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Old 08-24-2017, 10:50 AM
 
Location: RVA
2,175 posts, read 1,274,479 times
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Not an advocate of RM either, but in a situation where RE values collapse, doesn't the RM for home purchase holder come out ahead of a conventional mortgage ? Put down $100k on a $400k house. After 10 years market collapses and home is worth $250k. The most the RM holder loses is his $100k, right? The conventional mortgage holder loses the $100k plus everything he put in to it for 10 years, as he still has to pay the note. The shift of risk goes to the RM provider, who is betting on appreciation not collapse.

I don't know this for fact, just asking.
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Old 08-24-2017, 10:54 AM
 
71,990 posts, read 72,020,102 times
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if you start breaking short term periods of time up in to small chunks with certain events you can always make something better or worse of an outcome . heck i can take periods of time bonds beat stocks . does that mean that is your typical outcome ? hell no.
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Old 08-24-2017, 10:57 AM
 
71,990 posts, read 72,020,102 times
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Quote:
Originally Posted by Perryinva View Post
Not an advocate of RM either, but in a situation where RE values collapse, doesn't the RM for home purchase holder come out ahead of a conventional mortgage ? Put down $100k on a $400k house. After 10 years market collapses and home is worth $250k. The most the RM holder loses is his $100k, right? The conventional mortgage holder loses the $100k plus everything he put in to it for 10 years, as he still has to pay the note. The shift of risk goes to the RM provider, who is betting on appreciation not collapse.

I don't know this for fact, just asking.
in a way you are pre-selling the house at an agreed price if you or your heirs decide to let it go .

like anything you presell years in advance if the price falls you win . but historically longer term real estate has not gone down in very many places . so the answer is hypothetically , yes , long term in practice -doubtful .
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Old 08-26-2017, 09:26 AM
 
97 posts, read 97,766 times
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As a previous poster replied, I wish people wouldn't offer advice on things they know absolutely nothing about. I'll try to comment on a few of the misstated facts, not misstated opinions

>>another problem is the majority of reverse mortgage receivers are now taking lump sum.
while this was true years ago, not so much anymore. you can not take all available proceeds upfront any longer unless it is needed to pay off mandatory obligations (such as forward mortgages). The most you can get in year one is 60% of what you're eligible for. you now also end up with much less money taking the fixed rate cash out option. 40% less. if you don't need all the cash upfront why would you take it anyway? you can leave it in a growing line of credit instead to use if needed.


>>if married, it is best if both of you qualify, so you can both be on the mortgage and the youngest can stay on after the oldest dies.

Old information. if set up correctly- even if one spouse is under 62 they are now protected and can stay in the home payment free for life. even if the borrowing spouse were to pass away. the trade off is the amount you qualify for is less since the numbers are based on the younger non borrowing spouses age. i believe the only state this doesn't apply is texas.

>>then you or your heirs actually get a bill or balloon note due . but in the case of the reverse mortgage the lender already had you sign a deed in lieu so you or your heirs can opt to have the house sold by the bank to satisfy the loan or pay off the loan and get clear title
no one gets a bill or a balloon. you receive a payoff statement to pay off your non recourse loan. like a forward mortgage. You do NOT sign a deed in lieu at closing on a HECM. Contrary to popular belief- the bank doesn't want the house at the end. Neither does HUD.
If the home is upside down when the loan comes due- heirs can buy the home for 95% of the appraised value (less customary selling costs). Not matter how much is owed on the mortgage.

>>the problem is the condo we were interested in was almost 7 figures .
exactly. max claim amount on a reverse mortgage is $636,150. you qualify for a percentage of the max claim, or home value. whichever is less. Even a 90 year old, in a million dollar home, would only be eligible for 75% of $636,150


For the real estate agent that doesn't like reverse mortgages- you need to educate yourself on the hecm for purchase program. You're doing yourself and your clients a disservice.


