Leading edge boomers falling for reverse mortgages (friend, payment, family)

[willow wind]

Go to the Housing and Urban Development website for info

About Reverse Mortgages for Seniors (HECM) - HUD

and a reverse mortgage calculator

Reverse Mortgage Analyst

Two things to be careful about with a reverse mortgage ;

If you are single- a long term nursing home stay can put your loan into default - used to be six months, may now be up to a year

for anyone- after the last owner passes away the home must be sold and closed within 6 months or the government can begin to foreclose . Doesn't matter to you when you're gone, but may to your heirs.

HUD won't loan on 100% of the equity in the home at the time the mortgage is taken out, so there is usually something left.

[mathjak107]

something left for the heirs because hud doesnt loan on 100% equity???????????????? your confused about something.

they may not loan on 100% of the home equity but the insurance costs and accured interest can easily wipe out what equity you have left. home equity totally vanishes most of the time in the first 10-15 years of payments depending on the loan size,the interest rate and appreciation.

[loveautumn]

what scares me is that the TV ads for reverse mortages are done with very well-known, likeable actors who we would probably all trust...that is why us older people can get sucked into doing these things. They make it sound like there is absolutely nothing to lose...but you know the old saying "it's just too good to be true". And we believe that these "actors" wouldn't be lying to us, now would they??? These companies wouldn't be making these loans if they weren't going to make money on you. I'd be very cautious and really do my homework before getting into a reverse mortgage. I mean, isn't it really just another equity loan with lipstick on it!

[mathjak107]

there structure can be a big trap.

they only loan you 50-60% at best .. if you take it lump sum you may spend the money to quickly and have no more home equity as accrued interest and up front fees eats you up.

if you take the paypents they take the lump sum, subtract your age from 100 and divide by that amount of years.

thats a far smaller payment then most realize they were going to get and fall short of their needs . now they too dont have enough money to live on and no home equity..

[willow wind]

Not confused in the least- just sold off a relative's home that had a reverse mortgage on it. The family had a tidy sum left over.

There are too many variables to apply a reverse mortgage to any one situation. If all depends on age of applicant, amount of loan, the original value of the home, the market the home is in, type of plan used ( very important), plus actual length of life of the borrower , etc.

These loans are not for everyone. For many people they could be a disaster.
They are very confusing. Lots of research needed first by people who understand what they are doing. Educating oneself is important.

[BayAreaHillbilly]

It's just another form of using a home as an ATM!

Don't do it!

[mathjak107]

Originally Posted by willow wind

Not confused in the least- just sold off a relative's home that had a reverse mortgage on it. The family had a tidy sum left over.

There are too many variables to apply a reverse mortgage to any one situation. If all depends on age of applicant, amount of loan, the original value of the home, the market the home is in, type of plan used ( very important), plus actual length of life of the borrower , etc.

These loans are not for everyone. For many people they could be a disaster.
They are very confusing. Lots of research needed first by people who understand what they are doing. Educating oneself is important.

but it had nothing to do with hud not loaning a 100% so your guaranteed equity. thats where im dis-agreeing. expenses and accrued interest can eat up any equity regardless of huds limitations.

[Cattknap]

I know of someone who is in their late 70's who took out a reverse mortgage years ago. Her house is in total disrepair and requires tens of thousands of dollars in repairs. This widow has no money for repairs and she is basically stuck in her decaying house.

[Bideshi]

Originally Posted by TuborgP

Wonder if many are taking a lump sum distribution and using it to buy gold?

Would they be wrong to do that?

[mathjak107]

they more than likely couldnt make enough to cover the expenses and accrued interest. that interest accuring year after year with no offestting payments is killer.