Reverse home mortgages

[Tink3815]

Do you any of you seniors out there have a reverse mortgage to get extra money in retirement? Our home is paid for and we currently have no plans to move or downsize for several years. We are 62 and 64. Just starting to research and would like opinions on them.

 

[teller80]

I've heard so many bad things about them but I don't remember the specifics. Go to YouTube and search for "Dave Ramsey Reverse Mortgages," as a starting point.

 

[_19disnA]

My parents had looked into one and we convinced them it was a bad idea. You pay a significant "fee" to initiate this loan, so you lose some of your equity upfront and the TV ads never say that or it's in the tiny small print that races across the screen. If you are going to use that money to live beyond your means, it is a bad idea. If you need the money to maintain your existing home or pay ongoing expenses like taxes/insurance/etc. they you are probably living beyond your means and need to move someplace more within your budget. TV ads make it look like 'free' money but it isn't. Down the road if your health declines and you need to move someplace smaller or perhaps live in a nursing home/assisted living, that is less money you will get from the sale of the home.

 

[NannyBeBe]

I would not take out a reverse mortgage just to have extra money. You should both be able to collect social security soon. My advice to you would be to try to be debt-free by that time. If you still need money to pay bills, one or both of you could still work after retirement. To me, getting a reverse mortgage is giving your home to the mortgage company.

 

[dvcgirl67]

I would not take out a reverse mortgage, but my sister and her husband started buying homes, fixing them up and renting them out about 15 years ago. About a year ago they did something that was kind of in this ballpark and very interesting to me.

They have quite a few rentals now.... 10-12? The bulk are in the county where we all grew up, about 30 minutes south of us. The homes are cheaper there and it still made financially. My BIL handles most of the interaction with his renters...etc. So, people in the different neighborhoods got to know him as a good landlord. An older couple approached him wondering if he had any interest in buying their home and then allowing them to stay in the home as renters. They agreed on a price for the home and monthly rent for them.

The couple wanted to stay in their home, but wanted to free up equity to be able to enjoy a bit more travel during retirement. So it worked for both parties in this instance. Obviously, everyone has to behave in this scenario, but both parties did their research on each other. My BIL appreciated the ease of the process and the couple appreciated unlocking their equity.

 

[barkley]

one of the concerns i have with reverse mortgages is how they can impact one or both spouses down the line in retirement. unless a reverse mortgage is done correctly with both spouses on the paperwork then the death of the one under whose name the mortgage is in can trigger repayment which frequently means the other spouse must sell the home on the lender's timeline vs. their own (i understand the same can happen if that named spouse is in nursing or assisted living care for 12 or more months). additionally, i wouldn't consider it without having a discussion with an elder law attorney in my individual state who has knowledge in federal and state medicaid laws. i say this b/c some types of assets are exempt within the medicaid program but i've read that w/some reverse mortgages, depending on how they were structured originally, there could be nonexempt assets that will be counted.

i always recommend people use elder law attorneys for these decisions b/c i previously supervised a medicaid eligibility unit. the number of people who had what would have seemed great retirement savings but ended up with devastating end of life care costs that necessitated them applying for medicaid was staggering. it is far better to know how financial decisions can impact your choices NOW vs. when it is too late.

 

[Mortlives]

The commercials I've seen always suggest you can get "up to" 45% of the value of your house. I'm assuming the maximum is what you get if they expect you to die really quickly, which means they are charging an insane amount of interest. There are lots of ways to get more value out of your house, without resorting to basically giving it away for a song.

 

[AlohaNow]

Something else that Tom Selleck isn’t mentioning in those TV ads…..once you die, there is very limited time for your heirs to act if they wish to keep the property in the family. The bank can often take the house before the children even figure out that their parents held a reverse mortgage. If you do go the reverse mortgage route, read the full document, have an attorney read the full document, know exactly what you are signing to, and let any heirs know the details and the timelines.

