Was talking with a couple recently. They are considering a reverse mortgage. Asking me what I thought and I cannot answer them intelligently. Anyone here know whether this is a good idea or not? Upsides.......Downsides?
Anyone Here With A Reverse Mortgage
- Thread starter walterjay
- Start date
Google "downsides of reverse mortgage". There's few good articles and about using home equality loan instead.
AZjeff
$50 Site Donor 2023
Nobody that will admit to it.
Personally, I have never been a fan of a reverse mortgage. Some things to consider, what is the living arrangement when the mortgage is paid down? If you don't need the money, sell it when you plan to move. If you need the money, why not sell the house and manage the funds in a new living arrangement.
Very true, a better option would be a HELOC and draw as needed. Even better is to borrow against investments.
tell them to tread carefully! the math behind a reverse mortgage is where everyone involved in the transaction gets rich except the person with the house.
exhaust every other option for tapping home equity, for the love of Granola, please tell them to be careful and think it through
exhaust every other option for tapping home equity, for the love of Granola, please tell them to be careful and think it through
That is what I was thinking. I just don't like the sound of it. I don't think they have any money to borrow against. Not even sure if the house is paid for.
to avoid flooding this thread with doom, give them a typical cautionary warning.
we are talking another tier of fine print....that makes a rental car agreement look like a PTA bake sale.
report back if they seriously want to move to the next step, then Anons can flood the thread with specific advice.
we are talking another tier of fine print....that makes a rental car agreement look like a PTA bake sale.
report back if they seriously want to move to the next step, then Anons can flood the thread with specific advice.
Patman
Staff member
I can’t imagine any circumstance where a reverse mortgage would be a good thing unless you have nobody in the world that you want to inherit your home when you’re gone. Otherwise you are just taking that money away from them and making your will that much more complicated 
I can’t imagine any circumstance where a reverse mortgage would be a good thing unless you have nobody in the world that you want to inherit your home when you’re gone. Otherwise you are just taking that money away from them and making your will that much more complicated
My next door neighbor went to a Reverse mortgage for the final 5-8 yrs of his life. Single family, 2 BR property worth around $260K then. My neighbor was an ex-IRS mortgage specialist/adjustor who told me he only would go after cases where they could 'win' judgements of $1 MILL or more. Well, somehow he got his mortgage company to agree to a $260K reverse mortgage. He said he got around $65K in cash and had to keep up on the maintenance & home insurance. He used that cash to fund everything else but home maintenance. By the time he was done he had maxed out multiple credit cards....and the property was semi-distressed. When he passed away there were no direct heirs or any relative who wanted any of the few assets remaining, including the house.
1-2 yrs went by before the home was "free" to go on the market. The bank priced it at $250K and it went nowhere. Then a drop to $215K and still nothing. After another year of sitting and lower and lower prices.....eventually the house sold to a re-modeler for just over $150K. It pretty much needed everything on the interior redone/replaced, new roof, new chimney, water abatement in the basement, new car port roof, new windows, new plumbing/burner, new heating system. The house resold in pretty nice condition for around $290K.
The "plan" worked out as my friend was able to stay in the home to the very end while spending next to nothing on the property his last several years. The bank lost a considerable amount of money on the deal. Worked out great for that homeowner though.
That's the way to do it! This guy is my hero.
stage 4 cancer or other terminal disease with no heirs, and if you have a spouse he/she has their own nest egg.
In theory it could work, but I don't know if it is a good deal compare to refinancing or HELOC.
To be honest if I have to start drawing down equity it might be easier to find a way to sell the house to someone who wants to landlord and rent it back from him, or sell it and relocate or rent, then invest the rest in a mutual fund and gradually withdraw from it.
To be honest if I have to start drawing down equity it might be easier to find a way to sell the house to someone who wants to landlord and rent it back from him, or sell it and relocate or rent, then invest the rest in a mutual fund and gradually withdraw from it.
In the nearest town closest to me (if you can call it that), an elderly man got a reverse mortgage on his property in his remaining years.
The amount he got on it was for $150K. This property had a big two-story house and two huge outdoor steel buildings.
Footnote: I was actually in the house doing some work after the owner deceased. Everything is up to date.
ANYWAY, the reverse mortgage company tried to put a price in excess of $150K on it and there were no takers. They obviously had not done their homework on this house, because they got an offer for $50K from a local twenty-year-old and they immediately took it. Again, I was in the house and buildings and I will say this man got the bargain of his lifetime.
Why did this house and buildings go so cheap? It's a town of 20 people and the only business in town is the post office. The fire department is obviously volunteer and the nearest gas station, grocery store, hospital and hardware stores are a good 20 minutes away.
However, all the locals are laughing that a big out-of-state company took it in the shorts.
The amount he got on it was for $150K. This property had a big two-story house and two huge outdoor steel buildings.
Footnote: I was actually in the house doing some work after the owner deceased. Everything is up to date.
ANYWAY, the reverse mortgage company tried to put a price in excess of $150K on it and there were no takers. They obviously had not done their homework on this house, because they got an offer for $50K from a local twenty-year-old and they immediately took it. Again, I was in the house and buildings and I will say this man got the bargain of his lifetime.
Why did this house and buildings go so cheap? It's a town of 20 people and the only business in town is the post office. The fire department is obviously volunteer and the nearest gas station, grocery store, hospital and hardware stores are a good 20 minutes away.
However, all the locals are laughing that a big out-of-state company took it in the shorts.
I would think that a HELOC would be a better deal for most.
Probably more cash available and the homeowner could draw it down as needed although they would also have to pay on the note each month.
Downsizing is a possibility but with all expenses considered might be hard to make work.
I would hate to be in a position where we had to hock the house to survive, although I know that things can change unpredictably.
Probably more cash available and the homeowner could draw it down as needed although they would also have to pay on the note each month.
Downsizing is a possibility but with all expenses considered might be hard to make work.
I would hate to be in a position where we had to hock the house to survive, although I know that things can change unpredictably.
As a last resort I guess it’s okay. My neighbor took out a reverse mortgage, and it completely wrecked their finances after the elder family member passed away. The daughter ended up having to refinance, and now she’s so deep underwater it’s hard to believe. In my view, a reverse mortgage is right up there with the fallout from a Chapter 7 bankruptcy.
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I’m sure they’re probably fine. Henry Winkler cannot be wrong.
In the case of my neighbor, his total annual income was around $22K from soc sec. After food, utilities, home insurance, paying off
credit card penalties/fees, there wasn't anything left for home maintenance. Could you get a HELOC when you have no means to pay interest on it?
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