Like the title says, Do Your Research! Speak to licensed professions. if you decide this is right in your situation, get MANY offers. they are not all the same. not even close. don't listen to random people on the internet that claim to know what they're talking about, including me.

Reverse mortgage aren't the loan of last resort any longer. there are now income requirements, credit checks, and mandatory tax/insurance escrow accounts for people with bad credit/payment history. If you don't have the income, you can't get a reverse mortgage any more. Even if you have the income but dont pay your bills on time, you may not qualify any longer.

and lastly- Inheriting a mortgage free home from your parents isn't a right. leaving money to your kids is a privilege, not an obligation. this old school thinking is going away. most people complaining about reverse mortgages are children who only have dollar signs in their eyes.
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Old 08-26-2017, 12:37 PM
 
71,990 posts, read 72,020,102 times
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i disagree , you sign either a deed in lieu , or a deed of trust over but it is not automatically executed ..

some states use a deed in lieu instead of a deed of trust .

when the terms of the reverse mortgage end , as i said it is no different than a balloon payment due . you just have the option not to pay it but the mechanics are the same . you can call it what you want but there is a loan outstanding until you choose what to do with it .

" The property is passed to the borrowers’ heirs and then the borrowers’ heirs must do the same thing they would have to do with a forward mortgage – determine if they want to keep the home or sell the home. If they want to keep the home, then they must pay off the balance with a new loan (refinance) or with other money available to them. If they choose to sell the home, then the heirs need to contact the servicer of the reverse mortgage as soon as possible and inform them of their decision and maintain communication with that servicer."


Why Do Reverse Mortgages Have 2 Notes and 2 Deeds of Trust?
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Old 08-26-2017, 02:08 PM
 
Location: Grove City, Ohio
10,147 posts, read 12,415,507 times
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This published just yesterday and in my opinion it is dead on.

More seniors are taking loans against their homes — and it’s costing them

I knew a lady that took out a reverse mortgage and it ended up causing her to lose her home. Sad, sad story.

Had a storm, tree fell over and killed the garage.

Instead of fixing the garage the second mortgage people just took the money never even bothering to clear the debris. That was one issue right there.

Someone already mentioned it but if I got that desperate I would sell the house to rent a small apartment. I own all of it or I own non of it.
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Old 08-27-2017, 08:59 AM
 
97 posts, read 97,766 times
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we'll have to agree to disagree on that

in the mortgage world a balloon is a when you owe a predetermined amount on a predetermined date. that's not the case with reverse mortgages. if you have a home equity loan, sell your house and pay off that debt. did your home equity loan have a balloon feature? Call a lender and get a Good Faith Estimate for a reverse mortgage. there is a question: does this loan have a balloon payment? the answer will be no.

Of course you have to sign mortgage instruments. Home Equity Conversation Mortgages are mortgages! As your link explained, the reason why you sign two is to protect the consumer. not for title conveyance. If your lender goes out of business or otherwise fails to live up to their obligations under the loan. HUD will step in to make sure you have access to your credit line (or continue to receive monthly payment). That is a good thing.

please provide evidence a deed in lieu of foreclosure is signed at reverse mortgage closings to be executed later.

At the End of the loan- when the mortgage comes Due- one of the Options the borrower/estate has is to sign a deed in lieu of foreclosure. This is usually only done if there is no equity left in the property.
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Old 08-27-2017, 09:58 AM
 
Location: Ocala, FL
407 posts, read 476,307 times
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Quote:
Originally Posted by nicet4 View Post
This published just yesterday and in my opinion it is dead on.

More seniors are taking loans against their homes ó and itís costing them

I knew a lady that took out a reverse mortgage and it ended up causing her to lose her home. Sad, sad story.

Had a storm, tree fell over and killed the garage.

Instead of fixing the garage the second mortgage people just took the money never even bothering to clear the debris. That was one issue right there.

Someone already mentioned it but if I got that desperate I would sell the house to rent a small apartment. I own all of it or I own non of it.