 

[AnnaS]

I have also heard that it is a bad idea but honestly don't know all the details - hidden fees, don't get as much money it's worth, if you live a long time, etc. . A friend wanted to do this and her son, an attorney, told her no way.

I would also recommend trying to pay off any debts if you have any before retiring.

If you live in a decent size/large home - consider downsizing. Friends of ours did this two years ago and said it's the best decision they made. They sold their home and bought a condo (lived in a condo when they first married). No worrying about pool, landscaping, taxes are half the cost, insurance is less, utilities are less, etc. etc. (HOA not bad). You might be able to just downsize if not interested in a condo (not available in your area).

Do you have two cars? Would you consider one? My husband and I went down to one car (the other one was on it's last legs/I retired and saw no need for another one). We said we'll give it a shot and if we need another one, we would get one. Two years later - we are more than good.

Do you have one car? Expensive/BMW ? - get one a little less $$ when the time comes.

Do you both still work? Full-time? Would one or both consider working part-time?

I would look into any other option first. Good luck. If you find out and get specific details about reverse mortgage - please share/would love to know. Your decision and what works best for you of course.

 

[LuvOrlando]

The financial vehicles are so exploitive. Pretty much the only thing we have that is protected is a home and these situations can force you out when you are most vulnerable.
You can sell and downsize, if your goal is to stay in it without regard for the equity after your life maybe just open up a big home equity loan with the longest term you can find and pull enough out to afford the payments. Create one account for payments and one for spending - it's not a great idea but if you are stuck it's probably better because you or our kids can just pay back the loan when it sells down the road. The home equity are mainstream and safer, go with fixed.

 

[_19disnA]

There is a reason you see so many TV ads for reverse mortgages, home warranties and extended car warranties...............they make MONEY for those who are selling them. I also find it a bit sketchy when some well-known actor uses their credibility to sell such schemes.

 

[Travel60]

Last resort if you are desperate. You've basically sold your house and they are paying you in installments.

 

[crjack]

I just paid one off on my dad's house. We had to take one but it was literally our only option to pay for private aides or place him in a LTC facility. We had depleted all of his liquid accounts.

I had to attend an information session and pass a short quiz after to certify that I understood all of the program details.

I wouldn't do one if it wasn't absolutely necessary. You have to understand all of the specifics. It worked out ok for us but could have easily been a different scenario, especially in a soft real estate market. ( I live in greater Boston and our market is insane right now so no issues with home value or offers.)

 

[Christine]

Is there's a commercial on to do something like this (and it's aired over and over again---company is spending$$$ to advertise this), then RUN AWAY FAST. This is not a good idea and of no benefit to you.

 

[neverlandsky]

Several relatives have done it. The absolute best situation and the only situation I would recommend it was for relative in their (80s) that owned home for nearly 60 years and they were debt free. They had 800K in equity / did a 140K reverse mortgage loan for the last 3 years of their life to supplement 24/7 in home care that was costing 5K per month not including living expenses. Relative wanted to stay in home and passed away in their home. Heirs had an estate sale, then listed home within 90 days of passing and sold home within 6 months later.

We strongly discouraged and discussed with another relative late 60s to not take a reverse mortgage. They don’t have $100s of thousands in equity, using funds for fun, neglected home repairs, and supplementing retirement. We as heirs will have to deal with this aftermath. Not looking forward to it.

 

[NYCgrrl]

It’s not for everyone and in fact the amount of consumers it works for is quite finite as @neverlandsky noted. I would stress that it tends to work best for a single senior with no emotional attachment to the property.

 

[MrsPete]

Is there's a commercial on to do something like this (and it's aired over and over again---company is spending$$$ to advertise this), then RUN AWAY FAST. This is not a good idea and of no benefit to you.

I was going to say something similar: if they have to pay celebrities /produce expensive commercials to convince you that this is a good idea, it's probably in their best interest -- not yours.

