Reverse Mortgage vs CashOut Refi vs Other?

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Topic Author
DJAlcatraz
Posts: 49
Joined: Mon May 13, 2019 4:37 pm

Reverse Mortgage vs CashOut Refi vs Other?

Post by DJAlcatraz »

I am writing on behalf of my aunt who is 90 years old. Her son (My cousin) passed away and she is now living on her own. We are trying to help and set her up as best we can, my head is spinning with to do lists, and questions, and finding passwords and accounts, etc. But we know we need to find a long term solution for her since we do not live near her and she is going to need income. Im not 100% clear on the finances, but that will hopefully come more into focus in the coming days. However, i am going to make some assumptions for this question.

Home Value $1Million.
Paid off, but possible HELOC on the house of $60,000 (+ or -)

With all of that being said, does this line of thinking make sense? I Know there are warnings about the reverse mortgage, but when does it ever make sense if not now? Or is there some other option to consider? Thank you for this.
GP813
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Joined: Wed Dec 11, 2019 10:11 am

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by GP813 »

With her son passing is she going to be able to remain in the home by herself for long? I think more details are needed here.
Topic Author
DJAlcatraz
Posts: 49
Joined: Mon May 13, 2019 4:37 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by DJAlcatraz »

We will need to find someone to watch her. That expense will come from this.
Apathizer
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Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by Apathizer »

Why not sell the house and invest the proceeds in a moderately conservative automatic re-balancing fund like Vanguard Life Strategy Conservative Growth (VSCGX)? She's 90, so realistically won't be alive much longer. $1 million should be plenty for her to live comfortably the rest of her life.

I'm guessing she might have a strong sentimental attachment to the house, but at her age home ownership seems impractical.
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SnowBog
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Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by SnowBog »

If there are minimal assets besides the house, you may want to check into elder & low income services available in their county & state.

There may be benefits she qualifies for to help her stay in the home (vs. ending up in a nursing home paid for by the government is she didn't have any other assets).

I don't know anything about it, but a quick search turned up https://www.newretirement.com/retiremen ... -and-more/
sureshoe
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Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by sureshoe »

I am assuming she doesn't want to move or we wouldn't have this post - because moving to somewhere with assisted living is clearly the best choice financially and practically. But, many people see that as a death sentence. If willing to move, do that.

If unwilling to move, refi - but I would imagine she would have trouble getting a mortgage with absolutely no income to repay it. Think about it - if you're a bank, would you let someone cash out $500k from their home just to fund their retirement? Then, they die and you have to foreclose. There might be a bank out there, but that's where reverse mortgages come in, but they generally aren't a great idea.

I think you have to have a hard conversation with her about where she's going to live if there are not assets to provide care in the house.

Good luck - tough situation.
Topic Author
DJAlcatraz
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Joined: Mon May 13, 2019 4:37 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by DJAlcatraz »

Impractical? Maybe. But it's her home, and if she wants to live her, Im going to honor those wishes and explore every option there is. She doesnt need a caretaker, just someone to check on her and help out with chores. We can find that. But I do have to figure out her financial and help. She is in more debt then I previously thought. But if her home is worth $1M, and we can apply for a REVERSE Mortgage that would help her Consolodate Debt, pay for monthy expenses and help with care taking expenses. How realistic is it to get $200,000 ? If/when she passes, the house will be sold. Bank gets paid their debt, makes some money on fees and whatever is left over is for the heirs. Is that not a good plan?
Darwin
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Joined: Sat Feb 25, 2017 12:44 am
Location: New Hampshire

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by Darwin »

DJAlcatraz wrote: Thu Jan 13, 2022 10:26 pm Impractical? Maybe. But it's her home, and if she wants to live her, Im going to honor those wishes and explore every option there is. She doesnt need a caretaker, just someone to check on her and help out with chores. We can find that. But I do have to figure out her financial and help. She is in more debt then I previously thought. But if her home is worth $1M, and we can apply for a REVERSE Mortgage that would help her Consolodate Debt, pay for monthy expenses and help with care taking expenses. How realistic is it to get $200,000 ? If/when she passes, the house will be sold. Bank gets paid their debt, makes some money on fees and whatever is left over is for the heirs. Is that not a good plan?
My wife and I have recently dealt with this and related issues several times recently... Her parents, one of mine, and now (in about the same situation as you describe) with a previous older neighbor. In the latter example, we're on the other side of the country but are still trying to help her out like we did before. Friends are friends, regardless of distance. In all the (I'd say three) somewhat similar situations there was resistance on their part to get ahead of the downward physical trend. I get it, the resistance to change. I don't want to leave my comfortable home, either!
What I've looked into suggests that reverse mortgages aren't the corrupt financial vehicles of the past, thanks to regulation. But the distrust lingers because of the scandals of the past. Personally, with no kids I consider it a reasonable way of tapping into home equity like you're thinking about for your aunt, to help her stay in the home she's accustomed to. But ultimately, like with my older neighbor, it's her decision. Good luck!
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Tracker968
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Joined: Tue Feb 23, 2016 9:32 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by Tracker968 »