We have had a reverse mortgage since 2010 which we used to purchase our home.

First, there can be no second mortgages when one has a reverse mortgage as there is no equity to borrow against for a second mortgage and you're not allowed to get one by the terms of the reverse mortgage. Therefore, the "second mortgage people" never existed. Lady should have had homeowner's insurance, required by the reverse mortgage holder, that would have paid for repair or demolition of the garage. The house is hers until she dies and the insurance would have paid her as the homeowner. It's no different that it would have been had she had a "forward" mortgage.


Second, I read the article. The lady owing $6K in taxes knew she had to pay them. Poor money management on her part is not the fault of the reverse mortgage holder. Same with the one claiming to owe $490 but doesn't have the money due to "family" financial problems. She bailed out a relative and now can't pay her own bills. Stupid. Again, poor money management. Maybe the deadbeat family member should help her out since she helped that family member out, ya think?


We bought a house on 5 acres and put down a little over half the purchase price. We have 2 horses that would have cost around $800 a month to board that instead live on the property with us. We have no house payment. I automatically tuck away money every month to pay the taxes when they come due and I pay the homeowner's insurance every month. I fix what breaks when it breaks.


Property in Ocala has increased in value almost back to where it was before the crash. We can sell this house now and get back what we put down in equity even after paying off a 7-year-old reverse mortgage. Even if we couldn't, if you figure the monthly payment on a "forward" mortgage plus the board I would have been paying for my horses, at this point we haven't lost a dime and are, in fact, way ahead.


As far as "if I got that desperate I would sell the house to rent a small apartment," the thought of living in an apartment, throwing away money in rent every month and putting up with the noise and fellow tenants right next door would make me suicidal. If taking a reverse mortgage would allow me to stay in my home free of charge (except taxes and insurance), I don't see why anyone would give that up voluntarily.
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Old 08-27-2017, 10:42 AM
 
97 posts, read 97,766 times
Reputation: 145
since the purchase program seems to be getting a lot of comments let do an oversimplified example.

65 years old, in good heath. retired. own a $300K home free and clear. very little savings, social security $1500/month. Looking to downsize to save money and have less maintenance.

Many posters have stated- I would never do a reverse mortgage. I would sell and rent first.

Option 1. reverse mortgage for purchase. you find a $200k home you can comfortably age in place in. sell current home, put 100k down on the new purchase. bank $200K. never have a mortgage payment, only taxes/insurance/maintenance- which your social security alone more than covers.

option 2. sell home. find place to rent. lets say rent is $1500/month and never increases for life. in 5.5 years you just spent 100K on rent. in 16 years you just spent the entire $300K.

Fast forward 20 years.

Person who took option 1 still has a home that they can afford on their fixed income and hopefully money in the bank.

Person two?? probably blew through all their money on rent. now they are 85 years old. living on social security. rent alone is more than they being in a month. they can no longer afford rent. have no savings and don't own a home.

which situation would you rather be in at 85 years old?

You're essentially pre-paying your rent/mortgage for life with a reverse for purchase. there's a break even point. if you sell or die before then, you probably lose out. if you live past that, you likely to make out. the longer you live the better deal it is.
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Old 08-27-2017, 11:29 AM
 
Location: Prescott AZ
6,138 posts, read 9,111,221 times
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Anicon: I did option One. Tried selling my house in one community and it was a BIG hassle. Had 3 realtors. None of them helped me. Finally sold to an investor but still came out with money to buy a very nice home in a 55+ community, in a MUCH better area. The house was $250,000 and I put $109,000 into the reverse mortgage.

I have no house payment anymore. I save money for taxes and insurance to pay when due. I love my house and have put about $30,000 into it to bring it up to others in the area. I plan to live here until I die. My kids are well off and don't need my money. And I never signed any deed or bank note.

For me this was a dream come true. I did alot of research and others should do the same.
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