I only know one story about a Reverse Mortgage, and it's a bad one: Back when we lived in our first house, we were casual friends with a nice old guy who lived catty-cornered across the street. After he died, my husband helped his son clear out the house, and the son was MAD. Apparently his father had needed some pretty extensive household repairs, and -- being short on cash -- he had taken out a Reverse Mortgage to cover them. He died suddenly only about a year later (and he was old but not all that old), and the bank owned his house, which the son had expected to inherit. My husband got the impression that the son was unaware that the father had taken out the Reverse Mortgage and would have been willing to help his dad. We assumed that the father was ashamed to tell the son he was in need.

My take on the concept: it's an expensive way to get money, and the bank is likely to be the big winner here.

one of the concerns i have with reverse mortgages is how they can impact one or both spouses down the line in retirement.

Agree. I'm one year from retirement, and I've had lots of conversations about finances /other issues with similar-aged friends and co-workers. It seems that most people tend to think about the next couple years ... not 10, 20 or more years in the future, when one spouse may be left alone. These choices are really hard because you don't know how long you'll live, and you don't know how much money you may need for future expenses.

Since the OPs are in their 60s, they presumably have quite a few years left. A Reverse Mortgage ties them into this property forever, so if one spouse is widowed, he or she would have trouble, say, downsizing to a condo or moving in with an adult child or with a sibling.

The commercials I've seen always suggest you can get "up to" 45% of the value of your house.

Yeah, would you sell your house for 45% of its value? I think not.

The bank can often take the house before the children even figure out that their parents held a reverse mortgage.

Yeah, that's basically the story I told above.

If you live in a decent size/large home - consider downsizing ... Do you have two cars? Would you consider one?

If money is a concern, yes, downsizing is a great idea -- though it can be problematic financially if the house requires some fixing up, and buying something smaller can sometimes cost almost as much as keeping the old, larger house. BUT downsizing will cost less in terms of utilities and yard upkeep -- and that's a savings.

Downsizing to one car in retirement is a HUGE money saver -- and could potentially remove the need for a Reverse Mortgage. My husband and I only had one car for the first three years of our marriage, and when I finished school /started working and we needed a second car, it was a BIG bump-up in our budget. When we retire in another year, we will definitely be getting rid of one car -- it's even easier today now that Ubers are a choice.

 

[dclpluto]

Do not do it. You hear nothing but bad things about them. They are laughing all the way to the bank. Now to help out the younger people so you don’t have to think about this when you get older. Up your 401k you should be putting 15 or more percent into your 401k.

 

[GAN]

Do you any of you seniors out there have a reverse mortgage to get extra money in retirement? Our home is paid for and we currently have no plans to move or downsize for several years. We are 62 and 64. Just starting to research and would like opinions on them.

I don't know where you live, but if I were you I'd sell it in this market and rent for a while. What's the advantage of a reverse mortgage? Take the cash while the market's hot, then downsize in a year or two. These are uncertain times, inflation is hitting us pretty hard. Invest the money in a safe fund and earn some interest that you can live off or invest it in Tesla and double your money in 5-years .

 

[MrsPete]

... Now to help out the younger people so you don’t have to think about this when you get older. Up your 401k you should be putting 15 or more percent into your 401k.

Yes, if you're still young /at the beginning of your career, someone lives (lives well) on 15% less than you earn ... so put aside money. Also work towards a paid-for house and avoid debt. Saving in your 20s is much more effective than saving later in life ... you still have years ahead of you, and the power of compound interest is on your side.

How can you do this in your 20s when you're still on an entry-level salary?

- Drive a used car /drive it as long as it will possibly last
- Live at home with your parents a little longer
- Live with a roommate
- Don't upgrade your electronics
- Think twice about how many music /movie subscriptions /gym memberships, etc. you need
- Buy clothing used /don't buy more than you actually need
- Travel, but do it on the cheap
- Cook at home and brown bag your lunch
- Never carry revolving debt on your credit card
- Don't think you must do everything everyone on Facebook seems to be doing