Thoughts on my parent's reverse mortgage home and getting them out

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jbruinho
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Thoughts on my parent's reverse mortgage home and getting them out

Post by jbruinho »

Hi guys,

Wanted to get your opinion on a situation that I am in. My parents (father) took out a reverse mortgage approximately 5 years ago and have accrued about $160k in total. The net worth of the house is worth $275-300k. My father has kept his finances very close to him and does not share it with the family, including my mother, solely out of pride and not wanting us to worry about (him) them. However, given that he is in his 70s, my brother and I have a big concern about his finances, especially since I have been the sole provider for my parents - including paying all their bills, property taxes, etc. that he hasn't made the best of decisions over the years. Note that I do live with them (in my 30s) and long story short, moved back from California to financially help them as they were initially going to lose the home and I stepped in to help pay for some debt, but had no idea that he additionally took out a RM.

I know my mother additionally has been wanting to downsize the home but my father has been reluctant to want to sell or move out, and I'm assuming the reason why is because the bank now owns it. I haven't spoke to my brother about it, but wanted to get your opinion on what I should do in this situation.

Option one: Letting the bank eventually take over the home. I'm assuming with interest accruing that the equity of the home will be eventually gone within the next 5-10 years. I really do not know if my mom will want to keep the home, just because upkeep is high and so are the property taxes. I'm assuming that he either got a lump sum or is getting monthly payments into his bank account. I already pay for most of the bills so not sure what's he using this extra money for - but that will have to be a family discussion.

Option two: (I am leaning towards this) Having me and my brother pay off the $160k and put the house under our name. I'm assuming that my father had no plan on leaving any heirs to us which is why he did the reverse mortgage, which is fine, but I think from a financial standpoint, this would make the most sense - to purchase the house outright from my parents by buying the debt off of them. It would provide mental reassurance/health, get the home back, and as there is still equity in the home that it could still be financially beneficial to take now. However, the caveat is that I would have to withdraw money from my stock account which I would get taxed on capital gain for selling those stocks.

What are your thoughts/opinions on the situation? I've been supporting my parents for the past 6 years, so I think in the end, they would be fine with whatever me and my brother decide. I just want to weigh out all my options and see, if long term withdrawing some stocks to pay off $160k debt to get a house that's still worth $275k, is a good financial decision. I have no intentions of removing them from their home as I am financially stable but utterly hate the idea that everyday, the bank is taking away our home. I feel like option #1 is a win (bank) - lose (parents) situation and option #2 is a win (parents) - win (us) but not sure if this is the best financial for everyone in the end. I really think in the end, my mother will want to keep the home for another 2-3 years.

Edit: https://imgur.com/a/SkU401b (here's a copy of the letter)
Last edited by jbruinho on Thu Dec 12, 2019 3:08 pm, edited 1 time in total.
rj342
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by rj342 »

We had huge problems, though not the same, with my father.

Question 0: Why the heck you are paying for most of things while he is either accumulating (or wasting) cash from the house?
Question 1: Why buy the house (selling your stocks to do so)? They don't ever have to move out under the RM (assuming ins and taxes kept up)-- just let the lender have the house when they die, in effect as payment. After all that's what the RM bought the lender. And that RM money circles back around to your father. And for you to buy out the RM, I believe you are in effect having to pay a bunch of interest *in the cash buyout price* -- otherwise they would make no money if they are not getting the house (whose value they gambled would be enough to cover their time value of money paid to your dad, incorprorating expected longevity, etc).
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RickBoglehead
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by RickBoglehead »

Totally agree with those points. You took over paying the bills, but your father won't disclose things and took out a reverse mortgage without discussing it with you? And now you're thinking of bailing them out further?

No, the right solution is likely to leave the reverse mortgage in place until they leave, then sell the house and pay it off, or walk from the house. And stop paying their bills ASAP.
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delamer
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by delamer »

Difficult situation, especially since your mother doesn’t know about the reverse mortgage.

Your biggest problem is finding out where the money has gone while you’ve been supporting your parents.

My recommendation — don’t do anything other than insisting on disclosure and no more withdrawals. Your mother needs to be told immediately and your father has to stop withdrawing money (if withdrawing is still an option). How did you find out about the mortgage? And how did your father get it without your mother’s consent; was the house in his name only?

