contact your area Agency on Aging again he may qualify for some help.
Contact your local Senior Services Office they will have a Social Worker that can help you find resources that might help.