Reverse Mortgages (payments, opinion, insurance, cost)

[TimtheGuy]

Originally Posted by sunnyhelena

She should down-size- is there a neighborhood where she can get a smaller house or condo? What state are you in? Then put the equity money in CD's/invest. Just my 2 cents- I hate to see older people lose out because of greedy banks.

sunny

How do the older people lose out? They would be losing out much more if they give up the house they love and you stick them in some crappy rental.

[TimtheGuy]

Originally Posted by LML

Do NOT do a reverse mortgage. It is really a scam. She would be much better off to sell and leave. It is hard but not as hard as dealing with greedy banks.

How is it a scam?

How do you know what she would be better off doing?

[TimtheGuy]

Originally Posted by sunnyhelena

You are NOT eliminating a mortgage by getting a reverse mortgage. They are tapping into your equity. My father had one and the interest was usurious. Just trying to help.


sunny

I think the interest rates today are in the 7's and are adjustable. Would you consider that usurious?

[TimtheGuy]

Originally Posted by blue62

The only way I would even consider a reverse mortgage would be if I had no heirs, and wanted to travel, but did not have the money .My husband received some literature on it awhile back. Here is what they offered. They valued our home at 80% of the market value, they wanted to deduct 7,500 for closing costs,this did not include title search which they wanted 1500 for, we only owe 8,000 on our home (fair mrkt malue is 170,000.). They wanted 750 handling fee to pay off the house,,etc. It went on and on, and on. After the first page, I realized it was a scam..Can't see why in the world the government would reccommend it. I am 65, my husband is 69. We are both exceptionally healthy, and have plenty of children and grandchildren to leave our assets to..In the meantime, we are perfectly able to care for our house and lawn,and will continue. (Well, at least I will, hubby just retired and fishes or visits relatives all thr time)

While some people do it for travel or purchases, OTHERS do it to buy food and their medicine!

[TimtheGuy]

Originally Posted by NewToCA

azloafer, the payments made to you in the reverse mortgage have an imputed interest rate. As a result, the maximum paid to you cannot go on the rest of your life regardless of age. To do so would jeopardize the "lender" in providing funds in excess of property value.

Their has to be a "cap" on the amount they will ultimately provide.

There is no cap. It is all odds. So, yes if you happen to live to 110 you could "beat the system".

[TimtheGuy]

Originally Posted by NewToCA

So it is possible that the lender will provide a monthly total, over time, which will exceed the value of the property?

If this is true, how do they make money, considering that any equity left in a property still belongs to the owner?

Yes it is possible. It is all based on statistics with a cushion built in of coarse.

[JEM125]

What does IMO mstand for.

[Tfreesemann]

Originally Posted by dreamofmonterey

Be careful. Reverse mortgages tap into your equity. They may approve it, but really, it is the banks way of taking away from your mother's estate. They used to do this alot in NY. Seniors who were house rich- and "cash poor"" i.e. they live on SS but equity in their house may have been 600.000.00. IMO it is predatory lending- if your Moms house is paid off- she should be able to give that to her children- for inheritance, whatever.

sunny

Actually Sunny it is a way for seniors to use their real estate investment to have a more enjoyable retirement. The only greedy people in the equation are the heirs who are more interested in what their inheritance may be rather than their parents and grandparents who poured money into the house for years to have a stress free and financially independent retirement. If the house isn't in a trust (even if you have a will) the lawyers will get a portion of the inheritance in probate and depending on what the owners need to be more comfortable there will be equity available for the heirs that feel entitled to the fruits of thier parents labors. If they would have put the money into a mutual fund or the bank every month, would you tell them not to use that to enjoy their retirement, but rather keep it their so thier heirs can have it when they die? Many people who have a reverse mortgage use it to pass on their inheritance while they are living because they understand "time value of money" ($1,000 is worth more today than 20 years in the future), they want to help and see thier heirs enjoy the money while they are living, and they don't want to have a "paid off" house if they have to go into a nursing home (the nursing home will put a lien on the property and the heirs will get nothing unless the owners have long-term care). It is best to talk to a professional that understands Reverse Mortgages.

[Tfreesemann]

Originally Posted by killer2021

Do not do a reverse mortgage. Most people don't know what they are getting into and end up doing something they don't know what they are doing. What happens is it goes out of control and the person could end up loosing their house!

Like the others have said - sell the house buy a smaller house/condo (100% down ONLY).

Killer - please don't spread incorrect information. A Home Equity Conversion Mortgage (the most common Reverse Mortgage) is insured by the federal government and guarantees the owners to live in the home as long as they choose and they can never owe more than the house is worth - even if they use more money than the house is worth. Get your facts straight - you are not helping anyone by posting your ignorance on the subject.

[Tfreesemann]

Originally Posted by azloafer

Isn't the whole idea, lose the house or not, to eliminate the mortgage payment and maybe even have a monthly income? We don't see how we could both be retired and still make huge house payments. We are house rich. Downsizing still puts us buying another house and keeping up the repairs even though the payment is smaller. We are in a three year old house now; it would be hard to move into an older and smaller house and have more upkeep problems because of its age. Am I wrong???

You are not wrong - the people without reverse mortgages and without the whole picture will encourage you to move - this adds many other costs::
Relator Fee (3-6%)
Moving costs (min $1,000)
Stress of moving from a home you love (you can't put a price on this)