My parents are 90 and 92 and still living at home. One has fairly advanced Alzheimer's, the other is bedridden. They have home care 24/7. But they're running out of money to pay for it. Their house is a tear-down but the property is very valuable. Should we get a reverse mortgage or would a regular bank loan be betterL?
Expert Answer by Barbara Steinberg
One difference between qualifying for a bank loan and a reverse mortgage is that borrowers must meet strict credit criteria when applying for a traditional loan. Credit history is not a criterion for a reverse mortgage. Most elderly people do not have sufficient credit scores to qualify for bank loans. Another difference between a bank loan and a reverse mortgage is that payments need to be made on the bank loan, but not on the reverse mortgage. Since your parents are running out of money, they may not be able to make loan payments even if they can qualify. While a reverse mortgage usually has significantly higher fees than a bank loan, this is one situation where it appears to make sense.
Answer
You mention that the house is a tear down. If more than 15% of the home's current value would have to go toward home repair, as mandated by HUD, it may not qualify for a reverse mortgage. I would hope that it does not exceed that amount so you can help your parents.
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