Reverse Mortgage?

**frugalfranny** · 12-21-2011, 01:41 PM

Another thing I just can't understand..........

Can someone give me a scenario when using a reverse mortgage would be a good thing?

There has been an ad on TV for them.........and I have a friend that has investigated them..........and almost did it

......with VERY LITTLE equity, but I think finally realized what she would be doing.

Is this right???..........

1. you HAVE to still live in your house (no renting)

2. you still have to pay for all the up keep........new roof, paint, etc.
(and are MANDATED to keep it up......not let it fall to ruin)

3. you get a monthly income based not only on value/equity of house (at the time the papers are signed) but your life expectancy is figured in it too.........right?

4. unless purchased after your death, your family has no claim to your house????????????

BUT WHY WOULD YOU DO THIS????????

Has anyone here done it? Know someone that has? What am I missing here?

**Telephus44** · 12-21-2011, 02:38 PM

You are basically selling your house before you die. While I agree in most cases its a bad idea (and I think so of the fees are outrageous), I can see a few situations where it makes sense.

Picture this: Little old lady is 80 years and can no longer afford her bills on social security alone. She gets to continue to live in her own house, but gets money every month so she can cover her bills. When she dies, her heirs don't have to worry about whether or not they can sell the house, nor do they have to worry about supporting her financially up until her death.

**ansley** · 12-21-2011, 03:53 PM

Originally Posted by Telephus44

You are basically selling your house before you die. While I agree in most cases its a bad idea (and I think so of the fees are outrageous), I can see a few situations where it makes sense.

Picture this: Little old lady is 80 years and can no longer afford her bills on social security alone. She gets to continue to live in her own house, but gets money every month so she can cover her bills. When she dies, her heirs don't have to worry about whether or not they can sell the house, nor do they have to worry about supporting her financially up until her death.

That is my dh's great aunt almost to a T. The only difference is that she has no heirs. It has worked out well for her. Before she went the reverse mortgage route she tried to sell baked goods. But she was reported (who would do that to a little old lady no one will hire) and was shut down.

**frugalfranny** · 12-21-2011, 07:39 PM

Originally Posted by Telephus44

Picture this: Little old lady is 80 years and can no longer afford her bills on social security alone. She gets to continue to live in her own house, but gets money every month so she can cover her bills. When she dies, her heirs don't have to worry about whether or not they can sell the house, nor do they have to worry about supporting her financially up until her death.

But they have given her the money based on some life expectancy..........so say she dies in two years...........and they still OWN the house right? They have made a killing!!!!

Can the heirs then come in and pay back what was paid to her, then sell the house and keep the profit?...........assuming after only two years there would BE some profit.

Have heard the same thing about the fees.........

**lisaflex** · 12-21-2011, 09:02 PM

its not a good idea...anyone considering should stop conisidering...jmho

**NikoSan999** · 12-21-2011, 09:19 PM

Talked to a lady who done this...with Bank of Hell no less.

Forget the details but yes...supposedly ( remember what bank we're talking about ) supposedly the heirs can come back in and buy it back...but while I forget the details I'm quite sure NOT at just what the bank paid the little old lady.

Actually I'm thinking it was at fair market value. What the bank is SAYING and what's in the fine print in the middle of the contract are probably two different things.

You also brought up another good point on number two...
2. you still have to pay for all the up keep........new roof, paint, etc.
(and are MANDATED to keep it up......not let it fall to ruin)

NOW....if this is the little old lady who tried to sell baked goods out of her home and can't make ends meet....HOW is she going to paint the house...put a new roof on etc...( and they CAN send inspectors out to check on the house to see that it's in good condition for when she dies and they get it at no cost to them for the repairs) then how the crap is she going to do all this even on what they give her a month considering she still has to have it to live on. A roof here is thousands of dollars, have you called a painter lately to get a quote on painting a room ( know some...haven't done it ourselves) much less the entire outside of a house. Again, thousands. Unless it is one he&& of a house paid almost off the monthly pittance they give her is NOT going to cover old age AND costly home repairs...small ones yes, maybe, but not ones in the thousands.

So inspector comes, tells her it needs a new roof, she can't afford it....she voids the contract...loses the house. Pfft..out on the street. In todays banking world they'd probably have in the contract....buried of course 3/4 way thru where you're tired of reading it even if you tried and understood it...that they can in turn sue her for THEIR cost of repair plus legal. Bet you.

**frugalfranny** · 12-22-2011, 12:09 AM

Originally Posted by lisaflex

its not a good idea...anyone considering should stop conisidering...jmho

I agree but I wasn't asking if it was a good idea............was
asking to get some more knowledge about them and to see if anyone had done it.

Just can't imagine a scenario where it would be worth it........or why someone would do it.........always someone that might need it.

Got curious after I kept seeing this ad on TV for them...........runs often too so SOMEONE must be doing them.

