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Old 03-21-2016, 04:18 PM
 
991 posts, read 497,420 times
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Reverse Mortgages.

Pros?
Cons?

Mom and dad owe 95,000 on a 200,000 dollar home.
15,000 dollars owed on credit cards.

24 hundred a month income.
mom is 75.
Dad is 65.

I took moms credit cards!

Your thoughts?
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Old 03-21-2016, 04:26 PM
 
Location: Central IL
15,233 posts, read 8,523,201 times
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What about your dad's credit cards?

I don't think you can legally do this unless they are agreeable or declared incompetent. Is there some reason you want to take this on yourself? Other than that you want to "save" them from themselves?
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Old 03-21-2016, 04:34 PM
 
Location: Fayetteville, NC
437 posts, read 616,908 times
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What Is a Reverse Mortgage? - AARP

Its a tool, like many others, but the fees can quickly eat up a good chunk of the benefits. I believe these reverse mortgages usually require appraisals and closing costs, all of which will be taken out of the benefits to be paid to the homeowner and added to the amount that has to be repaid to the bank.

Great if you don't have any heirs and aren't worried about leaving them a house that they have to buy back from the mortgage lender.
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Old 03-21-2016, 04:37 PM
 
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Why do they owe that much on a $200M home at their age ? Did they take out an equity loan ?
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Old 03-21-2016, 04:41 PM
 
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the fees will be insane on the reverse mortgage. they have to take the reverse mortgage money and pay off that loan . the fees and interest on the part you will use to pay off that mortgage will be a lot of extra money in expenses .

the reverse compounding interest can eat up that credit line all to quickly .

another problem is the majority of reverse mortgage receivers are now taking lump sum.

that reverse compounding interest can be killer.

even here in long island with the typical home worth more than 500k it can be quite painful.

On a $250,000 lump-sum in ten years the balance will climb to $465,841. Assuming 3% home price appreciation, that would leave about $72,000 in equity based on a home's $537,566 value. In 20 years, the loan balance would reach $868,031, exceeding the home's $722,444 value.

having to relocate can be a real issue . don't forget eventually many who live out of state want to move closer to kids and family if they need care.

there are just so many negatives to using your home as a piggy bank that we all could make a never ending list as life plays out. many who took these loans just have not reached the point where their location has been a problem health wise or family wise yet..
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Old 03-21-2016, 05:42 PM
 
Location: Florida
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I think it is the last thing you do and when you need the money for daily expenses. In effect it acts like an annuity.

Might be time to get a fee only financial planner to help identify problem areas and solutions.

Can they live on 2,400 a month?

Remember if they move from the house or fail to keep it up and pay the taxes the house will go up for sale.

65 seems too young.

You might try and find some reverse mortgage calculators to see how much they could get. My guess is not enough to last more than a few years so the mortgage will probably not solve any problems.
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Old 03-21-2016, 07:01 PM
 
2,443 posts, read 2,070,942 times
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Quote:
Originally Posted by epliny View Post
Reverse Mortgages.

Pros?
Cons?

Mom and dad owe 95,000 on a 200,000 dollar home.
15,000 dollars owed on credit cards.

24 hundred a month income.
mom is 75.
Dad is 65.

I took moms credit cards!

Your thoughts?
They might be better off to sell the house and buy a cheaper home or rent.
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Old 03-21-2016, 07:04 PM
 
6,803 posts, read 3,862,667 times
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Could they sell the house? They could rent or buy something affordable on their income. They might enjoy a senior community with activities other than shopping.
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Old 03-21-2016, 07:47 PM
 
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My understanding is the borrower is generally not responsible for any loan balance that exceeds the value of the home. But, like others said, the fees are typically exorbitant on reverse mortgages. Could they refinance the mortgage to a lower rate? That would free up some cash. Or consider a private (within the family) reverse mortgage? Less expensive and the house stays in the family, if that's desired.
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Old 03-21-2016, 07:56 PM
 
13,903 posts, read 7,400,560 times
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Quote:
Originally Posted by epliny View Post
Reverse Mortgages.

Pros?
Cons?

Mom and dad owe 95,000 on a 200,000 dollar home.
15,000 dollars owed on credit cards.

24 hundred a month income.
mom is 75.
Dad is 65.

I took moms credit cards!

Your thoughts?
My thought? They need to be in a paid-for $100K house/condo with very low condo fee with no mortgage and no credit card debt. With zero debt, $29K in income should work.

A half year's income worth of credit card debt is a huge hole.
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