Reverse Mortgage?

[Darsa]

My parents, aged 74 and 65, are having a tough time of it currently, financially. They have been looking into the option of a reverse mortgage on their home, in which they have a decent amount of equity at this point (they owe about half the house's value).

For some reason, the idea of a reverse mortgage makes me nervous, and I'm afraid that they'd be setting themselves up for a disaster if they decided to go that route.

Can anyone give me any practical information or advice regarding this process? I've been looking into it, and all I can find is information about how wonderful it is and what a help to seniors, etc. I suppose that should make me rest easier, but I can't help but be suspicious of something like this, sounding "too good to be true".

Thanks in advance for any and all help!!

 

[Suzanna1973]

There was an article posted in Reader's Digest in either November or December weighing the pros and cons of a reverse mortgage. You can probably find it on their website.

 

[Darsa]

I found exactly what you're referring to, thank you VERY much, that was an excellent piece of information. Printed out and on it's way to mom and dad!

Thanks again!

 

[eliza61]

My dad is thinking about doing this. He's financially strong but he's always wanted to tour Europe. He's 82 and in great shape. We've told him to go for it if he really wants to as me and all my siblings are grown, moved away and settled so it's not like we would need an inheritance. I'll have to look up the article.

 

[PatsMom]

If your parents still owe half the value of the house, they will probably not qualify for a very high reverse mortgage. I can remember the rules on loan to value but there was quite a cushion to allow for the accrual of the interest owed based on actuarial life expectancies.

Today's reverse mortgages are not the products they were years ago when seniors really got burned badly. They are regulated by the FHA (I think- some quasi government agency anyhow). My company has a few clients who have pursued the reverse mortgages to do things they have always dreamed of. They can work as long as there isn't a strong intent to pass along a property to a child. The borrower can take either a lump sum or use it like a home equity line of credit. The lender will require that the borrower attend an informational seminar to make sure they understand the terms of the loan and what they are doing. Children/other interested parties are encouraged to attend.

 

[TheZue]

Just curious, but what happens if they need to go into assisted living at some point and they have no equity in their home? Do they have to go into government supported care? Everyone in my family has used the equity in their home to get into a very nice nursing home when the time came...the one that didn't sat in the hospital for months and ended up sharing a room with four other patients when she couldn't manage at home anymore That would be my only concern.

 

[Suzanna1973]

Glad to know I was able to help!

 

[bumbershoot]

Just curious, but what happens if they need to go into assisted living at some point and they have no equity in their home? Do they have to go into government supported care? Everyone in my family has used the equity in their home to get into a very nice nursing home when the time came...the one that didn't sat in the hospital for months and ended up sharing a room with four other patients when she couldn't manage at home anymore That would be my only concern.

I don't know how to answer that. But in my grandmother's case, it was going into a nursing home (with alzheimers after she fell in her home and broke her hip) and being there for a certain amount of time that caused the reverse mortgage process to kick in, and the company that owned her house (and had been paying her) took over.

She was in a decent home for quite a few years. So not having equity in a house didn't seem to hurt her. And the monthly payments she had received from the company helped her a GREAT deal.

But she had outright owned that home for decades and decades. But it is in Florida right along a river, so I'm sure upkeep was high.


OP, if you or other family members have an attachment to their house, try to help them as best you can, b/c that house is gone with a reverse mortgage. My mom, aunt, and uncle couldn't help my grandmother to the extent that the r.m. could, so they lost a gorgeous home once Nama was in the nursing home for good. And I was just in grad school, couldn't have done anything even if I tried (and I did want to, loved that house!).

 

[criticamas]

I understand completely why you may feel scared about a reverse mortgage. Quite frankly, they do seem too good to be true. A reverse mortgage is a way for your parents to access their home equity without paying their monthly mortgage payment; however, they will still need to continue paying property taxes and insurance and keep their home in good condition.

In addition, as the loan increases in size over time, it could reduce the amount of money remaining when your parents pass away. If your parents are struggling to make ends meet, a reverse mortgage could be of help to them.

However, that does not mean that the funds are free. You might want to refer to these two neutral guides: the HUD Reverse Mortgage Guide hud.gov/hud-partners/single-family-hecmhome and a pros/cons reverse.mortgage/pros-cons of reverse mortgages. It is also wise to speak with a HUD counselor or financial adviser for additional assistance.

 

[thegash35]

Your parents are very elderly, in financial distress, and still owe half the value of their home on a loan.
Reverse mortgages are generally a bad idea.
Your parents should be looking at selling their home and buying a place that is within their means, ideally using the proceeds from the sale to buy in cash and not taking out another mortgage. Or using the funds from selling their home to move into a senior assisted living type of community.

 

[barkley]

zombie thread-17 years old.