Is a reverse mortgage is a good or bad idea?

[sputnam]

I think you can probably back out of it if you want to, but the lender will still get a substantial amount of the equity if you try to back out early. You will have to pay some kind of penalty if you back out early.

Whether you back out at some point or it runs its course, the lender will get paid.

 

[Zoe]

Whether you back out at some point or it runs its course, the lender will get paid.

I don't know. I have done 1 or 2 for a lender. I try not get into business of homeowner and try to stay focused on the real property.

I would hate to see someone do it and then upset a family member and/or them regret it later and that is why I suggested like a real estate lawyer or certified accountant. The lawyer or accountant could could probably go to closing on the loan with any questions the borrower may have. They could at least be with the borrower before they signed the papers and answer questions for the borrower.

 

[Zoe]

The borrower was smart enough to ask the question here. The borrower has to realize that we are not experts in financial counseling or their legal rights and later ramifications if they regret it later.

We focus on an effective date. We don't look in what property will be worth when this person dies.

The appraisal will be done as of an effective date for the lender. We don't know when the borrower will die or what value will be then.

 

[ucbruis]

It can help with cash flow, but the interest keeps building and it reduces your home equity over time. I was reading about it earlier and found a page breaking down the pros and cons that made the whole thing a bit clearer.

 

[Terrel L. Shields]

What I meant by that was he "officially" disabled. He has to prove that the amputation, despite the use of a prosthetic, prevents him from working.

A friend as a child broke his leg and they found bone cancer when it didn't heal. Amputated it. So, of course, in college they wanted to see "proof" of his disability to get out of ROTC (required at that school), so he pulled his prosthetic off and sit it on the desk during registration. They waived his ROTC requirement.

Yes, I'd think about a reverse mortgage but be sure to read the fine print. If married, you want to be sure that the house is not in foreclosure if only you die.

 

[Mark K]

I think you can probably back out of it if you want to, but the lender will still get a substantial amount of the equity if you try to back out early. You will have to pay some kind of penalty if you back out early.

False. You can pay off the RM early simply by paying the mtg balance and any interest and fees due. They do not get any equity in your home.

 

[Zoe]

False. You can pay off the RM early simply by paying the mtg balance and any interest and fees due. They do not get any equity in your home.

yeah, but fees and interest and God only knows what the house will appraise for when you back out.

Give you example. Assume you did one in 2005 and backed out in 2010? Maybe you back out in 2008?

If you hit the lottery, you won't worry about it.

 

[Zoe]

My point is you better be in it til death or do a home equity loan if you need the money. You could get a financial manager to do a home equity loan and diverse the equity in your home in various investments. Similar to like a diverse mutual fund. You may make more money in investments than you are paying in interest on a home equity loan.

If your home value goes down and you are about to croak. Just let the bank have it and protect your investments in like a trust.

In some trusts, the bank can't get their hands on the money. They can get your house if you don't sell it and pay them off but they can't touch the money in a trust.

 

[Mark K]

yeah, but fees and interest and God only knows what the house will appraise for when you back out.

Give you example. Assume you did one in 2005 and backed out in 2010? Maybe you back out in 2008?

If you hit the lottery, you won't worry about it.

It’s like any other mortgage. You can pay it off anytime and it doesn’t matter what the house appraises for.

Not sure where you’re getting the phrase back out, you either keep the mortgage or you pay it off. You don’t back out of anything.

There’s a difference between a reverse mortgage and home equity line. If you’re in a position to need a reverse mortgage, you likely don’t have the income to make payments so you do not want a home equity line.

You should do some research.

 

[KeithH]

Recently I have found myself in a tough spot.
I had my left leg amputated below the knee and money has been tight. Super tight. The extra kicker is my job doesn't have any work for me. So I am out of a job and walking on a prosthetic leg. My buddy suggested a reverse mortgage for my condo but I admit that I do not know much about them.

Are there pros or cons you know about that I should know about?

If you qualify for a reverse mortgage I would recommend it. The new guidelines have some significant advantages. Talk with your lender who offers them and see what they can do for you. I meet so many people who really need this loan and because they do not understand them they do not and often fond themselves in a bad place that they did not need to be in. Good Luck