5 Replies Latest reply on Apr 2, 2013 6:02 PM by cyber888

    Reverse Mortgage

    sammies
      I have a mortgage free home and will be retiring in a couple of years.I do not have children.  I am a widow.  I have been considering a reverse mortgage since my heirs will not want my house since it is not in the right location and will sell it immediately when I pass on.
      This would give me liquid money now so that I can invest.  Please give me your feedback on your opinions. Thanks so much.
       
        • Re: Reverse Mortgage
          JerryD
          My understanding of reverse mortgages is that they are for people desperate for money because the fees, etc. kill you. Ever consider just selling and renting or if you love a home then downsize. Another possibility since you have no close relatives, why not move to a cheaper area. We did and the savings can be substantial.
          • Re: Reverse Mortgage
            Chrysalis
            Hi, Sammies-
             
            JerryD and I have a lot of respect for each other, but we often differ on our approach to various retirement questions. That's good news for you because you get a range of opinions. Insert thewinkingemoticon.
             
            Personally, I don't want to risk being homeless in old age. So no rentals or home equity loans for me! If you want to stay in your home until you die, then a reverse mortgage may be an excellent choice. However, the depressed real estate values in most parts of the country will lower the amount of your reverse mortgage, too, so be sure to get a professional appraisal done first ($150-$100). On the other hand, since the fees and interest rates on reverse mortgages mount up so quickly, you have to assume that you essentially sold your house to the bank. So the younger you are when you get the reverse mortgage, the more years you will have to live in the house payment-free before it goes to the bank.
             
            Here is what I said last year about reverse mortgages. My opinion hasn't changed: 

            Like any financial option, a reverse mortgage is a good choice for some people but not for everyone. The good news is that you can get most of your equity out of your house (is it 60% or 70% of the appraised value?) so you can use the money when you need it. You don't have to make payments, and you get to live in the house forever.

            The bad news is that, despite what the reverse mortgage salesmen tell you, you should consider that you just sold your house to the bank. The costs are very high and they compound quickly, so in 2 or 3 years you will owe more than the house is worth. As I said, you can stay in your home forever, but your heirs might be a little disappointed. (Phooey on them, I say!)

            My 89-year-old mother waffled for 2 years between a reverse mortgage and a home equity loan. She finally decided that she couldn't stomach the thought of trying to repay a home equity loan and perhaps losing her home some day because of missed payments. She got a reverse mortgage and is happy with it.

            There is a lot to think about and many options for you to consider. Don't rush into any such decision. 
              • Re: Reverse Mortgage
                sammies
                Thank you very much for your thoughts.
                  • Re: Reverse Mortgage
                    cyber888
                    If your house is paid for.  Reverse mortgage will give you around 60% of your house's appraised value at age 62.  At age 65, you may get around 62% - 63% for your house value.

                    If you are 100% sure you are not leaving your house till you die, then this might just be for you.   You are, however, responsible for maintaining your house and making sure it works.  If your house in unlivable,  if you're not paying repairs, then you're at a loss.  Be sure your house is in excellent condition when you do this and comprehensively covered by insurance.
                  • Re: Reverse Mortgage
                    JerryD
                    Sammies points out that different people are comfortable with different solutions. To me, the 30-40% loss of equity she quotes due to the reverse mortgage was/is just NOT acceptable to us.
                     
                    Several of my suggestions retained all of your equity and still keep you in a home that is potentially as nice or nicer than the one you may have. We, for instance, moved to another beautiful state, got a home and lot that we could never even dream of in the urban area where we had lived for over 30 years, put a large amount of money in our pocket (but blew it on add ons to the new home that were largely discretionary) and ended up with lower taxes and cost-of-living.
                     
                    I did not detect any great desire on the OP for remaining in the existing house or area even. Please do clarify your goals and do the numbers before any choice. This one is important.