Anyone Here With A Reverse Mortgage

[Pablo]

If I am near croaking and the boss starts cheating on me yeah makes sense

Or in plain English what did you do wrong in life to even consider such a thing

Either enjoy your paid off home or have all the cash you need + to pay it off working OT for you at a rate well clear after tax of mortgage rate

 

[ATex7239]

Buy house. Pay tens of thousands if not hundreds of thousands in interest to the bank over several decades. Finally pay it off. Then turn around and give it right back to the bank. Sounds like a good deal for the bank.

 

[alarmguy]

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

Ummm ... I would not agree to the way you worded this but I get it.
However you cant take away money from someone else by spending it on yourself. I feel some young (not my kids) have this entitlement attitude, think what you have is theirs.

The will would not be more complicated simply because there is no house involved. It actually would be less complicated. At least here in the USA.

 

[alarmguy]

Ive seen a lot of things in my real estate practice.
It's an individual decision. When you hear bad things, its because the public at large doesnt understand what they are doing, yet the information is available but like many they dont bother looking into all the details to make an intelligent decision for themselves. They listen to "sales people" who make a living off their decision.

For some, it's a huge asset that can make their later years more fun OR not bother digging into savings. For others, it could mean getting back that asset while you are alive instead of selling and downsizing to a smaller home or renting.

It might make a difference to someone thinking about relocating to a retirement friendly state or staying where they are living off the current asset. It's the persons money to do as they please, not the ones who would have inherited the unspent funds.

Either way, we all buy things and live a fun and robust life after retirement if we planned correctly, so even if you leave your house to your kids, your still spending money if you are enjoying life. So they get the house with a little less in the savings account or get the savings account with no house. Either way, who cares?

I do agree though, reverse mortgages need to be FULLY researched to understand what you are getting into. Of course the profit margin for the bank might be large (though sometimes it's not at all) but that is why they are in business. No doubt about it, it's a convenience for the homeowner and you do pay dearly for it or should I say, your kids pay dearly as you wont be on the earth anymore.

 

[Patman]

Ummm ... I would not agree to the way you worded this but I get it.
However you cant take away money from someone else by spending it on yourself. I feel some young (not my kids) have this entitlement attitude, think what you have is theirs.

The will would not be more complicated simply because there is no house involved. It actually would be less complicated. At least here in the USA.

The will would be more complicated if the mortgage company only is owed a portion of the value of the house and then the rest of it goes to the heirs.

 

[PandaBear]

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. 🫩

If the daughter is living in it and a partial owner then I would imagine a HELOC is a better choice than reverse mortgage. Typically reverse mortgage is there for people who don't want to pass the house to the next generation.

 

[PandaBear]

Buy house. Pay tens of thousands if not hundreds of thousands in interest to the bank over several decades. Finally pay it off. Then turn around and give it right back to the bank. Sounds like a good deal for the bank.

You don't "give it to the bank" you sell it to the bank and rent it back.

You are mixing 2 concepts here: 1) occupancy cost / renting a home when the bank is having a partial ownership, and 2) borrowing money with interest and paying it off over time.

You don't own your home until you pay it off, you are a partial owner only. You are borrowing money to be a partial owner so you can live in it or use it to generate income until it is paid off. It should be compared to borrowing money to invest while renting, and compare to whether you can afford living in the house you want to live in. People say renting is just throwing money down the drain without realizing mortgage is just renting in a different term, and the opportunity cost of mortgage is investing in other assets you could have done.

 

[ArrestMeRedZ]

My impression, based solely on fear and superstition and not actual knowledge, is there are lots of administrative costs associated with reverse mortgages, and the loan is guaranteed by the US Government. So the bank makes it's money up front, and doesn't lose even if the house sells for peanuts.
My neighbor's husband passed and the resulting loss of income (military retirement and SS) put her in a bad spot financially. We helped her out for a while, then sat down with her to figure out a way forward. She was dead set against a reverse mortgage because, frankly, she was convinced (as am I) it's a scam. She has no heirs so we are looking at a life estate or irrevocable trust where I cover her house and other expenses in return for my estate getting the house upon her demise.

 

[ATex7239]

You don't "give it to the bank" you sell it to the bank and rent it back.

You are mixing 2 concepts here: 1) occupancy cost / renting a home when the bank is having a partial ownership, and 2) borrowing money with interest and paying it off over time.

You don't own your home until you pay it off, you are a partial owner only. You are borrowing money to be a partial owner so you can live in it or use it to generate income until it is paid off. It should be compared to borrowing money to invest while renting, and compare to whether you can afford living in the house you want to live in. People say renting is just throwing money down the drain without realizing mortgage is just renting in a different term, and the opportunity cost of mortgage is investing in other assets you could have done.

I’m aware of the nuances between the two. You borrow money to purchase the home and are in indebted to the bank. You complete the required payments and satisfy the loan taking full legal ownership of the house. Then you turn around and sign up for more debt by borrowing against the house you already satisfied the debt on. Removing the full legal ownership. You are “giving it back to the bank” because they would have no legal standing to ownership without the reverse mortgage. Again sounds like a good deal for the bank.

