What types of situations make you NOT be able to qualify for a reverse mortgage?

Question

I'm assuming they don't let everyone do a reverse mortgage - what are the DISqualifications?

In short:
Senior inlaw CA house value: 700,000
Mortgage consolidated with cc and other debts: 400,000
These people are still racking up the debts

When father IL passes on, mother IL wants to do a reverse mortgage so she'll have money to live out the rest of her life. She was told she just has to hit a certain age. She seems to think the house will be left to us, but we doubt there will even be a house.

But would she be qualified? Wouldn't they not allow a reverse mortgage if your debt was too high?? Thanks!

Answer 1

http://www.financialfreedom.com/ReverseMortgage/FAQs/

Has LOTS of information. There's even a requirement that she see a financial counselor. Unfortunately, the only requirement is that there be equity in the house to borrow.

The private site has a "reverse mortgage calculator" On a $400K paid off house, a 79 year old widow would get maybe $1500 a month from the reverse mortgage and maybe $1500 a month social security for a total of $30K a year. I wouldn't want to try to live on that and keep the house. On a $700K house with $300K of debt, the calculator would assume there was money coming from somewhere else to pay the mortage and still only loan $1500 a month. If the mortgage payments were $3000 a month, it wouldn't be enough to avoid foreclosure.

Answer 2

HUD and AARP have information.
A reverse mortgage is a very expensive loan against the house. They would first pay off the current mortgage and huge loan fees the loan her half the value of the house as monthly payments or a lump sum. When she no longer lives in the house she needs to pay back the loan, if deceased her estate will pay it back or the house will be sold.
If she wants to downsize or move in with the kids or something she will have to pay off the mortgage.