Reverse Mortgage?

Don M.

Well-known Member
Location
central Missouri
@Don M. Well, that is interesting. I'm glad it worked out for them. I suppose it does depend on your situation. But I would still research it very carefully before I committed.

Yes, there are good reverse mortgages out there, but they are Not the one's advertised on TV. Luckily my Sister worked in the banking business, so she knew the details, and found a plan that worked out good for our parents.
 

I'm glad to see this thread, as it is something I am considering.
It's good to read everyone's opinions, cause it is a tough decision for me.

I'm really confused too. Someone has offered to help me, a relative, like doing our own reverse mortgage.
Not sure what I'm going to do. I'm having to weigh both sides.....

Just do be very, very careful, and real ALL the fine print and be sure you understand it. I would strongly advise consulting an attorney about it before taking such a step -- a bit of money spent beforehand can prevent a lot of heartache later. There is probably a senior citizens' law office near you; they provide advice and counsel for greatly reduced fees or free for many things and they are greatly experienced in things like this.
 

bowmore

Member
A much better deal is a HELOC (home equity line of credit). You borrow what you need and just pay interest on it. I needed the money from my condo to help pay for our new home. When I sold my condo, the loan was payed off from the proceeds.
 

mathjak107

Senior Member
the problem with a heloc is most people who are in need of a reverse mortgage can't afford the payments on a heloc ... they serve a totally different purpose and crowd.

the heloc is for those who can afford to make payments .
 
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chic

SF VIP
Location
U.S.
It worked extremely well for my wife's grandfather. I forget when he first got the reverse mortgage, but he lived to be 109 and continued to get money for the life of the reverse mortgage. It didn't make her father happy because he was hoping to get the value of the house after his father passed.

It's worked out well for my great aunt who is still alive at 97. She's the only person I know who has one.
 

mathjak107

Senior Member
worked out well ? that is a very vague term .

it is like my buddy said his mother tucked away a bunch of stock certificates in a draw and never paid attention and she did well .

so i told him to bring a list over ...she was doing way way worse then had she just bought an s&p 500 fund .

the term doing well needs to be compared to alternatives ...it rarely is .
 
the problem with a heloc is most people who are in need of a reverse mortgage can't afford the payments on a heloc ... they serve a totally different purpose and crowd.

the heloc is for those who can afford to make payments .

I have a line of credit against my house which I've used a couple of times. It didn't have set payments, but I made huge payments and paid it off very quickly. It had a very low floating rate of interest and was my cheapest alternative at the time and cost me very little to use. Now it just sits there in case I need it and costs nothing unless I use it.
 

mathjak107

Senior Member
I have a line of credit against my house which I've used a couple of times. It didn't have set payments, but I made huge payments and paid it off very quickly. It had a very low floating rate of interest and was my cheapest alternative at the time and cost me very little to use. Now it just sits there in case I need it and costs nothing unless I use it.
that is very different than someone in need of a reverse mortgage for their income to eat
 

mathjak107

Senior Member
the big issues come up when one can no longer stay where they are .

you can find you can't drive anymore and need a city with extensive public transportation .

you may want to be closer to family .

the area specialists and facilities may be lacking for your conditions .

there are so many reasons those who thought staying where they are would not be an issue .

now when you need to relocate you may have little to no equity left .

reverse compounding plus the fees and insurance you pay for on a reverse mortgage can be devastating to home equity. you have to pay for insurance the bank carrys incase they don't get enough to satisfy what you owe .
 

fmw

New Member
There is some misinformation in this thread. As an example, someone wrote above that the interest is applied to the value of the home, not the amount drawn from the reverse mortgage account. That is incorrect. The interest is applied to the amount owed on the reverse mortgage. For some people a reverse mortgage is not a good financial move. For others it certainly is. Let me dig into it a little.

People who retire with a pension and people who want to bequeath their real estate to family members can find better approaches than the reverse mortgage. For other people It probably makes sense for some. I have a reverse mortgage and the reason it makes sense for me and my wife is pretty simple. We have no children and, hence, nobody to which to bequeath our property. We are not retired. We continue to operate a small business which provides some income that is supplemented by social security.

