I'm considering a reverse mortgage on my house. Anybody here have one, or know something about them?

[CTyankee]

We're an elderly couple who need some additional income. I've done some research and plan to ask the guy who does our taxes next week, but I'd like your input if you have one.

[deRien]

1. DON'T

I know someone who did this and now she is out of money but her property is worth at least a million dollars ~ and it belongs to the bank ~ none of which she can access. She has no money and has to go on Medicaid. She has serious health issues and can't go back to her home.
It's a very sad situation.

[LuvLoogie]

2. The bank owns the home afterward. Doesn't it?

Do you have any children that you could do a quit claim and transfer the property and they can take on the taxes. Maybe rent a room to a college/foreign exchange student, if you don't mind sharing space. Consider how much extra income you need. Are you up for a shift at Starbucks or the local library?

Edit to add: I just hate to see assets you work your life for to be handed over to the capitalists again. But you should do what is best for your peace of mind and comfort. That could be a quit claim, but speak to a financial advisor or two first.

[CTyankee]

4. We are in our 80s and hubby is handicapped. No, we don't have accommodations for renting a room.

I don't think my kids want the house because they live and work out of our state, so this wasn't the home they grew up in. And I don't think there is any expectations that they will inherit our house. For one thing, this is a second marriage for each of us and neither his kids nor mine would care but they WOULD be stuck helping us pay our bills if we don't pursue this option.

I want to talk to my tax preparer for any advice he could give us. The house is worth more than what we paid for it initially and we've been paying for over 25 years.

[Ocelot II]

3. Be careful. They can turn out to be expensive. Here's some info from the FTC:

If you’re 62 or older, you might qualify for a reverse mortgage. With a reverse mortgage, the amount of money you can borrow is based on how much equity you have in your home. (Your equity is how much money you could get for your home if you sold it, minus what you owe on your mortgage.) While a reverse mortgage lets you access your equity without selling your house right away, it can be financially risky:

A reverse mortgage increases your debt and can use up your equity. While the amount is based on your equity, you’re still borrowing the money and paying the lender a fee and interest. Your debt keeps going up (and your equity keeps going down) because interest is added to your balance every month. This can use up much – or even all ─ of your equity.

A reverse mortgage can limit your options down the road. Generally, a reverse mortgage must be paid back when you die or move from the home. You could use up your equity, so you get nothing when you or your estate eventually sells the home. That means you could come up short if you want to move to a smaller home, an assisted living facility, or to another locale to be closer to family.

A reverse mortgage can be an expensive way to borrow. The fees and other costs to borrow money this way can be higher than other alternatives like a home equity loan or home equity line of credit.

More at https://consumer.ftc.gov/articles/reverse-mortgages

[XanaDUer2]

5. Folksy Tom zselleck is punchable

[CTyankee]

6. Yes, he is. My tax guy is not; he's solid and can give me good advice. I don't think we are his first clients who have

had to deal with this.

[claudette]

7. Better to

get legal advice regardless of what Tom Selleck says. I wouldn’t do it.

[OLDMDDEM]

8. Don't do it. Our neighbor did and regretted it later.

[CTyankee]

9. why did they regret it?

[OLDMDDEM]

10. The money he borrowed accumulated interest to the point where there was no equity in the house. He died and left

nothing to his family. A grandson ended up buying the house from the lender.

[CTyankee]

12. We don't have kids from this marriage. Neither his nor my kids would even want it and would consider it to be a pain in

neck to deal with and would be forced to deal with an unpaid for house that is now owned by our kids who live in New York, California, Tennessee, and Massachusetts. We love our house. We don't want to have to sell it and use the proceeds to move into assisted living which could end up costing us more OR selling it and moving into a rental apt. we don't want to be in and risking running out of money.

[OLDMDDEM]

13. I understand your points. There are up front fees also. My neighbor's fees were about 15% of the borrowed amount.

[CTyankee]

14. That seems like a lot. I don't know CT's tax in my case. Again, a question for my accountant who is very familiar with

CT tax laws. He might recommend it or he might suggest an alternative.

[OLDMDDEM]

15. I agree. Talk with your professional about it. Good luck.

[Big Blue Marble]

18. I am a CPA and do not recommend reverse mortgages.

The front end costs are closing costs not taxes. You will still be responsible for
your taxes and insurance though and falling into arrears will trigger foreclosure. You will receive a
portion of your equity and the mortgage holder will busily take the rest through
interest and fees.

The most important consideration in your decision is that you are giving up control of
your home. If you feel that a reverse mortgage is your best option, educate yourself
to make sure you understand the tricks and traps of obligating yourself to a reverse
mortgage.

https://www.investopedia.com/biggest-mistakes-reverse-mortgages-5225608
l

[louis-t]

30. Doesn't sound so bad.

He got HIS money out of HIS house and used it as HE saw fit. What's wrong with that? I imagine there are people that don't come out as well. The fact that he "left nothing to his family" shouldn't even be an issue.

