Can we talk Reverse Mortgages?

Granlan_TX

13 years ago

I've been doing some research on Reverse Mortgages. Some things I understand, but I still have doubts and concerns.

Has anyone here taken out a Reverse Mortgage, and if so, are you pleased?

Does anyone have an opinion about why these loans may not be a good choice for some?

I would like to hear what you all think about this before I make an appointment with my bank.

Thank you! :)

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Comments (9)

azzalea
13 years ago
From what I've heard, the fees and charges eat up the equity--giving the lending institution the lion's share while the homeowner gets very, very little cash in hand.

The advice I've heard from reputable, knowledgeable financial people (who aren't trying to sell these things) is not to touch them with a 100 foot pole.

Be very, very careful, if you're considering this. Make sure you get EVERYTHING in writing, and take your time making up your mind. Speak to as many people as you can who might be qualified to help you understand the process and profits.

Me? I wouldn't go near one. I don't like giving up control, I wouldn't be comfortable with someone else owning my home. Were I to find myself in a position where I might consider one, I'd prefer to sell my home, bank the profits, and get a small, affordable sr. citizen appartment. Alternatively, I might decide to take in a boarder, if I could find one I felt could be trusted and was financially stable.
vala55
13 years ago
I think it would depend on your age, I would check with a financial person. I have thought about if a disaster happened and I needed it. I believe some of them are backed by the government???
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My 75 year old mother inherited her mother's house a couple of years ago. Actually she inherited it with her sister, and then bought her sister out. It was a much nicer home than she was living in, plus my grandparents built it in 1945 and it has a lot of sentimental value so my mother wanted to keep it and live in it. With a reverse mortgage she was able to take a lump sum to pay off her sister, plus she has a line of credit she can use to make repairs to the house as needed. She has enough money invested for her normal expenses, but was worried that a house that age would really nickel and dime her. As she puts it the reverse mortgage lets "the house take care of itself." My siblings and I aren't concerned about there being any value left in the house when the time comes for her to live elsewhere, and it's really the best place for her to live right now - walking distance to town and a university with an elder-education program.
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To try to make it clear..my point was that this man was wealthy, yet he entered into a reverse mortgage on the home that he had lived in all his life. I think of a reverse mortgage as something home owners do when finances are tight. For whatever reason, the bank in this situation had paid out more than the home was worth at the time of Andy's death...probably because Andy even though he signed a contract to do so, put no upkeep into it in the 25 years or so of this RM. Our government guarantees these 'loans' so that the lender cannot loose in situations like this. That would be tax payer's money, yours and mine. The relatives of Ann and Andy inheritated the rest of the estate as they should have. It just seems wrong to me in cases like this where the home owner has the means to do right, but dosen't, that we the taxpayer gets the bill.
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nicole__
13 years ago
My FIL took one out. It was FANTASTIC! He had no money for his care outherwise. He got what the house appraised for minus the closing fees and such. The money left went to his heir as declared in the will.

Your home is a huge assett. "IF" you could sell your home and live on the interest.....???? or supplement your income with interest from a CD from the sale of your home & rent for cheap, I'd say do that instead. It would put you in control....but.....is that an option?
chisue
13 years ago
There have been discussions about this on the "Household Finances' forum here.

Last week I read that there are plans to further regulate and lower the initiation costs of taking out these loans. You still have to stay healthy long enough to come out ahead on this.

My main quibble is that often people will do *anything* to STAY PUT. Sometimes that's not the best choice, and sometimes it's not very long before they need somethng like assisted living anyway. Remaining isolated at home can also work against one's well-being. Some people are better off selling and moving.

The more these products are hyped, the more I figure that the companies offering them know they are good deals -- for them!
folkvictorian
13 years ago
The most basic thing you'd need to remember, is that at the end of the mortgage, you no longer own your house.

If you do a reverse mortgage for 20 years and take those payments from the bank for 20 years, at the end of that time you are done receiving money and have no home. The bank now owns your home and you've spent all of your equity and you're out on your bum. My grandma lived to 103 and I'm sure I won't make it that long, but you never know...
vala55
13 years ago
I wouldn't want to lose my assets, but if I made that decision it would be about the income and to keep a roof over my head, preferably my own. I wouldn't care what was left, I have no heirs. My home has always been my insurance policy. I managed the money in our marriage and worked to keep us out of debt and made sure our home was paid for when we retired. I knew if times got bad, I could sell my home and buy a cheaper one and live off the extra.
chisue
13 years ago
folkvictorian -- No, that's not quite right. True, you do not have anything to leave to anyone, but the mortgage holder can't throw you out.

You have to leave the house (die, for instance), sell, or want to refinance for the mortgage holder to benefit. Their bet is that one of those things will occur in a shorter length of time than you bet it will. (And it usually does, or they wouldn't be in the business.)
Terri_PacNW
13 years ago
Here's some articles that AARP put together..you might find some information in them that will help you Granlan..

Here is a link that might be useful: AARP on Reverse Mortgages
joyfulguy
13 years ago
Here, there's mainly one carrier that offers them, and they won't lend more that a certain percentage 40%, 60% of the appraised value.

You can take the loan as a lum,p sum, I think, or as monthly payments, at a specified rate of interest.

When you leave the home and sell it, the debt comes due, the paid-out amount(s), plus the accrued interest, and annual interest on it.

Any residue is yours, as I undersatand it.

Many don't like them, as they like their financial freedom, and there are number of restrictions.

Could you arrange a home equity line of credit at your bank, or credit union, where you draw amonts as needed, with interest acruing as you go?

ole joyful

Can we talk Reverse Mortgages?

Comments (9)

azzalea

vala55

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