The reverse mortgage is free money in a sense. We plan to live in our house until we die. If that has to change, we can sell the house, payoff the reverse mortgage and move to a more modest place. Or we can let it go until we are both deceased and leave it to the mortgage company. At that point it is obvious that we won't care about the house.

We used some of our reverse mortgage to put a new roof on the house and replace all of the exterior doors including the garage doors, pay off credit card and all other debts and buy a new car to replace one that was ailing badly. It represents about 60% of the available funds from the reverse mortgage so the rest sits in case we need it. In the meantime, we live in a nice house rent free with no mortgage payments unless we want to make some payments. Those payments, less interest, would increase the funds in the account by the way and be available to be drawn.

Life goes on here as it did before but without debt other than the reverse mortgage and with the benefit of some home improvements and a new car. Assuming we both die while living in this house, it would have cost us nothing really since we have no use for the real estate after death and we have nobody to which to give the property. Given all of that, I would take a reverse mortgage even if I were a millionaire. Why not make use of the value in the house while we are alive?

So the decision to take out a reverse mortgage is neither right nor wrong. It is dependent entirely on a person's individual situation. My one piece of advice is to be sure you shop at least two reverse mortgage companies before committing. Even though it is a government program with fussy government rules, there is a margin for the reverse mortgage company that can affect the amount available quite substantially. Do due diligence. If a reverse mortgage is not for you then ignore the commercials. I hope this provides some useful information for the OP.
 
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fmw

New Member
the big issues come up when one can no longer stay where they are .

you can find you can't drive anymore and need a city with extensive public transportation .

you may want to be closer to family .

the area specialists and facilities may be lacking for your conditions .

there are so many reasons those who thought staying where they are would not be an issue .

now when you need to relocate you may have little to no equity left .

reverse compounding plus the fees and insurance you pay for on a reverse mortgage can be devastating to home equity. you have to pay for insurance the bank carrys incase they don't get enough to satisfy what you owe .

This is a good point. Nobody can see the future. The other point is that the reverse mortgaged house is still owned by the owners and can be sold. Naturally that would involve paying off the reverse mortgage from the proceeds but, given the numbers, it can still provide for a move to a more modest or more convenient place. The reverse mortgage certainly isn't for everybody but it can be valuable for some.
 

New2Old

New Member
Location
Iowa
There is some misinformation in this thread. As an example, someone wrote above that the interest is applied to the value of the home, not the amount drawn from the reverse mortgage account. That is incorrect. The interest is applied to the amount owed on the reverse mortgage.
Well, that's the way it was 20 years ago. My father borrowed about $35, 000 and 6-7 years later, when he died, he owed $170,000. Interest WAS based on the value of the house.
 

fmw

New Member
Well, that's the way it was 20 years ago. My father borrowed about $35, 000 and 6-7 years later, when he died, he owed $170,000. Interest WAS based on the value of the house.
It wasn't that way with a government sponsored HUD reverse mortgage. My interest rate is 1.99% compounded against the amount I have drawn from the account. Your father's numbers make no sense to me at all. I'm sorry your father had such a disastrous arrangement. I wouldn't have recommended that to anyone either.
 

garyt1957

Member
Sometimes, a reverse mortgage can be a good thing. My old parents both had declining health in their later years(both were in their 90's), and could barely take care of themselves. My Sister set them up with a reverse mortgage that allowed them to stay in their home and paid for a team of really nice ladies who took excellent care of them 24/7 during the last 2 or 3 years of their lives. They didn't want to be stuck in some Senior care facility where the prices would have been ridiculous to get the quality of care these ladies gave them. When they passed, we sold their home, paid the bank about $40,000, and still had enough left over for a nice inheritance. In their particular case, being able to live out their days at home was much better....and probable cheaper, than a good senior care facility. One of my old Aunts, in Denver, is at a top tier senior center, and she is paying about $70K/yr. to stay there.
How did you get to sell the house when they died? I thought the bank got the house?
 

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