Ask Terry Questions Should we refinance my mother’s mortgage to pay for her In Home care ?

Should we refinance my mother’s mortgage to pay for her In Home care ?

By Terry Savage on February 12, 2019 | Financial Planning / Retirement

Hello Terry, thanks so much for allowing questions!!! My 81 year old mother owns her own home. She has roughly five years left on a thirty year mortgage. I live with her. She pays the note with her Social Security benefit. We have a joint checking account. I pay all utilities and her health insurance premiums. She had a stroke 3 years ago and I took over the actual paying the bills. She was able to remain alone at home while I work, but now she has broken her hip and combined with the residual effects of the stroke, she can’t be alone in the house. We need in home care. We don’t have the money. Can she refinance her mortgage to get money to pay for in home care? Would you recommend a reverse mortgage? I’m at my wit’s end and don’t know where to turn.

Terry Says

Oh, this is a tough situation — and it’s why I have always recommended Long Term Care Insurance.  It would come in handy right now!  Well, the first decisions you have to make are actually not financial.  What do you think is best for your mother in the years ahead?  Is she going to need round-the-clock care?  If so, she is better off selling the house now — and using the proceeds to get into a good assisted living facility.  If the money runs out (net after mortgage is repaid), they will likely keep her there– and apply for Medicaid. And when she passes on, anything that is left in her bank account would go to you, her heir.

If you see an attorney, you might be able to benefit from a wrinkle in Medicaid eligibility.  It says that if an adult child is living in the home, it cannot be sold by Medicaid.   So she might be able to immediately get into a Medicaid-funded nursing home.  But they would take her Social Security check!   And then you couldn’t afford to stay in the home.

Of course, I see the other part of the problem.  What are YOU going to do?  This setup worked for a while, but could you live in a studio apartment near her assisted living facility?  Maybe it’s time to break up this cozy arrangement.  Or maybe you can find a person you can trust to rent a room!  (Check with your church.)

You can’t refinance the house in her name, because she has no real income.  If she signed over half the house to you as a “joint tenant with survivorship rights” you might qualify for a mortgage refi –and to pull some cash out.  BUT, the monthly mortgage payment would likely be significantly higher.  check with your bank.

You could have a Reverse Mortgage, but it is costly to set up — and I have a feeling she won’t be there in the house for another 5 years.  That’s the time it would take to roughly recoup the fees you pay for an RM.  So that just postpones the day of reckoning.   And it would be a costly delay.   You could do that, but you’ll still need to make plans for yourself.

\If you decide on a RM go to to see how much money you could get each month based on the value of the home, her age, and the payoff of the remaining original mortgage.  And you can search for a RM lender there.  Just remember that when she passes on, or moves out, the loan must be repaid (or refinanced) if you want to keep the house.

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