[Omnipresent]

11. Beware: President Reagan was behind it!

[Big Blue Marble]

19. Yes, reverse mortgages are part of the array of strategies by the wealthy

designed to strip the imiddle-class of it's wealth. I refer to this process as the giant vacuum cleaner.

[Iggo]

42. Trickle Up. (n/t)

[gristy]

16. I looked into one a few years back and found the terms just horrible.

Don't do it!

[Fla Dem]

17. My 1st choice would be, if you have the funds, pay off the mortgage.

This may not be a viable option for you, but it would free you up of further payments. You would then live with no mortgage payments for the remainder of your lives. No more monthly mortgage payments. Now that monthly payment can help pay other expenses. Eventually you could sell the house and all the proceeds would go to you and/or spouse. Or if you decide to sell and move to senior living, you would have the funds to support your life. Of course, if you don't have the funds to payoff the mortgage, then it's not doable

I am not at all an expert, so really just sharing what I did about 5 years ago.

[CTyankee]

20. The key thiing here is that we get to stay in our house. The escrow amount just went up A LOT.

It takes up a bigger share of our income.

The bond funds that I inherited from my mother over 30 years ago have diminished. One ran out of money so I don't have the monthly income it produced.

[PennRalphie]

21. Escrow should be for taxes and insurance

Most mortgage companies require escrow equal to what you will owe next year, your shortage this year, plus a cushion of 2 or 3 months. In some areas, taxes and homeowner’s insurance are soaring, causing huge escrow changes. If you have enough equity in your home, the mortgage company may allow you to pay your own insurance and/or taxes without an escrow fund. It might just be one of the two. Choose the one that’s the highest to pay yourself. Just make sure you put that money away every month, via auto withdrawal or transfer.

You may be able to avoid the reverse mortgage that way.

Best of luck to you.

[CTyankee]

22. I am going to the bank that holds our mortgage to discuss this with them. They might have an idea for us.

At least they will have some numbers we can deal with.

[PennRalphie]

27. Good luck!

[Vinca]

23. If you've owned your house for 25 years, it must be worth a whole lot more than you paid for it!

The market just about everywhere has gone up to crazy levels. We're older, too, and paid off our mortgage a few years ago. The value has gone up a couple hundred thousand or so. We'd love to downsize, but there's nothing smaller at a reasonable price and we're past the point of wanting to do renovations. Any chance of that where you are? Selling and buying something more affordable? I don't know much about reverse mortgages other than my grift alarm goes off when I see the commercials on TV.

[CTyankee]

25. We did consider it but we love our home and want to stay in it for as long as we can.

I plan to discuss all these issues that you raise with the bank that holds our mortgage now. Our biggest expense by far is our monthly mortgage payment. I want to go over what they will/will not pay for. Inheritance for our kids is not in the question. But we are not in arrears on payment.

[Kali999]

24. mom has one

She's had it a long time. She's in Cali and had to get insurance through the state. Because she was jerked around by insurer and they want to get out of there. She's sunk a lot of money keeping it up. She needed new duct work . Air conditioner broke this summer. She has had roommates that help. And a horse she can't ride or sell. She 80 something now.Make sure both names are on it.

[surfered]

26. I have not done it, but I am extremely suspicious. Do your research. Depending on your state, you may be..

...able to borrow against your home from a more reputable financial institution.

[Shermann]

28. If you run the numbers they aren't as predatory as they might seem (assuming the bank is reputable)

The bank is loaning you money and the interest will accrue, and they might not get anything back for 30+ years. They cap the loan amount such that they are unlikely to lose money. That means you will only be able to access a percentage of the equity in the house, maybe 20%. After such a long period of time, all that accrued interest means the bank might get the rest. They are taking a risk here and banks get paid to take risks. But you get to stay in the home as a significant fringe benefit and never have to make loan payments.

If you want to access closer to 100% of the equity you have to liquidate the house and rent. But there are costs associated with that as well.

[MaryMagdaline]

29. Reverse mortgages are not terrible if you can get over some psychological hurdles

1. I make the assumption that I will die broke.
2. I will either be in my home or a Medicaid nursing home.
3. If a reverse mortgage guarantees that I will not be homeless, I just have to accept the fact that I do not and will never own this house that I love. It now belongs to a stranger who has guaranteed I can live there for life so long as I can afford to pay taxes, insurance and maintenance/upgrades.
4. You can’t get full value for your house without selling. And you have to give up the thing you love in order to get full value.
If you sell, you get your big check but even if you downsize, your taxes could go up and your insurance will go up, and no matter how big your check, you are living in your second choice home (or no choice at all home) and your money will still run out.
5. If you stay in the home that you love and you can afford the taxes and insurance you have to accept the fact that your physical security (never having to face homelessness) is bought at the expense of greedy capitalists who will make exorbitant fees while you live and will be rewarded with your home when you die.

I can never make a financial decision by looking at the greedy asshole on the other side who might benefit from the deal. If the deal gives me something I cannot otherwise get without making the deal (in this case - security from homelessness) then the deal is a good deal in my eyes.

