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If you need funds for medical expenses, then you will probably consider Medicare as a financial resource in lieu of a reverse mortgage.

If you are 65 years or older your probably already have Medicare. Medicare is a god-send for many people! There are however, some significant holes, especially with the recent reforms that affect people who spend a lot of money on medications. These and other gaps in Medicare coverage can sometimes be covered by Medicare Supplemental plans or with a reverse mortgage.

If nursing home care is needed, Medicare will cover the cost only if the senior went to a skilled-nursing home (not assisted living) directly from the hospital, will be staying longer than three days, and requires ongoing skilled-care that was prescribed by her doctor. Even then, Medicare covers all nursing home care costs for only 20 days, and supplements them for no more than 100 days. It does not cover non-medical care such as assisted living and in-home care. If you need those services, they will cost tens of thousands each year, so you should seriously consider a reverse mortgage. For more information see http://www.medicare.gov/Nursing/Payment.asp

This is the second post in a series.

If you need additional monthly cash flow, and there is any possibility that your funds will last less than a year, then it is time to assess all your options and obtain the money that you will need over the next several years. Which may mean that it is time to obtain a reverse mortgage. You do not want to get caught in a stressful last minute scramble for money and risk not having enough.

If you are going to use the funds that you have, make sure that you first consider the cost as compared to a reverse mortgage. If those funds have been in invested in stocks or a similar investment vehicle, you will probably owe capital gains taxes when you cash them out. The tax laws have become so complicated that you should talk to your tax expert to determine how much in taxes you will owe. Another cost of cashing in your investments is the loss of the future returns on those investments. Remember, the long-term return on stocks is about 11% per year – which, when compounded over time, can add up to a lot of lost money – far more than a reverse mortgage would cost you.

What if you are an heir and those investments belong to a senior parent? Then you need to consider the consequences of using those funds now versus avoiding capital gains taxes by waiting to inherit the funds. How does that work? Generally, when you inherit an asset that has increased in value, you enjoy the benefit of a stepped-up basis in that asset and thus no capital gain. Here’s an example:

Mom bought stock 20 years ago for $1000. $1000 is her basis in that stock. Today, that is worth $10,000. If she were to sell it, she would have a capital gain of $9000. That means she must pay capital gains taxes on $9000. But, when the heir inherits the $10,000 in stock, his basis is $10,000. So assuming he sells it before it appreciates more, he will have $0 in capital gains taxes! You should consult a tax expert to confirm all tax-related issues for your specific circumstances.

Check here to find out what reverse mortgages California cost.

This is the third post in a series.

Now let's look at a few of the situations where the reverse mortgage makes perfect sense. Clearly, if the senior could benefit from extra monthly cash flow in any way, the reverse mortgage is a potentially good option. AARP reports that 44% of people over age 60 have saved less than $75,000 for retirement and cite social security as their primary source of income. Fortunately, these numbers exclude home equity. With life expectancy much greater today than 20 years ago, it is evident that many seniors simply do not have enough money to fund their lengthy golden years. For them, the cash flow or a home-equity line of credit "nest-egg" from a reverse mortgage could be a great thing.

In many cases, health and related expenses become an issue. Some seniors have had many relatively care-free years, depending on their social security income and a little savings to cover their bills. But recently medical issues have started cropping up and as time marches on, the potential of more problems only increases. The senior might try applying for long term care insurance, but find that the opportunity passed back when they were 50 years old and healthy. Now the prospects of paying for proper medical care (even the deductibles), in-home care, and prescription drugs are daunting. The smart and prudent move would be to plan ahead and obtain the reverse mortgage in order to be financially prepared.

As a lump sum, the senior could use the reverse mortgage to pay off an existing mortgage, and increase their monthly cash flow by hundreds, or even thousands of dollars each month. Or they could use it to pay for home upgrades to improve the accessibility and mobility in the home. Some have even used the lump sum to purchase a second vacation home! There are a million uses for additional funds.

If you have done any research or read any news articles, you've read that reverse mortgages aren't for everyone. And I agree with that. But for many, they are the best thing since sliced bread. What makes the difference?

Let's start with talking about for whom reverse mortgage may not be the best choice. The most obvious group is those who do not qualify for any of the programs. The basic requirements, such as both spouses being too young or non-home ownership, can be evaluated quickly. But the existence of a current mortgage, unknown home value, and even ownership in a stock co-operative can go either way.

There are several scenarios where a reverse mortgage might not be the best choice. A single homeowner who is very sick, plans to move into a nursing home soon, and can easily qualify for a large home equity line of credit. He may be better off with that mortgage if it will give him more than enough money to cover expenses for the remainder of his time at home.

A couple who has conservative investments that are securely providing them MORE than enough money to support their desired lifestyle for the rest of their lives may not need a reverse mortgage. It's probably unnecessary for a single person with a good pension, excellent health, a long term care insurance policy and who has no desire or need for additional funds.

Everyone's situation is unique. If you think that you or someone you know may qualify for a reverse mortgage and are curious about its potential benefits, I encourage you to investigate it. It may or may not be for you or the person you know. But get your questions answered and find the information that you need in order to make the best decision for your situation. As there is unfortunately a lot of misinformation out there, whatever decision you make, be sure that it is well informed and based on the facts. Much of that information can be found in this blog. A helpful reverse mortgage FAQ may also help you make the right decision.