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.
My brothers and I got a reverse mortage for our parents late last year.
It has worked out great for them. My dad has since passed away and my mom and I are still in the house. To get the RM, the house needed to be repainted. Funds were in a "repair set-aside" for that and we didn't have to pay anything out of our bank accounts- the money came from the RM.
We don't have the monthly pay; we have the line of credit. I withdraw money as need. The remaining money stays in the line of credit and grows in interest each month about 6%.
The house was appraised at $830,000. As a safeguard, you can only get less than one-half of the value of the house.
The closing costs are high, it was about $16,000, but what many people don't realize is that with the line of credit, the portion that is not used grows each month.
For instance, for 8 months, the growth on the line of credit has been $14,800; the periodic interest (at 5.9%) which include the monthly servicing fee of $30/month, has been about $3,500. In other words, the growth on the line of credit is far higher than the interest rates.
My mom has dementia and selling the house and moving to a smaller one would not work- she would be confused as to where she would be.
I think the RMs work best for those over 75. I don't think someone 62-70 years old should get one unless it is absolutely necessary.
Yes, myself and my brothers will not receive as much from the estate when we inherit it, but it gives great peace of mind knowing that my mom will never have to worry about finances for the rest of her life and will be able to live in her home (banks do not "take away" homes with RMs; all they can do is get the money back from the RM, plus the interest). The homeowner still has the title of the house and it is in their name only- not the bank's.
I wish some people that post would try to find out the facts before posting. Here are the facts when it comes to paying back a Reverse Mortgage.
The loan HAS to be paid back and what is paid back includes the amount borrowed, closing costs and accrued interest. If you are looking at a HECM (Home Equity Conversion Mortgage, the most popular Reverse Mortgage) insured by the federal government, it is a non-recourse loan. What that means is that if the amount owed exceeds the value of the home - the heirs or estate will not be responsible for the difference.
For example: If the homeowner passes away and the home is worth $300,000 and the amount owed is $350,000, the $300,000 is paid to the lender from the sale of the home and the $50,000 is paid to the lender by the Government.
If the lender gives more money out to the homeowner over time the difference between the value of the home and the amount owed is paid by the Government. For instance:
If the house is worth $300,000 upon the seniors passing and the amount owed is $350,000 the the first $300,000 would be paid from the sale of the home and the remaining $50,000 would be paid by the government.
A reverse mortgage is considered a refinance - the Judgement will have to be settled at closing to do a Reverse Mortgage. Depending on the value of the home and the amount of the judgement - it might still be benficial to look at the numbers.
Killer - you are WRONG! With a HECM (Commonly referred to as a Reverse Mortgage) you can NEVER I repeat NEVER lose your home --unless the US Gevernement goes out of business then we ALL lose our home. If that happens be glad you got your money out when you could.
Sunny - I think you are misguided - while a Reverse Mortgage isn't the best option for everyone, it can help a lot of people. I have seen it first hand. It is a financial tool - if used wrong it can harm people, but if used correctly it can be a great help.
Regarding the "Greedy Banks" trying to take the kid inheritance? What about "Greedy Kids" not wanting thier parents to enjoy the fruits of thier labor? When I visit with children ( I always encourage seniors to involve their kids in the intial education phase) most feel that if it will better thier parents retirement they are for it and aren't looking for any inheritance. If the kids mention their main interest is what they will get when there parents die..thats when I say I am sorry to hear that and leave. I feel sorry for the kid and the parents.
I have saved people facing forclosure, I have helped people while in bankruptcy and other that wanted to stay in the house they invested a majority of their adult live building memories in.
You are correct - sunny sounds like she wants to make sure she gets a lot of equity when her parents die. Why not use the money you invested in your home.
A reverse mortgage will eliminat any Monthly mortgage payments.
Look at it this way: If you made monthly payments to another investment tool and it grew would you hesitate to use it for retirement? NO
What is the difference? A house is a real estate investment and is one of the best investments you can make..why not use the equity to enjoy your retirement years.
Some people tell me they don't need the cash - fine, but when I retire I am not going to look to just cover my needs - I want to enjoy some of those WANTS that I didn't do because I was saving for my retirement.
Cash flow is what is important in life - who cares what is in you bank when you die (except maybe greedy heirs).
If the amount owed exceeds the value of the home - the Geovernment pays the difference.
Why or How do they do this?
1. The charge a Mortgage Insurance Premium up front (part of the closing costs)
2. They understand that people who can remain in their home are healthier (Physically, Financially and Mentally) and take less prescription drugs being less of a burden on our already strapped grovenment programs.
There are MANY mis-conceptions about reverse mortgages. They are not evil and they are not scams by the banks.
You cannot "lose" your house. You can live there until the day you die. You will never have to make a mortgage payment and there is no credit qualifying.
It is a great tool for the house rich cash poor elederly.
The most common ones are done through HUD and HUD is not out to screw homeowners.
The biggest negative with them is that the closing and carrying costs are pretty high.
It is possible that the amount owed could pass the value of the home, although not very common. The estate will not be liable for this deficeincy.
The heirs may give up some/all the equity in their parent's property, but are they more interested in Mom/Dad getting by or their inheritance?
My Mom Is Going To Be 62 And Is Thinking About A Reverse Mortgage. Does Anyone Know If The Will Give Her One With A Judgement On The House. It Is Not A Lein. She Needs To Collect Ss But It Will Not Be Enough To Pay Bills And What Remains On The Mortgage.
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
Not predatory lending Sunny. She needs to worry about herself before what she can give as inheritance. Odds are there will still be equity at time of passing to give to the kids.
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.
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.
Estate pays the difference? - WRONG