I agree with moving her to a senior apartment. Just did that with my mother, 92. She thought she would have to move into a depressing one room apartment with poor care. She wouldn't even go look at places. Finally got her to visit a nice sunny 3 room apartment. She kept asking "can I really afford this"? Now she is making new friends, playing in the bell choir, going to church, eating a good meal everyday. She is walking more, has more energy, a total win/win. And we don't have to worry about maintaining the house- sold it.
Topic Author
DJAlcatraz
Posts: 49
Joined: Mon May 13, 2019 4:37 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by DJAlcatraz »

Thank you everyone for your responses. It's somewhat overwhelming since im her main support right now.
1) Figure out how to pay for a funeral
2) Get a handle on monthly bills
3) Try to consolidate debt (A LOT of debt, makes me so ill, but will figure it out)
4) Moving forward, her living situation and caring situation.

For the short term, We feel her living at home is the best remedy. She really just needs someone to come by and grab mail, get groceries, light laundry. She might eventually need to move somewhere, but trying to get this now.

Im going to explore options,, she needs money and Im trying to figure out the best way to use the equity in the house to provide income and consolidate debt.
SnowBog
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Joined: Fri Dec 21, 2018 11:21 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by SnowBog »

DJAlcatraz wrote: Fri Jan 14, 2022 1:40 pm Thank you everyone for your responses. It's somewhat overwhelming since im her main support right now.
1) Figure out how to pay for a funeral
2) Get a handle on monthly bills
3) Try to consolidate debt (A LOT of debt, makes me so ill, but will figure it out)
4) Moving forward, her living situation and caring situation.

For the short term, We feel her living at home is the best remedy. She really just needs someone to come by and grab mail, get groceries, light laundry. She might eventually need to move somewhere, but trying to get this now.

Im going to explore options,, she needs money and Im trying to figure out the best way to use the equity in the house to provide income and consolidate debt.
At the risk of being redundant, I'll repeat my prior recommendation...

I'd suggest you contact someone from her state and county to learn more about any assistance programs she might qualify for. They may have this information on their websites, or may have contact info for where to look.

These might include things that could help lower expenses, maybe even lower debt, and might provide low cost (or free depending on her finances) services that help her stay in her home.

After learning what you can there, you may also want to contact debt reduction resources. I don't know enough about them, but my impression is they could try to work with the lenders to reduce, and maybe even consolidate, the debt. You/she could do this on your own, but it would take more time. But the idea is to see if creditors are willing to reduce the debts given the death and sounds like inability to pay back in full. The answer may be no, but at her age/income I'd think there may be willingness there to get what they can vs. having extra costs of collections/probate/etc.

This might not remove the need to explore using home equity for the income... But hopefully it helps lower the amount of income needed...
Topic Author
DJAlcatraz
Posts: 49
Joined: Mon May 13, 2019 4:37 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by DJAlcatraz »

Thank you very much, wonderful advice. I will start looking at local services in california to assist with care giving, and also debt consolidation.
SnowBog
Posts: 2674
Joined: Fri Dec 21, 2018 11:21 pm

Re: Reverse Mortgage vs CashOut Refi vs Other?

Post by SnowBog »

Now knowing CA, some places to check:

https://www.cdss.ca.gov/in-home-supportive-services

https://seniors.insurance.ca.gov/

https://www.cpuc.ca.gov/LifeLine

https://www.aging.ca.gov/Programs_and_Services/

There's probably more... But these are ones I found in my first 2 minutes of searching.

The .gov addresses, especially anything CA.gov, are government sites/programs.

I'm not familiar with CA, but it's not uncommon for many of these types of programs to be delivered through the county (even if they are state programs). And the county may offer other services as well, so recommend doing some research for their county as well.


You may also want to check with their utility providers, county property tax, etc. They may offer reduced rates or special programs for elderly and/or low income people.

For example, many countries were I live will allow deferring property taxes completely for qualified households. This won't aviod the tax, but the idea is if it helps people stay in their home, they'll basically just carry debt against to home until it's paid off (presumably when the home is sold if they can't live there anymore, or as part of the estate settlement). They may have fees / interest added for this option, so it may not be the cheapest, but depending on their property tax it could dramatically improve cash flow (at the cost to the estate/heirs - which might be a good tradeoff in this case).
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