Remember that the bank won’t “take over the house” in the sense that your parents can continue to live there as long as they want (assuming that they pay the property taxes and do basic maintenance). The reverse mortgage only matters when they sell.

And when they sell, they’ll net some equity. That’ll will be about $100,000 to $125,000, if the mortgage and price stays the same. At that point, your family can decide what the best options are. Having your father as an owner on any future house is not an option, obviously.

But there is no point in your taking a tax hit to buy an illiquid asset that you don’t want to own in the long run.

Good luck; I feel for your mother.
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gr7070
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by gr7070 »

I'm not significantly helping anyone financially without knowing their full financial picture.

Father is too "proud" to share that information but not too proud for child to pay their bills?

I apologize for being so direct, but I'd want more info before I made any big decisions, and as noted above before I continued helping with bills.

Without knowing specifics regarding the house, the mortgage and potentially other significant financial issues you could make some poor decisions.
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BL
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by BL »

I think OP should pay some reasonable amount for room and board, perhaps as a direct payment on some bills. Beyond that, perhaps getting some financial info in exchange for paying a bill might make sense. Also a power of attorney would make sense, but parent may not be ready for that now if ever. Mother could grant poa if she chooses.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Jack FFR1846 »

A little late, but why did you move in with them to help them financially when your father won't tell you anything about his finances? For all you know, he's stashed a million dollars somewhere and is happy to let you pay his bills. For me to bail out anyone, long before that decision is made, I'd need every financial detail that exists. If they're unwilling......have a nice day. They can deal with it themselves.
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Carefreeap
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Carefreeap »

gr7070 wrote: Thu Dec 12, 2019 1:42 pm I'm not significantly helping anyone financially without knowing their full financial picture.

Father is too "proud" to share that information but not too proud for child to pay their bills?

I apologize for being so direct, but I'd want more info before I made any big decisions, and as noted above before I continued helping with bills.

Without knowing specifics regarding the house, the mortgage and potentially other significant financial issues you could make some poor decisions.
I agree with this post.

There are different kinds of mortgages. My father and his girlfriend refinanced the house they bought 20 years ago with a reverse mortgage. It paid off the prior acquisition debt. They don't receive payments, they just don't make mortgage payments therefore the balance keeps growing. They are responsible for taxes and insurance as well as their utilities. They actually have a fair amount of equity but are in San Diego County. The biggest problem is they have very little income and really still can't afford the house plus they are a good 15 miles from a major medical center. Dad is terminal with chronic health issues and of course neither one wants to go into assisted living. It's a hot mess.

Don't mix your finances. Pay them "rent" for your share of the house and help them with upkeep. Otherwise you're going to make a mess even messier.

Good luck. It's hard situation to be in.
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NotWhoYouThink
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by NotWhoYouThink »

You can't rescue them and need to avoid letting them drag you down. Many many people are in a situation similar to your parents, money just flows through their hands. The are not going to change, and you can't make them become responsible, no matter how many rules people propose for getting them to own up to their problems before you help them.

So if you need to be there for some reason help with the taxes, but don't buy out their loan. A reverse mortgage lets them stay in the house as long as they keep up with taxes and insurance, and as long as it is medically safe for them to be there. (This is a real reverse mortgage, right? Not just a HELOC?) Start looking at senior living options for them. Is there subsidized senior housing in the area? Nursing homes that take Medicaid patients when they need that level of care?
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big bang
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by big bang »

I respect you for trying to help your parents.
You may want to check carefully the terms of the reverse mortgage. But, as far as I understand from their advertisements is that they can live in the house as long as they are paying the property taxes and the home insurance. When the time comes and they pass the bank can take the house.
I feel that you do not need to take any action except to continue helping them the best that you can as a concerned child.

This is what I found in Wikipedia:
https://en.wikipedia.org/wiki/Reverse_mortgage
A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance. Reverse mortgages allow elders to access the home equity they have built up in their homes now, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower's estate) is generally not required to repay any additional loan balance in excess of the value of the home.
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jbruinho
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by jbruinho »

Thanks everyone for the response/input. I guess a little background - I come from a very traditional Chinese family, so a lot of it is traditional for the kids to take care of their parents. While they don't specifically asked me for money, they did raise me, so I do have some obligation to pay them back / owe them for the years that they spent on me.

