U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 01-28-2009, 08:07 PM
 
Location: D/FW METRO AREA
60 posts, read 254,160 times
Reputation: 48

Advertisements

Hello All,

Can I can get some feedback on this please? My parents are both 67 years old each and would like to take out a reverse mortgage on their home. They have great credit (780+), own their home out right, own their vehicles out right, and have no credit card debt. My father's pension as well as their combined SS checks is great too. It's almost as if they had never stopped working. Not to mention more than enough money to cover the costs to take the loan out. As well as if they were to become ill and need to be placed in a nursing home. Whew....I hope I've got it like that when I'm 67.

I understand that payments do not have to be made up until they cease to live at the house or upong their death. Which it's pretty obvious they plan on staying there untill they pass on.

The only reason why they are even considering doing this is so that they could split the money they take out amongst me and my siblings. Needless to say this left us with our mouths on the floor. They stated that why wait until after their death...you see they are very active and both sets of grandparents lived well until their late 80's and early 90's...they figure we could use the money now instead of 10-20 years from now.

I'm so confused and feeling strange about the whole thing....just the thought of them wanting to do such a thing is overwhelming. It makes me sad really. But I understand their love for us and their desire to see us happy. Me and my siblings have until Sunday to come back to them with an answer.....

Some of our concerns are (if we tell them to go for it) Does this mean the bank gets the house?? What if one dies, will the other have to start making payments?? Who pays the mortgage off after their death?? The house is in a trust so how will that effect all of this??

Sorry for the long post...and thanks for any input!!
Reply With Quote Quick reply to this message

 
Old 01-28-2009, 08:16 PM
 
Location: mass
2,905 posts, read 6,664,129 times
Reputation: 4984
Is this kind of like a way to get around inheritance tax?
Reply With Quote Quick reply to this message
 
Old 01-28-2009, 08:22 PM
 
Location: D/FW METRO AREA
60 posts, read 254,160 times
Reputation: 48
Quote:
Originally Posted by mommytotwo View Post
Is this kind of like a way to get around inheritance tax?
Good question!? I hadn't even thought about that. But I guess if they gift it us, maybe?
Reply With Quote Quick reply to this message
 
Old 01-28-2009, 08:46 PM
 
Location: mass
2,905 posts, read 6,664,129 times
Reputation: 4984
Maybe.

If that is the case, now I am wondering what the process of reverse mortgage is. I wonder if you have to show that you need the money. (I have no idea, just thinking that someone might have had the same idea I did and so they might put a stop to it! lol!)

hopefully someone who actually knows what they are talking about will come answer you!
Reply With Quote Quick reply to this message
 
Old 01-28-2009, 09:39 PM
 
Location: Montrose, CA
3,031 posts, read 8,141,251 times
Reputation: 1939
With a reverse mortgage, they don't get a lump sum. They would get a set amount every month until they die, at which point the loan can either be paid off, or the bank will accept the house as payment.
Reply With Quote Quick reply to this message
 
Old 01-28-2009, 09:51 PM
 
Location: Apple Valley Calif
7,474 posts, read 20,547,033 times
Reputation: 5622
With a reverse mortage you CAN get a lump sum. There are different plans, and none of them are good unless you are desperate..!
It will not beat the Tax guy either. They can still only give you $11 k a year, each. They could spread it out a little, i.e. each of them give you 11, your spouse 11, each child 11, etc, etc. Tax wise it's far better to get the property in a trust. The tax man has heard every plan you could ever invent, and are ready and waiting for you to try it..!
There plan is a bad one. Reverse mortgages are for the desperate and the bank. Talk to a good CPA and financial planner and come up with a good plan.
Reply With Quote Quick reply to this message
 
Old 01-28-2009, 10:02 PM
 
Location: D/FW METRO AREA
60 posts, read 254,160 times
Reputation: 48
Quote:
Originally Posted by Donn2390 View Post
With a reverse mortage you CAN get a lump sum. There are different plans, and none of them are good unless you are desperate..!
It will not beat the Tax guy either. They can still only give you $11 k a year, each. They could spread it out a little, i.e. each of them give you 11, your spouse 11, each child 11, etc, etc. Tax wise it's far better to get the property in a trust. The tax man has heard every plan you could ever invent, and are ready and waiting for you to try it..!
There plan is a bad one. Reverse mortgages are for the desperate and the bank. Talk to a good CPA and financial planner and come up with a good plan.
Oh gad! This seems like such a hassle. My parents have a "financial planner". But I frankly don't know how good of one he is. I mean he has helped my parents make some good money. So that much I will give him. My concern is this reverse mortgage will come at a price...and I can bet he isn't pushing it for nothing!!!
Reply With Quote Quick reply to this message
 
