Reverse Mortgage

[marty bradbury]

Hi Folks. Anyone here ever get a Reverse Mortgage? My house is pretty much my retirement (when I decide to). And I plan on staying here as long as health allows. As always, I appreciate all your input.

[TBman]

This might be of help Marty.

https://www.lendingtree.com/home/rev...pros-and-cons/

[rokdog49]

I don’t expect you to say, but why would you want to do this…do you need income for some reason?
My Dad got one of these because he needed cash.

[Silly Moustache]

We don't use the term mentioned, but we do have something called "Equity Release" here in the UK.

What is means if I understand correctly is that the ER company will offer you a proportion of cash against the future value of your house.

Obviously the value of cash money "now" will be far less than the proportion of value of your house as and when it is sold, so, like any other debt/loam etc., it is VERY EXPENSIVE MONEY.

Using a quick online calculator you would need to be free of any previous mortgage debt, and on my house, I could get £87,500 @ 5.94% or £136,500 @6.8%

How long you live or choose to stay in your house, the more the cost would be, remember the debt grows every year!

A quick few jabs at my calculator indicates that within 10-12 years the total current value of my house would be needed to repay the debt.

Whilst generally houses increase in value there have been times when house values drop - times with high mortgage interest.

[Murphy Slaw]

The fine print is what would scare me.

When they say you must upkeep the home, pay the taxes, pay the insurance and such.

Their idea of "upkeep" might include things I would never do, don't want to do, and such.

The truth is, you're giving up "ownership", which pretty much says it all.

[Silurian]

It makes sense for some people. Especially those with no dependents or anyone close to leave the property to once you're days are gone.

You're living in a capital asset, so why not release some funds that you can enjoy. You can't take it with you when you're gone.

[Mr. Jelly]

My uncle had a reverse mortgage many years ago. When he passed his children sold the house and paid back what he had received. What was owed was less than the house was worth.

[Daniel Grenier]

My wife was a Bank Manager/Executive for a long while and this reverse mortgage option, according to her, is only fitting to a very small segment of the population. Dependents, age, health concerns, eagerness to stay put etc etc etc play a big role. Realize you are giving up a HUGE amount of equity in your home. They are always a much better deal for the lender - not the home owner.

[birdsong]

It's true there are "some" instances when this option is ok to take. But In general there are better and less risky ways to get cash out of the equity of your house. If you have a way to speak to a neutral financial advisor, that's one option to try. And of course reading info at the link that TBman included.

[Malcolm Kindnes]

I think it is a very expensive way to provide a retirement income, I wouldn't touch one. This is how finance companies get rich!

[rokdog49]

Originally Posted by Malcolm Kindnes

I think it is a very expensive way to provide a retirement income, I wouldn't touch one. This is how finance companies get rich!

Yes, only if you really need the money and even then, I’d think twice.

[gmel555]

My parents got one and it worked out well for them, but like anything it's not for everyone and all "the stars aligned" pretty well for them. It was 2006 and the housing market crashed shortly thereafter (Florida); so their valuation -and thus the money they received/had access to- was much higher than what it would have been just a year+ later. Interest rates also crashed so what money they did have was earning much less, but conversely they were charged lower interest on the money they withdrew (the yin & yang of economics). They got 12 years of much needed income out of it, HOWEVER, between the money taken, interest charges and reduced home values there was zero equity left when they did leave it for assisted living/nursing home; in fact the home had negative equity at the end. That's the big trade-off...

[MrDB]

The older you are (all owners must be at least 62) the fewer number of years the interest charges will accumulate so these are best for people mid 70's or later IMO. I had several clients who had them and it worked out well for all of them, but it is a "last resort" financial decision.

[Mr. Jelly]

Why not? If you're old and could use the money, what other options do you have? Why should people live in need to pass on a house to their children or whoever?

[SFCRetired]

Old thread I know. I am skeptical of these. It may be good for a very few number of people, but very few. If you are on your last legs and have no one to give the house to then by all means do it. But if you are just so stupid to want to stay in your home because you like it or have some kind of attachment to it you should suck it up, sell it and downsize and keep your money and not give your house to some corporation.

And why would anyone do this to pay doctor bills? They will put a lean on the house and take what you owe when you die, so don't worry about it.