Furthermore, the only reason I would not want to get involved in the reverse mortgage is if it would financially put me in a bad situation. Meaning it would severely put me in debt. But given that my net worth is currently $600,000 - with $220k in stocks, rest in my work IRA/roth account (which I will not pull out), I thought about just purchasing out the loan and having my father transfer the home title to me and brother it would still net me $100,000, especially since it is a home that I do not believe my parents will want to be in long-term as again it is very high maintenance and upkeep.

I plan on re-evaluating the financial situation, cutting payment and forcing my father to split the bills with me now that I know that he has a reverse mortgage. I found out about it because there was a letter that came in the mail yesterday and I opened it as I did have a suspicion that he had a reverse mortgage but was not willing to admit it to me before. Again this is apart of him not wanting to worryus / the kids but I am disappointed that he wasn't honest to me because he has not been very forthcoming about the situation. However he does have some mental issues, not in a bad way but I've always suspected he had some type of mental retardation growing up so I learned growing up not to always be upset with him about things. He did raise me so I am just trying to help him out. My parents had a traditional Chinese arranged marriage so there's always been a barrier between my mom and dad.

Edit: https://imgur.com/a/SkU401b here's a copy of the letter.
Dottie57
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Dottie57 »

I think you are a good son.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by BarbBrooklyn »

You ARE a good son, but you need to figure out where the money going.

Debts, gambling, addiction, blackmail? If your dad is someone of limited cognitive ability, he might be vulnerable to any and all of the above.

Will your brother be able to join you to reinforce the message to your dad that he needs to come clean about his financial affairs?
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Sandtrap
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Sandtrap »

As "popo" would say, "Aiya!"

I have seen this often with relatives that have lived a good life and now the children are once again involved with their lives to "help out". As you know, it can go so far as moving in with them and taking care of them financially and health wise until they pass away. Or, in a more limited way where the children help only so much but not so much as to sacrifice their own life's path and the benefits of their own family.

It is difficult to take a leading role in your parents life and finances without seeming disrespectful. Yet, at this point, all of the children have to sit down with the parents and discuss what is practical.

Then make a long term strategy that is good for everyone.

Are you the eldest son?

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Last edited by Sandtrap on Thu Dec 12, 2019 5:14 pm, edited 1 time in total.
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drawpoker
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by drawpoker »

jbruinho wrote: Thu Dec 12, 2019 3:05 pm .....just purchasing out the loan and having my father transfer the home title to me and brother...................

You seem to indicate you will put up the entire amount to pay off the reverse mortgage loan ($162,000). Nothing was mentioned about how much the brother will contribute, yet you say you would be putting your brother on the deed to the house if you go through with this.

Why?
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by junior »

While I have no experience with reverse mortgages I'd think if your parents want to move they just have to sell the house. As long as they are not underwater the new buyer pays off the reverse mortgage and that's it.

While they might not be able to afford a new house that's not a reason for you to buy the old house from them. You need to decide whether you are going to buy the "downsized" house for them, but I don't see why you would buy the reverse mortgage house from them.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by TN_Boy »

jbruinho wrote: Thu Dec 12, 2019 3:05 pm Thanks everyone for the response/input. I guess a little background - I come from a very traditional Chinese family, so a lot of it is traditional for the kids to take care of their parents. While they don't specifically asked me for money, they did raise me, so I do have some obligation to pay them back / owe them for the years that they spent on me.

Furthermore, the only reason I would not want to get involved in the reverse mortgage is if it would financially put me in a bad situation. Meaning it would severely put me in debt. But given that my net worth is currently $600,000 - with $220k in stocks, rest in my work IRA/roth account (which I will not pull out), I thought about just purchasing out the loan and having my father transfer the home title to me and brother it would still net me $100,000, especially since it is a home that I do not believe my parents will want to be in long-term as again it is very high maintenance and upkeep.

I plan on re-evaluating the financial situation, cutting payment and forcing my father to split the bills with me now that I know that he has a reverse mortgage. I found out about it because there was a letter that came in the mail yesterday and I opened it as I did have a suspicion that he had a reverse mortgage but was not willing to admit it to me before. Again this is apart of him not wanting to worryus / the kids but I am disappointed that he wasn't honest to me because he has not been very forthcoming about the situation. However he does have some mental issues, not in a bad way but I've always suspected he had some type of mental retardation growing up so I learned growing up not to always be upset with him about things. He did raise me so I am just trying to help him out. My parents had a traditional Chinese arranged marriage so there's always been a barrier between my mom and dad.

