Reverse mortgages, are they good, bad or ??

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
squirm
Posts: 4239
Joined: Sat Mar 19, 2011 11:53 am

Reverse mortgages, are they good, bad or ??

Post by squirm »

My mother is considering them, and was wondering if overall they're worthwhile to look into.
User avatar
arcticpineapplecorp.
Posts: 15080
Joined: Tue Mar 06, 2012 8:22 pm

Re: Reverse mortgages, are they good, bad or ??

Post by arcticpineapplecorp. »

It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
User avatar
EternalOptimist
Posts: 829
Joined: Wed Nov 07, 2012 11:21 am
Location: New York

Re: Reverse mortgages, are they good, bad or ??

Post by EternalOptimist »

Do lots of research, for me, I'd only do one if I had absolutely no alternative for funds.
"When nothing goes right....go left"
User avatar
Spades
Posts: 286
Joined: Fri Apr 22, 2011 3:04 pm

Re: Reverse mortgages, are they good, bad or ??

Post by Spades »

My first impression would be that they are terrible and lead to the loss of your home no matter what. Why not sell the house and move into a cheaper living space that is affordable and stable? I had a family do just that by selling her home and moving into a retirement community apartment.

:sharebeer
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Reverse mortgages, are they good, bad or ??

Post by Default User BR »

Spades wrote:My first impression would be that they are terrible and lead to the loss of your home no matter what. Why not sell the house and move into a cheaper living space that is affordable and stable? I had a family do just that by selling her home and moving into a retirement community apartment.
I'm not sure what you mean by "loss of your home". The person who gets the mortgage will be able to live there until death. At that time, the loan comes due and the heirs can pay it off, refinance, sell it, or whatever.


Brian
User avatar
DaleMaley
Posts: 1592
Joined: Thu Mar 01, 2007 7:04 pm
Location: Fairbury, Illinois
Contact:

Re: Reverse mortgages, are they good, bad or ??

Post by DaleMaley »

One recent issue of reverse mortgages is where one spouse meets the minimum age of 62, and who has a spouse younger than the minimum of 62. They take out a reverse mortgage in only the older spouses name. The older spouse dies, then the lender insists the widow pay off the whole loan immediately. The widow then loses the house.

http://www.nytimes.com/2011/03/12/your- ... .html?_r=0

As another poster said, reverse mortgages should be a last resort measure only.
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett
User avatar
Abe
Posts: 2572
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

Re: Reverse mortgages, are they good, bad or ??

Post by Abe »

It depends. In certain situations, it could be a good thing. If someone does not have enough income to live on, and they have sufficient equity in their home, and they don't want to sell their home but want to live there until they die, then I think it could be a good thing to do. Just my opinion. I'm no expert.
Slow and steady wins the race.
User avatar
Phineas J. Whoopee
Posts: 9675
Joined: Sun Dec 18, 2011 5:18 pm

Re: Reverse mortgages, are they good, bad or ??

Post by Phineas J. Whoopee »

I agree, it's highly situation-dependent. A problem that can come up is when people think of them as very good, regardless.

I have an elderly relative who is absolutely livid that the bank cheated him out of the miracle of reverse mortgages.

And they did it only because he'd already taken 70% of the market value of his house out as a home equity loan. In fact, he was counting on the reverse mortgage to pay the interest on the existing obligation.

The advertising aimed at the elderly is very much reverse mortgage positive. This particular individual, as happens all too often, for years now has been gradually losing his critical thinking skills. And yes, he used to have them in spades. My bias would be to emphasize the potential downsides to anyone contemplating such a course, which no advertiser will say anything about.

He genuinely thought he could double dip.

PJW
Confused
Posts: 636
Joined: Wed Jun 20, 2012 1:23 pm

Re: Reverse mortgages, are they good, bad or ??

Post by Confused »

[Blanked for privacy]
Last edited by Confused on Fri Nov 06, 2015 12:40 am, edited 1 time in total.
User avatar
arcticpineapplecorp.
Posts: 15080
Joined: Tue Mar 06, 2012 8:22 pm

Re: Reverse mortgages, are they good, bad or ??

Post by arcticpineapplecorp. »

there are also some stories where the person gets a monthly cash flow from the reverse mortgage but didn't budget for taxes, only to have the home be foreclosed upon. Talk about adding insult to injury.

From AARP:
http://www.aarp.org/money/credit-loans- ... lpful.html

"Reverse mortgages are often considered a loan of last resort for older retirees who worry about outliving their savings or who want to finance a comfortable lifestyle. They tap what is likely their biggest asset — equity in their home — even as they continue to live there.

To qualify, borrowers have to be at least 62, own their home outright or carry a mortgage small enough to be paid off by the proceeds. There are no income or credit qualifications, although homeowners are responsible for paying the annual taxes, property insurance and maintenance. No loans have to be repaid until the owners move or die, in which case the bank takes its share and anything left goes to the heirs. However, if the owner fails to pay insurance and property taxes, the reverse mortgage is deemed in default and the owner is in danger of foreclosure."
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Post Reply