Help:My Inlaws Are About To Sign For A Reverse Mortgage

[Lynn CC]

and they asked me to look over their papers before signing.
It's actually a Home Equity Conversion Mortgage (HECM)
I looked on Suze Orman's site but it all looks confusing to me.

Any Input would be appreciated!

 

[sanctus]

The best advice I can give you is to get a lawyer to look it over and explain it all to them. And don't sign anything until you're sure you know what it means!!

 

[nbodyhome]

Clark Howard has mentioned these, and I wish that my husbands grandmother had one. Her house is worth maybe 500K, and she could have really used the money all this time.

Definitely make sure that the company that they are working with is good, and I'm sure you'll be able to find more information on the web. But I love the idea of the reverse mortgage - it allows people to stay in their home, while getting money back from it. The one bad thing I guess is if the heirs would have wanted the home.

 

[Chicago526]

I agree, take it to a lawyer, and make sure he/she has experiance in these types of things too.

Good luck!

 

[sandy6879]

Make sure you have a lawyer look over everything. There are some good companies out there and there are companies that are AWFUL. You could find the heirs owing money after the person passes to the mortgage company, along with a host of other horrors. Please BE CAREFUL on these!! My bank refused to do them due to the problems they can cause.

 

[oneangel]

Myu aunt is liscened to do mortgages, we were just talking about this the other night. Stay far away from these, what it does is give you money off your house, but then when you have taken the money at the end, you dont own the house anymore. Your family will be left with nothing, or if your mother is still allive, she will have nothing to retire in. Be very very careful, these are very bad news for anyone!!!!!

 

[CarolA]

Myu aunt is liscened to do mortgages, we were just talking about this the other night. Stay far away from these, what it does is give you money off your house, but then when you have taken the money at the end, you dont own the house anymore. Your family will be left with nothing, or if your mother is still allive, she will have nothing to retire in. Be very very careful, these are very bad news for anyone!!!!!

The facts above are only PARTIALLY correct. The owners of the house live in the house until they pass away. At that point the house goes to the mortgage holder. So "your mother will have something to retire in" The house she lives in!

Now you won't inherit the house. However, it's not the senior citizens job to "leave you with something" It sounds like it would be best for Grandmother and Granddad to live in poverty just so "we can leave you something" I don't want to inherit ANYTHING, I want my parents to have a good time!

From AARP.com

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

all at once, in a single lump sum of cash;
as a regular monthly cash advance;
as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or
as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.


Try going to the this site on the AARP for some good info....
http://www.aarp.org/money/revmort/ They have an article just on the HEMC's the OP mentioned. These sound like they would be good since it's acutally a federal program....

As my mother ages I plan to keep this in mind if it will allow her to stay in her house longer. Right now she is excellent finanical shape, but one never knows.....

 

[sk!mom]

I have been doing some reading on reverse mortgages because I think that it may be an option for my parents who have very little set aside for retirement except for their home. I am certainly not an expert and would agree that you should go to an attorney. I agree that they are not ideal- the ideal situation is to have plenty of retirement savings so that you do not have to do this but for people who are short or possibly even for those who just want to use up the equity it is an option worth checking in to.

 

[nbodyhome]

Myu aunt is liscened to do mortgages, we were just talking about this the other night. Stay far away from these, what it does is give you money off your house, but then when you have taken the money at the end, you dont own the house anymore. Your family will be left with nothing, or if your mother is still allive, she will have nothing to retire in. Be ver
y very careful, these are very bad news for anyone!!!!!

If you don't have any other money to live on, then at least you get to live in your house! If we had a house someday worth $500,000, and for whatever reason we didn't have any money to live on, I'd definitely think about a reverse mortgage. From what I understand, the mortgage company should sell the house and keep some and possibly leave some for the heirs - (but even if not, I'd rather my grandparents and parents be able to use the money from what they own, than for them to give it to me).

 

[MarySB]

I would add, to be careful with the idea that she can live in the house "for the rest of her life". My father had a RM and had to spend an extended amount of time in the hospital/nursing home. He almost lost the house over this.

 

[CarolA]

You need to read the terms. On the type the OP was using if you are out of the house over 12 months then the mortgage can come due. Also, if you don't keep the house in liveable condition, the mortgage can be called. Since the OP has both parents involved as long as both of them are on the mortgage it would require both of them to be out of the home 12 months.

 

[TnTWalter]

Here is info from Dave Ramsey's site...
_____________________
What is a reverse mortgage?
Reverse mortgages are normally offered to the elderly. This mortgage plan disgusts Dave. Old people working hard their entire lives only to finish up being in debt with their home on the line is an awful concept.