Edit: https://imgur.com/a/SkU401b here's a copy of the letter.
It's great that you are there to help, but it is unreasonable and unwise for you to give significant financial help without understanding, in detail, their financial situation.

For example, you could be subsidizing a gambling problem, and if there is a previously unknown reverse mortgage there could be unknown credit card debt. You risk throwing money away on an unsolvable problem.

You are not being a bad son by digging into financial details.
DrakeSRT
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by DrakeSRT »

If he owes $160k on a home worth $275k he won't be able to pull any more money out of the house but he also doesn't have to make any monthly payments.

Your comment about the bank taking the house away every day, what if he had a forward mortgage and had to make monthly payments on the $160k.

The thing I would be most concerned with at this point is, is your Mom on the mortgage and could she stay with no payments if your Dad goes first? Find out.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by MotoTrojan »

In this case you seem to have the power since you pay the bills. Either you get 100% transparency into the full picture, or your financial support ends. How can it be any other way?
delamer
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by delamer »

TN_Boy wrote: Thu Dec 12, 2019 7:48 pm
jbruinho wrote: Thu Dec 12, 2019 3:05 pm Thanks everyone for the response/input. I guess a little background - I come from a very traditional Chinese family, so a lot of it is traditional for the kids to take care of their parents. While they don't specifically asked me for money, they did raise me, so I do have some obligation to pay them back / owe them for the years that they spent on me.

Furthermore, the only reason I would not want to get involved in the reverse mortgage is if it would financially put me in a bad situation. Meaning it would severely put me in debt. But given that my net worth is currently $600,000 - with $220k in stocks, rest in my work IRA/roth account (which I will not pull out), I thought about just purchasing out the loan and having my father transfer the home title to me and brother it would still net me $100,000, especially since it is a home that I do not believe my parents will want to be in long-term as again it is very high maintenance and upkeep.

I plan on re-evaluating the financial situation, cutting payment and forcing my father to split the bills with me now that I know that he has a reverse mortgage. I found out about it because there was a letter that came in the mail yesterday and I opened it as I did have a suspicion that he had a reverse mortgage but was not willing to admit it to me before. Again this is apart of him not wanting to worryus / the kids but I am disappointed that he wasn't honest to me because he has not been very forthcoming about the situation. However he does have some mental issues, not in a bad way but I've always suspected he had some type of mental retardation growing up so I learned growing up not to always be upset with him about things. He did raise me so I am just trying to help him out. My parents had a traditional Chinese arranged marriage so there's always been a barrier between my mom and dad.

Edit: https://imgur.com/a/SkU401b here's a copy of the letter.
It's great that you are there to help, but it is unreasonable and unwise for you to give significant financial help without understanding, in detail, their financial situation.

For example, you could be subsidizing a gambling problem, and if there is a previously unknown reverse mortgage there could be unknown credit card debt. You risk throwing money away on an unsolvable problem.

You are not being a bad son by digging into financial details.
This is an excellent point. You should pull your parents’ credit reports.

If your father deceived everyone about the mortgage, who knows what else is going on?

This wouldn’t preclude you from helping, of course, but would give you a better understanding of their circumstances.
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Eagle33
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Eagle33 »

delamer wrote: Thu Dec 12, 2019 8:19 pm This is an excellent point. You should pull your parents’ credit reports.

If your father deceived everyone about the mortgage, who knows what else is going on?

This wouldn’t preclude you from helping, of course, but would give you a better understanding of their circumstances.
Great point about getting credit reports. Maybe he was scammed or is trying to deal with identity theft and wants to hide it from the family. But it is all speculation of what the root cause is and none of us knows the real facts, just symptoms.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by dekecarver »

Getting financials from elderly parents can be difficult and taking into the cultural nuances, that adds to the problem. The concern to me is the secrecy and what lies underneath the stone. Also it sounds like OP is carrying the load financially and emotionally (double whammy) as the brother is unaware of the situation as well if I understand the situation. OP, something to think about regarding your father, either love'em enough to forget about it and just keep doing what your doing or love'em enough to bring the issue to the table. Good luck either way.
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Re: Thoughts on my parent's reverse mortgage home and getting them out

Post by Shallowpockets »

You need to know the facts. Otherwise don’t post here. BHs have given you opinions already.
Get your facts. How long could that take?
Then you can repost here.
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