 

[PandaBear]

I’m aware of the nuances between the two. You borrow money to purchase the home and are in indebted to the bank. You complete the required payments and satisfy the loan taking full legal ownership of the house. Then you turn around and sign up for more debt by borrowing against the house you already satisfied the debt on. Removing the full legal ownership. You are “giving it back to the bank” because they would have no legal standing to ownership without the reverse mortgage. Again sounds like a good deal for the bank.

It is just a loan, don't complicate it with emotions.

If someone wants to cash out while still living in the house they can do two things: they can sell (the whole thing or a portion of it), or they can borrow against it.

I personally would just sell the house and rent, while investing the rest, but some people have emotional attachment to their homes, and that makes reverse mortgage beneficial (or horrible depends on how you look at it). Someone's good deal will be someone else's bad deal and if they feel resentful afterward and not keep up with the maintenance, then banks will eventually demand a higher rate to finance these loans. That's all there is.

To the bank all they care about is risk and return. How likely will they be up side down when they get the house in the end, and what is the mortgage rate, and how likely the owner will default. Most people probably should just sell their houses and either downsize or move somewhere cheaper after retirement. They don't need the commute distance or school district anymore, selling it and cash out would be a win-win. Reverse mortgage while living in an oversized house within short commute to work then blame the bank sounds immature.

 

[PandaBear]

My impression, based solely on fear and superstition and not actual knowledge, is there are lots of administrative costs associated with reverse mortgages, and the loan is guaranteed by the US Government. So the bank makes it's money up front, and doesn't lose even if the house sells for peanuts.
My neighbor's husband passed and the resulting loss of income (military retirement and SS) put her in a bad spot financially. We helped her out for a while, then sat down with her to figure out a way forward. She was dead set against a reverse mortgage because, frankly, she was convinced (as am I) it's a scam. She has no heirs so we are looking at a life estate or irrevocable trust where I cover her house and other expenses in return for my estate getting the house upon her demise.

What you did is just reverse mortgage. You are the bank. Does that make a difference to her or to you?

 

[RhondaHonda]

I think the reverse mortgage is also attractive because it doesn’t force older folks to make decisions on decluttering or getting rid of stuff in order to downsize/move/rent.

Sometimes decisions are not purely financial. I wouldn’t steer my mom into getting a reverse mortgage but if she wanted to, I’d like to go over the terms with her first. I’d rather just buy her house from her and let her live there if it came down to it. Neither my brother or I want her house so it would be sold either way unless she decides to move somewhere else first. She’s only 68 so she’s hopefully got plenty of time.

 

[samven]

A reverse mort can be used to protect yourself if used correctly. If you have an existing mort or a 2nd but still have sufficient equity for a bank to be interested you can get out from under the monthly mort payments, you also protect your house in the event you have overwhelming medical debt from one spouse in your later years. The creditors cant take what you dont own and you get to stay payment free in your home.
You need to be very careful but there are good reasons why someone would use a Reverse Mort.

 

[CarlB]

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?

If you don't need to let someone inherit the home, but want the cash. That's the gist. It's not specifically bad/good. Just depends on personal goals.

I don't have any heirs nor plan to, so a reverse mortgage could work well.

 

[ArrestMeRedZ]

What you did is just reverse mortgage. You are the bank. Does that make a difference to her or to you?

The difference being I'm covering maintenance, insurance, property taxes and a number of other expenses that a reverse mortgage wouldn't cover. Plus I'm covering unexpected pop up expenses since she doesn't have the resources. I would probably do that anyway since they have been great neighbors and I already had been helping her financially for a while even before her husband passed.

If she had heirs, and had sufficient income to cover those house related expenses, a reverse mortgage may have been appropriate. In this case a reverse mortgage would have given her a bit more cash up front, but it would have put her into a situation where she could have lost the house once that was spent. As it is, she can live in her house until she passes and she has enough income to live comfortably. And my estate will be reimbursed (she will probably outlive me) once that happens.

 

[PandaBear]

The difference being I'm covering maintenance, insurance, property taxes and a number of other expenses that a reverse mortgage wouldn't cover. Plus I'm covering unexpected pop up expenses since she doesn't have the resources. I would probably do that anyway since they have been great neighbors and I already had been helping her financially for a while even before her husband passed.

If she had heirs, and had sufficient income to cover those house related expenses, a reverse mortgage may have been appropriate. In this case a reverse mortgage would have given her a bit more cash up front, but it would have put her into a situation where she could have lost the house once that was spent. As it is, she can live in her house until she passes and she has enough income to live comfortably. And my estate will be reimbursed (she will probably outlive me) once that happens.

So you are a sales and lease back buyer with a variable lease. You are assuming a lot of risk too by doing that like what if she outlive you and your children have to cover all those expense and the sunk cost you already spent for her. I'm not saying it is a bad thing to do but you are taking over uncertainty and risk that bank would have taken or she would have taken. Risk like these don't go away they just transfer between different parties.

 

[ArrestMeRedZ]

Like I said, I'd probably do it anyway, so there isn't much risk involved. The monthly expense does not impact my lifestyle whatsoever, and I'm working hard to do retirement right and spend my monthly income. Not really worried about my kids as they have been helped while I'm alive and it doesn't look like I have a shot at grandkids. Generational wealth does not apply if there aren't generations.

If she passes first, I'll get that McLaren I've always wanted and a personal trainer so I'll be able to get into and out of it.