I have a sister who wants to keep her small house. It’s a one story, two bedroom, two bath with one extra bedroom or work space. It’s perfect if she has to have help come in in her old age or if she’s ever wheelchair bound. Her taxes are low because she’s been there 20 years and benefits from Florida’s homestead statute (gives deduction for 65 plus and widow plus caps percentages that taxes can be raised).
In her case, having peace of mind (free from homelessness) is worth the extra money she might gain from selling her house on her own. That money will run out anyway. Her taxes will go up if she moves.
For some people reverse mortgages are worth the peace of mind.

[CTyankee]

36. Not sure why I would even care about dying broke.

I don't want to leave a pile of debts to my kids tho. I am paying down debt now and not incurring any extra debt. The reason I am paying down and not completely off my debt is because our escrow payments have ballooned. I have a big balance with my dentist because our health insurance didn't cover the last checkup and cleaning I had (which my health insurance only covered a small portion of). I was shocked. It was just standard care (no whitening or other cosmetic stuff).

[Lulu KC]

37. Your kids do not inherit your debt

A spouse does, but not kids. If there is an estate, the estate carries the debt. If the estate is zero, the kids don't inherit anything, including your debt.

Still, debt's no fun. But our financial advisor has educated us on the financial benefits of having a mortgage and using cash elsewhere in the long term, FWIW.

Your people will know.

[Bev54]

31. I don't know if they have changed since I did mortgages but I did not recommend them to any clients.

At that time the interest was compound so they would add the interest amount to the mortgage and then charge you on the interest on the interest every month. It means it is very difficult to pay back without it being a considerable amount, should you wish. That is the first question to ask, if they are compound interest or simple interest.

If compound run away.

[BlueinUtah]

32. It depends on your own situation.

Whether this makes sense depends entirely on your own personal situation. A lot of the comments on here are completely untrue, the bank doesn’t own your home, you do. It’s a mortgage loan with deferred payments while you live in the home. The way these are structured now, the home’s appreciation will outpace the increase in the loan balance and you will still have equity that you can pass on, if that is important to you. These loans are highly regulated and HUD has made changes to protect the borrower. Talk to your CPA and then find a trustworthy reverse mortgage specialist who can advise you without pressuring you.

[CTyankee]

33. Thank you!

This is just an idea I had since I am in a situation where my bills suddenly seem to exceed my bank balance. Of course, it wasn't sudden; I was just not paying attention. I will be going to talk to the bank holding my mortgage tomorrow, to nail down some answers to my questions. My accountant will call me on Thursday as he is in Italy now and not in his office.

I am losing sleep over this situation and constantly worrying, altho I try not too.

[BlueinUtah]

34. Happy to help

Sometimes the lender holding your mortgage isn’t the best one to talk to. I’m not licensed in CT but I’m happy to answer any questions you have. I don’t post much but if you PM me or however that works I’m happy to reach out. As long as you’re aware of the pros and cons, you can make an informed decision.

[CTyankee]

35. I haven't had my call with my tax preparer yet (it's tomorrow) so I'll have good info from him.

He's been doing our taxes for many years and he can take a look at our last tax filing and give me some good general advice.

[Lulu KC]

38. Have you looked into refinancing?

Depending on your current interest rate, if the value of the house has increased a lot in 25 years and you haven't already done so, a refi can seriously reduce your monthly expenses. There's a fee to do it etc. and I'm sure your bank will review the possibility for you. If you're in the 2.5% interest rate already? Well, that won't help. But there are other options.

You have the impoverished feeling because you can't get to your equity easily, but you have the equity. You are sitting on plenty of money and you are doing the right thing by talking to people who know these things locally.

Your children will not inherit your debt unless you leave an estate, from which the debt will be subtracted. Since your children don't need your money or expect it, dying broke is a good option. It's the not-feeling-broke in the meantime that needs to be addressed. Sleepless nights are not good for us.

[CTyankee]

39. Thanks. I"ll review the possibilities with them, I am sure.

I keep feeling guilty, that I did something wrong or badly. What I most fear is that we'll be forced to see our house and move and apartment rents are very high here also.

I talked to one of my daughters today and will call her while in meeting with a bank rep. She wants to talk to them. Before she went to Warner Bros. to run the costume department, she worked in banking. I told her it was fine for her to talk to them but I doubted it would make any difference.

[Lulu KC]

40. Sometimes

It just helps to have someone who know the right questions. But if you have been paying for a house and have equity, you are probably rich, not poor.

I hope it goes well. Good to have smart kids in your corner.

[BlueinUtah]

41. Don't feel guilty

If the numbers make sense, and you decide to do this, don’t ever feel guilty! This is your house, and your equity. It’s good that you are talking to your trusted advisors, include your children as well. If you want to stay in your home, and this is a way to allow you to do that, then do it. There is a lot of mis-information out there, so talk to people you trust and get good information. Just don’t feel guilty about using your assets to improve your situation.