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.

Hi Roberta z5, It's been almost 2 years since you made this post. I'm wondering whether you found the information helpful, and what you decided to do, if you feel comfortable with sharing some of the information. While reverse mortgages are useful for some, there are more expenses associated with setting them up, and a number of restrictions ... possibly higher ongoing costs, as well. I have a bias, in that I like to run my own show. Since you're on a farm, I suspect that you may well follow similar paths of thought. I think that in a situation like yours, considering the amount of information that you have given, I would like to approach my financial agency to see whether I could set up a Home Equity Line of Credit with them. I have never owned a home (as I've lived in about 22 locations in 79 years, the real estate people would have loved me, had I done so). For several years I've had a Fully Secured Line of Credit, backed by mutual fund certificates, which the carriers issued to me at no extra charge, and stock certificates (which cost me $35. - 50.00 each to have registered). There was no cost to set it up, but when using real estate as collateral, there usually are fees for inspection and evaluation, plus investigation regarding other liens and possibly lawyer's fees on such property when so used. For most of the time I have let it lie unused, and they charge me no inactivity fees. My credit limit varies depending on the current value of the underlying assets ... which is easily ascertained in the case of stocks and mutual funds, less so when one uses real estate as collateral. But long-term real estate values have risen in many areas: if I were to use a reverse mortgage, I'd want to know whether, had there been appreciation in value of the property in the intervening years prior to sale on my departure, whether that increased value would accrue to me (or at least partially so). The interest rate varies depending on current rates ... for some time up until several months ago it was 6.25%, then was down to 5.75% for a while, then a few months ago went down to 4.75%. When it was at 6.25%, I said that I could borrow to invest at almost nil cost ... 25% income tax deductibility reduces it to under 4.7% (20% reduces to 5.0%). If I invest in a Canadian bank, pipeline, or other high quality stock, paying about 3% dividend that, being substantially tax-advantaged, leaves me with about 2.5% after-tax income, that reduces my net cost of the interest expense to under 2.5%. If my deal with the bank is that I pay interest-only monthly on the loan, which I don't ordinarily recommend, as I like to see debt reduced, let's say that I leave a $10,000. loan run for 15 years. When I go into the bank to pay off the loan, how much will I have to pay them? Exactly $10,000.00 ...which is precisely the amount that I borrowed, 15 years ago. Which would have bought a decent car, 15 years ago ... but not now. I gained from inflation ... and the guy who got a Guaranteed Investment Certificate at the bank for that $10,000.00 over those years ... gets his interest (rent on the money) over the years between ... and when he collects the funds ... gets precisely $10,000.00, the same amount that he gave the bank, those years ago. That will buy a lot less now. I gained from inflation - he lost. And inflation has been running at about 2% (higher for some of the basics that poor people must have). Now that the interest rate that I must pay is 4.75%, deduct 20% income tax deductibility reduces it to 3.8% (25% income tax takes it lower), deduct 2.5% after-tax dividend income on the shares reduces my cost to 1.3% ... and inflation is a lot higher than that! However ... ... since U.S. gov't. (and individual) debt is so high (and going higher, year by year), I fully expect that soon they'll have to offer higher rates of interest in order to seduce foreign lenders to buy more of their debts ... adding to that mountain. Before you sign on for a Reverse Mortgage ... make sure that you are entirely familiar with every one of the provisions ... and run them by your lawyer to make sure that you're aware of all of the parameters. Don't want you being subject to unpleasant surprises later ... when it's too late to alter the provisions of the contract. Good wishes for making wise decisions regarding efficient use of your income and assets. ole joyful

Interesting...

depending on any public funded programs for the future is a scary bet. being the child of 2 financial planners/cpa's i am very well informed on the future of US finances. many many famous financial experts (alan greenspan and warren buffett amoung them) are predicting the bankruptcy of medicaid and medicare in 10 yrs or less. SS apparently is bit more solvent at 20 yrs to bankruptcy. do you really want to put someone else's future dependent on that? and honestly if in the future we can't afford them and who is to say this country will be able to (i highly doubt there will be much of a fix given the economy) then what?? we can't even get regular insurance to the masses and that doesn't seem to bother alot of people. why would medicare/medicaid and SS going under bother those of us who will never see all the $$ we put in it any.... on reverse mortgages it is my understanding the deals USED to be much better for the homeowner but given the state of companies holding mortgages these days the fees associated w/ reverse mort. have skyrocketed. fees and charges eat away at what is paid out on a monthly basis and accrue over the period of the 'loan'. you need to definitely make sure to cover the length of time needed, i.e. planning on an elder to live well past their 90's otherwise when the time on the 'loan' expires the house/asset is gone and their very last yrs are left w/ nothing. also check into how reverse mortgages are handled in regards to declining home values, what may be worth $400K right now may only be $300K in 5-10 yrs and then their value runs out and the house is gone even faster.... there are lots of pitfalls but do your research and it may be what's best in your situation. ~ liz