Old 01-29-2009, 09:48 AM
 
28,449 posts, read 72,723,947 times
Reputation: 18469
Donn2390 makes some good points, but I don't think that reverse mortgages are ONLY for the desperate. There are ample protections as most reverse mortgages are done through the FHA's HECM program, in fact new caps on origination fees make this a pretty low risk option: Reverse Mortgages Get Better - Kiplinger.com

Personally I think that OP's parents are NOT looking at this properly. It they have a large "basket" of appreciated assets it makes more sense to gift out of that basket. Ideally in a way that will avoid taxes and create 'inter generational wealth' for not just the OP's generation of siblings but the grandkids and beyond. The way to do this is to research placing the appreciated assets into a "Generation Skipping Transfer Tax" Trust. It would be wise to investigate this. After investigation interview some attorneys. If you want to make a specific / targeted trust for retirement income things can be even simpler: Retirement InCome - for Everyone Trust

If you parents are intent on "freeing up" the equity locked into their home they can do some calculations to determine the relative merits of a traditional HELOC vs the reverse mortgage: HELOC or HECM Loan Comparison Calculator

Of course there is NO WAY to really know how long the OP's parents will live in the home and THAT is a considerable risk -- an odd one, too. IF they NEED to sell very soon the upfront costs eat the gains pretty badly. On the other hand IF they get a looooong life in their home, but interests rates rise to cap AND home values stagnate / fall the pay back could be huge.

btw-- a similar set of "what ifs" exist for the "equity sharing agreements" -- there are some "sweet spots" and "fortuitous circumstances" that MIGHT make this a winner for the home owner, but STATISTICALLY such things have better upside for the lender...
Reply With Quote Quick reply to this message
 
Old 01-29-2009, 09:57 AM
 
4,899 posts, read 12,220,519 times
Reputation: 3652
Quote:
Originally Posted by BESITOSDECOCO View Post
Hello All,

Can I can get some feedback on this please? My parents are both 67 years old each and would like to take out a reverse mortgage on their home. They have great credit (780+), own their home out right, own their vehicles out right, and have no credit card debt. My father's pension as well as their combined SS checks is great too. It's almost as if they had never stopped working. Not to mention more than enough money to cover the costs to take the loan out. As well as if they were to become ill and need to be placed in a nursing home. Whew....I hope I've got it like that when I'm 67.

I understand that payments do not have to be made up until they cease to live at the house or upong their death. Which it's pretty obvious they plan on staying there untill they pass on.

The only reason why they are even considering doing this is so that they could split the money they take out amongst me and my siblings. Needless to say this left us with our mouths on the floor. They stated that why wait until after their death...you see they are very active and both sets of grandparents lived well until their late 80's and early 90's...they figure we could use the money now instead of 10-20 years from now.

I'm so confused and feeling strange about the whole thing....just the thought of them wanting to do such a thing is overwhelming. It makes me sad really. But I understand their love for us and their desire to see us happy. Me and my siblings have until Sunday to come back to them with an answer.....

Some of our concerns are (if we tell them to go for it) Does this mean the bank gets the house?? What if one dies, will the other have to start making payments?? Who pays the mortgage off after their death?? The house is in a trust so how will that effect all of this??

Sorry for the long post...and thanks for any input!!
I would say it is definitely a bad idea for the scenario you listed. These are high cost loans that basically should only be used either as a last resort OR if you parents want to improve their lifestyles in some way (i.e. travel, or a major purchase)
Reply With Quote Quick reply to this message
 
Old 04-27-2009, 11:43 AM
 
Location: Irvine, California
55 posts, read 108,776 times
Reputation: 26
>>Does this mean the bank gets the house??

No. The bank never gets the house with a Reverse Mortgage - at least, not anymore. HUD introduced the HECM in 1989 and now Reverse Mortgages work like standard traditional mortgages. The homeowners retain Title 100% and the Reverse Mortgage Lender is simply a Leinholder, just like with the traditional conforming mortgage you're used to.

>>What if one dies, will the other have to start making payments??

No, the mortgage is in effect until the last person on Title no longer occupies the home as their primary residence.

>>Who pays the mortgage off after their death??

It depends on if the heirs want to keep it. If they don't want it, the Lender will foreclose on it. If they want it, they'll pay the Reverse Mortgage Lender the amount owed and keep the house.

>>The house is in a trust so how will that effect all of this??

The Trust holds Title to the house, so the Trust will need to be submitted to the Lender and Title company, for their review, to ensure it's compatible with the Reverse Mortgage. Approximately 50% of the Reverse Mortgages I've originated have Living Trusts, and only 1 Living Trust wasn't compatible. But they still got their Reverse Mortgage because they modified it, as per the Lenders suggestion, and everybody was satisified.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top