Terrified of Reverse Mortgage but husband is pushing it

[Doug Wegener]

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.

I am the trustee of my sister's trust. Somewhere around 2008(if memory serves me right) she got a reverse mortgage due to some unfortunate circumstances in the family. She died in 2025. Over the life of the loan , the interest amounted to over $200,000, much more than the amount she got ($130,000 or so). Unless there are dire circumstances , I would not recommend it. .......There are alternatives. Hometap has a program where you share ownership with them and they benefit from the appreciation , and you continue to live in the property. I recently did an appraisal for them. You might check that out or similar programs with other companies if they exist. Despite what a celebrety says, I think HECM's are exploitive.

 

[Sadie]

I am the trustee of my sister's trust. Somewhere around 2008(if memory serves me right) she got a reverse mortgage due to some unfortunate circumstances in the family. She died in 2025. Over the life of the loan , the interest amounted to over $200,000, much more than the amount she got ($130,000 or so). Unless there are dire circumstances , I would not recommend it. .......There are alternatives. Hometap has a program where you share ownership with them and they benefit from the appreciation , and you continue to live in the property. I recently did an appraisal for them. You might check that out or similar programs with other companies if they exist. Despite what a celebrety says, I think HECM's are exploitive.

Both HECMs and Hometap type loans should be used only in emergencies. Hometap loans typically cannot be paid off in increments, only as a lump sum, within 10 years. But they have no minimum age limit. With either, if the borrower passes, the heirs are left with either diminished or no asset in the form of the home that was collateralized. Both have high fees and should be considered only as a last resort.

 

[Zoe]

Both HECMs and Hometap type loans should be used only in emergencies. Hometap loans typically cannot be paid off in increments, only as a lump sum, within 10 years. But they have no minimum age limit. With either, if the borrower passes, the heirs are left with either diminished or no asset in the form of the home that was collateralized. Both have high fees and should be considered only as a last resort.

Wow. Yeah, that is what scares me if you don't need it. It is almost like you would be better off selling it and doing something else. Take your equity and get a little subsidized apartment or something. If you are elderly and on fixed income, you can get some decent housing sometimes. Sometimes somebody like HUD does subsidized housing in nice locations. I have appraised a few of them for HUD. I did a really nice one in downtown Hot Springs Arkansas high rise. It was nice and rents were not bad. They had activities and things. It was nice. I was doing mark to market on some of their housing with HUD.

I got to visit Hot Springs Arkansas again. I like Hot Springs. It used to be the place Hollywood loved to go. It literally has mineral water that comes out of the ground and is hot. Bath houses are a biggie. The hotels I have stayed in downtown Hot Springs say we have the same water in our hotel. I assume it may be true.

 

[Zoe]

HUD does pretty good on their elderly housing. They have torn down a bunch of subsidized housing and rebuilt new but it is not elderly housing. Their elderly housing is kept up good.

Like the ones I did, you had to be certain age and income levels applied on elderly housing. You couldn't have a million dollars in the bank and qualify. You couldn't be a teenager and selling drugs.

I can remember one development I did. A very elderly lady let me tour her apartment. She was ground floor and had a window view of nice landscape. I saw 3 or more trees that were same type tree. The one outside her window was much greener and bigger. I said that is nice your tree is prettier. She said I have a bowl on the A/C unit outside and I collect the water from the A/C unit and water it every day. That HUD development was in Mississippi.