The problem is not only are you going into debt with this kind of mortgage, but also the value of your home decreases in value. The equity in the home drops and you’re going into debt. How much sense does this make? This concept goes against all principles of building wealth and smart asset management.
_________________

Here's a link to another opinion:
http://findarticles.com/p/articles/mi_m0IHK/is_2001_April_9/ai_80454140#continue
_____________

Another article...
http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/04/01/8373304/index.htm

Good luck.

Trish

 

[mickeyfan2]

Here is info from Dave Ramsey's site...
What is a reverse mortgage?
Reverse mortgages are normally offered to the elderly. This mortgage plan disgusts Dave. Old people working hard their entire lives only to finish up being in debt with their home on the line is an awful concept.

The problem is not only are you going into debt with this kind of mortgage, but also the value of your home decreases in value. The equity in the home drops and you’re going into debt. How much sense does this make? This concept goes against all principles of building wealth and smart asset management.

I tend to disagree with DR here. They are not going into debt, but using a asset to live their golden years off of. Isn't that what saving for retirement is all about? How is the value of the home decreasing. The home may sell for more but you owe the mortgage, that is the same as anybody who buys a home with a mortgage. If you have equity in your home you are not in debt, you still have a networth.

I have not done any research on RM yet, since I am not elderly and don't have any elderly people I know who need or want one. They maybe a bad idea, but not for the reasons DR professes.

 

[TnTWalter]

I wasn't crazy about his can statement so I posted the other 2 links. It just makes me nervous. You would really have to know what you were signing because there are lots of snakes out there.

Trish

 

[rigs32]

I would add, to be careful with the idea that she can live in the house "for the rest of her life". My father had a RM and had to spend an extended amount of time in the hospital/nursing home. He almost lost the house over this.

But the same can be said if someone needs to go on Medicaid for extended nursing care.

And if you're elderly and in need of money beyond your social security, why should the value of your home matter? If you plan to sell the house, then no, don't even think about a reverse mortgage. But if it's only going to pass onto someone else, why not tap into the equity yor worked so hard to build up?

 

[JuneChickie]

How much do they give you ,, for example ,, if your home is worth 500 thousand,,,
do they give you 100 percent of that or what ??

 

[patsal]

We did some looking into this for my MIL--we were disappointed by the things that were offered. She does need the $$, but her house isn't really worth that much (rural upstate NY). When all wa ssaid and done and the fees taken out she would get $66.59 per month paid out to her and the house would be 1. in mortgaged status--which was no big deal it is hers and paid for by she and FIL years ago and 2. her heirs could purchase it back for the maount of the loan if they wanted to. Honestly, she is in failing health and I do not want to see her place the home in mortgages status for such a small payout--she may need to sell it to pay for long term care. We told her if it got to that point talk to us before she signs anything and we would give her $66.59 per month and call it her birthday/Christmas/mother's day present. Now a $500,000 home might be a very different story and would most likely have the cream of the crop co's to choose from. Just be sure to do the research and have a knowlegable lawyer look it over before signing anything.

 

[patsal]

How much do they give you ,, for example ,, if your home is worth 500 thousand,,,
do they give you 100 percent of that or what ??

From my MIL's paperwork, I found that the co. she was going to work with, only dispersed based on 60% of the home's projected equity minus fees.

 

[MrsPete]

From my MIL's paperwork, I found that the co. she was going to work with, only dispersed based on 60% of the home's projected equity minus fees.

You know there's going to be a cost -- a high cost. The bank can't "buy your house" at market value, make payments to you, then wait 10 years to take possession of it. They're a business.

And it's a risk for both parties. If the homeowner lives only two years, the bank wins! They made only a few payments to the homeowner, then they get to sell the house and make a big profit. On the other hand, if the homeowner lives 30 years, the bank's going to lose big time.

It might be a good option for the right person: the person who has a nice home, but little retirement savings. It could be a better choice than being forced to live in poverty during retirement, or better than being forced to sell the house and go live with one's children (key word being forced -- I know some families would welcome this arrangement).

 

[disneysteve]

They are not going into debt, but using an asset to live their golden years off of.

How is a RM not going into debt? The bank assumes ownership of your home and pays you money based on the home's value minus fees (which can top 10%). If you die, your heirs have to repay the bank when they sell the house. If you decide to move, you have to repay the bank when you sell the house. Sounds like debt to me.