Anyone known someone who got a reverse mortgage and was either happy or not?

Any major screw-overs?

Here's some history:

I've read up on them, my mother-in-law is in dire need, living on the edge so to speak. I would only consider an FHA one, for obvious reasons. She has a small mortgage left, which I understand the reverse mortgage will pay off, so no more mortgage payments is #1.

#2 is, the only way they can force the sale is if you're not living in the house for a full year, then they can proceed to sell the house.

I also understand how much money can be gotten, in what types (credit-line, lump sum, monthly payments or combo of all three), etc.

I'm just curious if someone has any horror stories to share, with as much full info as possible.

And, please, keep the "I heard so-and-so" stories to a minumum

 

Apologies if you already know this, but here goes:

A reverse mortgage - basically it's mortgage with no monthly payments. Isntead of you paying down the mortgage, it grows - exponentially - and the mortgage company plans to get paid out of the value of the home when you move out or sell. It's a terrible vehicle. It means that they'll be charging her interest on piled up unpaid interest.

I could see it for small sums for short term. So you take $10k out and lose $15k out of the sale 5 years later. Not a big deal. But reverse-mortaging, say, 1/3 of the homes value and leaving it on for 20 years - hey, people live long now - basically the mortgage company will own the house.

So what if you take out, for example, $30k. If you're having trouble paying bills and use that money to do so, it's going to run out. Then what? If the underlying reasons for the financial pinch haven't been addressed, you've lost $50k of the equity in your home in a few years, AND you're right back where you started from, AND you're losing more equity every day without the means to do anything about it. Trapped and hosed.

Unfortunately there is no magic bullet for tough financial spots. These reverse mortgage people live off of seniors' emotional attachment to their homes. But when someone can't afford their lifestyle anymore, well, they have to look that square in the eyes and adjust their lifestyle.

Sell the house, move in with family, invest the proceeds, estimate life expectancy, and make calculated withdrawls that will provide stable income for the estimate time left. Cold and heartles, I know, but that's life.

My 2 cents of one possible alternate view.

 

the push this junk towards the old people. they end up owning their house and the foolish person is now screwed.

 

Um, guys PLEASE calm down!

I know what happens, the bank owns the house, but the person gets to live there the rest of their life.

That's the POINT!

She has a small mortgage, but LOTS of equity in the house. She's 72. She MIGHT live another 10 years, MAYBE 15.

Who cares who owns the house when she dies? The children don't, they'd rather their mother live her life without worrying about money.

I was asking for people with experience in this, whether they knew of any drawbacks or were happy with the arrangement.

Again, I know what she's getting into, I understand that you are getting cash from a bank, and then they get back what they payed out plus interest.

Moving in with the "family" - out of the question. There's no children who have the extra room, and she wouldn't do it anyway. Which is a good thing for her self-image.

She gets SS and a small pension, and without the mortgage, and still getting rent from one of her daughters for the upstairs, she'll be set for the rest of her life. She needs a new car, which would definitely be in the works.

Let's just say she has $250K in equity.

 

well if you are not concerned about the bank owning the home and the assets she owns than by all means go for it. but when she passes away there will be nothing to give to her family. there is several good write ups on this. google it. i think one is on msnbc under money talk.

 

I had always hoped a reverse mortgage would mean that they would pay me to buy the house.

 

The family is not owed anything for the mother and her husband buying a house 50 years ago and keeping it up all these years. Nor do they expect anything, matter of fact, it's unanimous among the kids that she SHOULD do this.

I don't get that "gotta give something to the kids" thing. If I die with $5 in my pocket, I'll be happier than if I had $1M. By that time, my kids shouldn't need anything from me, and I'm not spending my life worrying about leaving them anything

I've already read-up on everything I can find. I'm looking for real-world stories.

 

Ah, my mother in-law did just that about 15 yrs ago, it tided her over so she could buy a smaller home in a retirement village. She lived with the mortgage for 5 yrs, sold the home and moved. She had no problems and was so happy she didn't have to ask the kids for help. (she was a widow, her husband had no life insurance, she had lots of equity in their home.)

 

Exactly what I'm looking for, thanks!

Keep 'em coming!!!

 

I'd maybe find someone to buy the housefrom your mom, but let her rent it till she passes, or Sell the house and buy something smaller, or in a retirement village, I just hate giving things to the bank.

 

She doesn't want to move out of her house, and certainly won't sell it. And I can't blame her. Renting it after selling is possible, but what does that do for the future landlord? Nothing, especially with taxes and everything else here on Long Island.

The Reverse Mortgage is the way for her to go... it'll give her money in hand, get rid of the mortgage, new car (or repair the one she has) etc. etc.

Still looking for more stories, good or bad about REAL reverse mortgages.

 

My ex father in law did something like this for his mother. She was about 70, lived in the family house on about 3 acres. The house was paid for, but falling apart and taxes took a big chunk out of her SS check. She had 5 kids but none were really able to financially bail her out. She did some kind of living will with strings thing, where she signed over the house and property to my father in law, with the stipulation that she live there for life, rent and tax free.

As soon as that happened, he had instant equity in a 60 year old dump. He took out an interest only construction loan and we tore down the detached garage and everyone pitched in and built her a new two-story on top of the pad. (Tile, hardwood, nice trim, except for the size, it could have been a tour home.) After she was moved in, the old house was knocked down and we built her a garage there.

Once the place was landscaped with porches built it was a brand new house on a huge lot with established trees. The loan was good for something like 18 months, with the way property values rise around here, at the end of the loan he had $35,000 into a place now worth $130,000.

The tax and loan payments were still there, plus, but we had improved it to the point that all the other brothers and sisters could get loans, (they had a lawyer and accountant figure out a plan and contract with default rules. When Gramma died, the house went on the market It was involved, but building the house really pulled them together.) The bank jumped at the chance to sell a mortgage on that one.

Gramma lived in a brand new house, for the first time in her life. She took care of it, too. She lived for about 10 years and the placed ended up selling for close to $300K, (3 BR on acreage with a view).

It took my father in law a little planning and a few thousand to lawyers and accountants, but the bank was the one that made the least, (other than us kids, we worked for Ginger Snaps - Gramma made the best cookies.)

 

Howdy, good ideas... nonetheless, no one in my mother-in-law's family can (or will) do anything like that

Keep 'em coming!

 

A reverse mortgage makes sense in some instances depending on the value of the property. There are several options including lump sum cash out or payments. I believe a lump sum would make less $$$ available, as they assume the home will rise in value as payments are made over a period of time. Be forewarned that the fees involved are much higher than those for a conventional (purchase) mortgage. It costs the bank money to process those payments. An FHA reverse mtg. guarantees the bank their invesment, based on value and life expectancy, so they are happy to issue them. HUD requires counseling prior to issuing their commitment. Do a google search for housing counselors in you area. Most are non-profit and charge accordingly for their services.

 

My mother in law has a reverse mortgage and gets payments every three months which seems to help her.