Terrified of Reverse Mortgage but husband is pushing it

[hunterjmen]

Honestly, the counseling step is mandatory for reverse mortgages, so don’t skip that - it’s meant to make sure both spouses understand the terms first. I was reading about it earlier and came across a page explaining the safety steps, including counseling, which helped clear things up a bit reverse.mortgage/safe.

 

[Mark K]

IMO, good candidates for a RM are those that have insufficient cash flow to meet their income needs but have a lot of equity in their homes. It seems you have a good income and good equity (paying cash for the home) so a small first mortgage on the home is the reasonable route for some extra cash for upgrades instead of a RM, IMO.

My Mom was the perfect candidate for an RM. After Dad died she was left trying to make ends meet on SS alone which, after paying bills (insurance, util, food, etc.) she had a total of $9/day left over for any emergency or other expenses like eating out, car repairs, buying presents, traveling, etc. She owned the house mortgage free. She was talking about a RM so I made her one. I had $zzz/month sent from my acct to hers every month on the first and it made all the difference for her peace of mind and allowed her to have spending $$ for small 'luxuries'. The RM was drawn up by a lawyer and recorded. When she passed, we sold the house and the estate paid off my mtg. and the remaining balance was split between us three kids.

A RM can be a lifesaver for certain people but it doesn't seem that you fall into that category. Personally, I think you both should get some financial advice from a CPA and a lawyer and then make a decision.

 

[DTB]

Typically most people have too great a percentage of their wealth tied up in their personal residence.

It can be a chore sometimes but I am frequently rebalancing my assets so that Real Estate (personal and investment) is not a disproportionate piece of the pie.

Personally, at age 72 (I'm 66 now) I could not even contemplate buying a new construction SFR. The amount of work and money needed in the first couple of years of ownership ( properly finishing landscaping, upgrading lighting, paint, window treatments, patios/decks...) would be a daunting task at that age. Who needs it?

For the Mrs. and me, several 1 BR 2Ba (no waiting) apartments, seasonally located will be the ticket.

 

[Charles West]

Reverse mortgages are the last resort, end-of-the-line types of loans. They are very expensive but can be useful at the end of a person's life.

 

[Zoe]

IMO, good candidates for a RM are those that have insufficient cash flow to meet their income needs but have a lot of equity in their homes. It seems you have a good income and good equity (paying cash for the home) so a small first mortgage on the home is the reasonable route for some extra cash for upgrades instead of a RM, IMO.

My Mom was the perfect candidate for an RM. After Dad died she was left trying to make ends meet on SS alone which, after paying bills (insurance, util, food, etc.) she had a total of $9/day left over for any emergency or other expenses like eating out, car repairs, buying presents, traveling, etc. She owned the house mortgage free. She was talking about a RM so I made her one. I had $zzz/month sent from my acct to hers every month on the first and it made all the difference for her peace of mind and allowed her to have spending $$ for small 'luxuries'. The RM was drawn up by a lawyer and recorded. When she passed, we sold the house and the estate paid off my mtg. and the remaining balance was split between us three kids.

A RM can be a lifesaver for certain people but it doesn't seem that you fall into that category. Personally, I think you both should get some financial advice from a CPA and a lawyer and then make a decision.

Having kids is a consideration too. Her saying they don't need it sounds like it is not for them. They might consider something more affordable in living expenses vs a reverse mortgage.

When I say more affordable, like a smaller outgoing expense per month.

 

[Terrel L. Shields]

What is the appeal for folks our age bracket of buying a house cash

Exactly. Borrow against the house at 30 years. Lowest payments. OTOH, an expensive home costs much more in taxes and insurance. I'd be downsizing, not upsizing. Framnkly, just being me, I wish I had a 500 SF tiny home. It's all I need.

 

[Alsie35]

To preface - I have the (prejudiced) opinion that all reverse mortgages are either scams or extremely unfair and hostile in their terms. OTOH my husband is sucked in and is pushing really hard to do it.

We have sold our house - and are buying a new construction, upper middle class house - cash - and he wants the extra cash (like $100K) to do improvements/upgrades and maybe live a little more luxurious (vs frugal). It makes a little sense - but I can't stop envisioning such a lien eating away equity - with terms that could force the instant sale of the house for some ridiculous lowball amount to edify the payoff. (read too many stories of this happening). It's not like we would ever default on taxes or maintenance etc. We are both 72 and have a very good Social Security income (and 401Ks etc.) More liquid assets than the proposed loan/lien amount. BUT many stories I've seen about people losing their houses due to medical issues - or the passing of one spouse - basically anything to force the sale of the house.

I've heard it's required by law to have counseling before getting one of these loans but I'm already being pushed towards applying/signing without any kind of discussion. The whole thing is very scary and we certainly do not NEED to do it. He is a very smart guy (retired CFO), but I don't get this at all.

He's saying the fees would only be $7,000 (to start) - not sure what interest rate. Not sure what to do.

For a retired CFO this sounds like a bizarre move. Since you're gonna own the house free and clear, why not just get a HELOC/first mortgage and make monthly payments? Unless you just want to deplete your equity that you hand off to your kids? If you have the $$$ to go into an upper type of retirement home, you shouldn't need a reverse mortgage which is typically only taken out by geezers with no $$$ who are just trying to survive.

But if you DON'T have the $$$ to actually live that upper life ... this doesn't sound like it's gonna end well ..

Something doesn't add up here ...

 

[Zoe]

For a retired CFO this sounds like a bizarre move. Since you're gonna own the house free and clear, why not just get a HELOC/first mortgage and make monthly payments? Unless you just want to deplete your equity that you hand off to your kids? If you have the $$$ to go into an upper type of retirement home, you shouldn't need a reverse mortgage which is typically only taken out by geezers with no $$$ who are just trying to survive.

But if you DON'T have the $$$ to actually live that upper life ... this doesn't sound like it's gonna end well ..

Something doesn't add up here ...

They could take cash out they don't need and put it with financial investor and offset some of interest on the house. Maybe make money. Income to debt ratio would be a consideration, but another option is sell the house. They get all the equity and do whatever.

 

[Zoe]

Get a little travel camper RV and travel the world. I appraised a vet's house that had cancer. His wife told me we are going to sell this house and see every National park in the USA.

That is what they did. They didn't have an RV. They were pulling a nice camper with a truck.

You can get some really nice small RVs with all you need to survive. Kitchen,sleep, bath.

Just pull over whenever you want to for groceries or whatever. You can find places to park it and dump the waste.

The toilet does have to be dumped occasionally. Have to fill the water tank back up and flush waste in safe place.

When you get to safe place, they have electrical hookup and waste facilities, water.

 

[Zoe]

In RV world they call them dump stations on waste.