Using a Reverse Mortgage to Pay Off Debt

UpdatedDec 12, 2008

Should my mom get a reverse mortgage, and pay off her credit cards?

My mom has approximately 60000.00 in credit card debt. She is 80 years old and has no mortgage on a 80-90 thousand dollar house. She has approx. 15 thousand in the bank. These credit cards are maxed out and are beginning to eat into her savings. Question? Should my mom get a reverse mortgage , which would be about 55 thousand, and pay off her credit cards

Thanks for your question.

Yes, a reverse mortgage might be the right solution for your mother. If she uses the entire $55K loan amount to pay off the credit cards, you'll wipe away that entire debt and she'll be free off those payments. However, keep in mind that she'll be using a large amount of the equity in her home and will not likely be able to use any additional equity should something come up in the future.

She won't need to make any payments on the reverse mortgage, but when she moves or passes or away, the reverse mortgage lenders will own use the proceeds from the sale of the home to pay off the reverse mortgage and collect their interest. This means that as an heir, there will likely be little value left in your Mom's home. Let us know if this is helpful and start your search for a reputable reverse mortgage lender here: Get a Reverse Mortgage

She could also simply pursue a traditional refinance and try to use the proceeds to pay off the loan, but if she has no cash flow that might be difficult for her to deal with.

She could apply for both and then decide after speaking to a few qualified Reverse Mortgage Loan Officers what is right for her:

Mortgage Refinance Quote

Reverse Mortgage Quote

I hope this helps to answer your reverse mortgage question, and I wish you the best of luck.

Thanks!

- Bills.com

6 Comments

BBill, Jul, 2009

Family law varies by the state. There are general guidelines for community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) which vary from the other jurisdictions. Since I don't know if you are in a community property state or not, it's impossible for me to give you general guidelines. Keep in mind that divorce settlements can be fact-specific, so "who gets the mortgage and who gets the property" types of questions can vary from couple to couple even in the same state.

CCarrol, Jul, 2011

My husband and I did a reverse mortgage in 2007 with Wells Fargo. They told us that we had to pay off all our debt- all our credit cards, even an auto we had co-signed for our daugheter that was turned back, and old cell phone bills that were in collections. We did pay off back house taxes and a judgment that should have been paid off, but now I have read that you do not need good credit. Our house was appraised for aobut $200,000 and we only owed about $16,000. We had to refinance. We were vary late on payments and taxes, but did they take our retirement money? I do not know if that was mortgage fraud. Does any one out there have answer for me. Do I need to a lawyer?

BBill, Jul, 2011

You are not required to pay off debt or collections accounts in order to get a reverse mortgage. You are required to pay off any liens, judgments, or delinquent federal debts (such as back taxes or delinquent student loans).

I think that speaking to a lawyer is a very good idea.

MM haifter, Jul, 2009

If a married couple have an existing reverse mortgate loan, they decide to get a divorse, do the original rquirements change or what happens to this reverse mortgage. Who gets what. Who is responsible for the payback. Can the person who gets control of the property continue with the loan. What happens if there is a new wife?

DDeborah, Dec, 2008

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.Deborah

MMortgage, Dec, 2008

A reverse mortgage can be a confusing concept. It's helpful to have information like this that can help.