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?
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.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?
Very true, a better option would be a HELOC and draw as needed. Even better is to borrow against investments.Google "downsides of reverse mortgage". There's few good articles and about using home equality loan instead.
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.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
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.
I can’t imagine any circumstance where a reverse mortgage would be a good thing unless
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.