Niko.........Yep---agree.......and I was just floored when this 'acquaintance' was going to do it........she is ALWAYS broke. Had to borrow money to get the outside of her TINY house painted don't know why she would do this......think she decided against it.

**Contrary Housewife** · 12-22-2011, 12:09 AM

It's a consideration for me because I have no heirs. I expect to outlive my husband and both my brothers. If I could sell the house back to the bank and live my final years in financial comfort, I would.

**frugalfranny** · 12-22-2011, 12:12 AM

Originally Posted by Contrary Housewife

It's a consideration for me because I have no heirs. I expect to outlive my husband and both my brothers. If I could sell the house back to the bank and live my final years in financial comfort, I would.

But have you checked on it...........I mean, enough to know the fees and etc.?

**Contrary Housewife** · 12-22-2011, 10:38 AM

Only what I've seen on the internet. Reverse Mortgages: Get the Facts Before Cashing in on Your Home’s Equity

I'm too young to talk to a bank about it yet, and who knows, we may not even be using money by the time I'm of an age to get this loan.

**ansley** · 12-22-2011, 01:14 PM

Originally Posted by NikoSan999

NOW....if this is the little old lady who tried to sell baked goods out of her home and can't make ends meet....HOW is she going to paint the house...put a new roof on etc...( and they CAN send inspectors out to check on the house to see that it's in good condition for when she dies and they get it at no cost to them for the repairs) then how the crap is she going to do all this even on what they give her a month considering she still has to have it to live on. A roof here is thousands of dollars, have you called a painter lately to get a quote on painting a room ( know some...haven't done it ourselves) much less the entire outside of a house. Again, thousands. Unless it is one he&& of a house paid almost off the monthly pittance they give her is NOT going to cover old age AND costly home repairs...small ones yes, maybe, but not ones in the thousands.

So inspector comes, tells her it needs a new roof, she can't afford it....she voids the contract...loses the house. Pfft..out on the street. In todays banking world they'd probably have in the contract....buried of course 3/4 way thru where you're tired of reading it even if you tried and understood it...that they can in turn sue her for THEIR cost of repair plus legal. Bet you.

Paid for, Brick house - no paint, metal roof - should be good for the rest of her life, she is an old lady that doesn't smoke or have animals - why does she need to paint a room? She does still have insurance on the house for major things. She can still do basic DIY maintenance. I doubt they will sue. She literally has nothing but the house and they knew that going in.

Would it be better for her to eat dog food and freeze in winter or suffocate in summer?

**Telephus44** · 12-22-2011, 03:00 PM

Originally Posted by frugalfranny

But they have given her the money based on some life expectancy..........so say she dies in two years...........and they still OWN the house right? They have made a killing!!!!

Can the heirs then come in and pay back what was paid to her, then sell the house and keep the profit?...........assuming after only two years there would BE some profit.

Have heard the same thing about the fees.........

I can see if you're worried about leaving money/the house to someone else that it would be a bad idea. Personally, I don't particularly care whether I get my parents house or any profit from selling it. That's somewhat situational though.

I'm also personally biased since I have some family members that have inherited houses that they can't sell or would have to put in tons of money in order to be able to sell. If that's the case, not having to worry about selling the house could be a positive.

Besides, in the example you were saying what if she dies in 2 years - what if the opposite happens and she dies at 107?

**frugalfranny** · 12-22-2011, 05:50 PM

Good points CH and teleph............like to see someone else's thinking on things.

Wasn't even thinking along the lines of no heirs.

Guess I was just thinking about my "friend" that was thinking about doing it...........figured if she couldn't afford to keep her house up NOW and had to take out loans for maintenance........the little bit of extra money she got wouldn't help much. (very little equity and not that old)

**Contrary Housewife** · 12-22-2011, 06:22 PM

Originally Posted by frugalfranny

But they have given her the money based on some life expectancy..........so say she dies in two years...........and they still OWN the house right? They have made a killing!!!!

Can the heirs then come in and pay back what was paid to her, then sell the house and keep the profit?...........assuming after only two years there would BE some profit.

Have heard the same thing about the fees.........

From what I have read it is more like a loan against the house. IE: a mortgage. So the heirs/estate could pay back what was loaned out to grandma and get the house back. If grandma dies before the terms of the contract end, there would presumably only be a small amount to be paid back. If the heirs could not come up with the money then the house would be sold and the bank will take what is owed them from the profits. The bank doesn't just "get" the house.

**NikoSan999** · 12-22-2011, 08:53 PM

Originally Posted by ansley

Paid for, Brick house - no paint, metal roof - should be good for the rest of her life, she is an old lady that doesn't smoke or have animals - why does she need to paint a room? She does still have insurance on the house for major things. She can still do basic DIY maintenance. I doubt they will sue. She literally has nothing but the house and they knew that going in.

Would it be better for her to eat dog food and freeze in winter or suffocate in summer?

First I only used the baked goods as an example....not to offend. I think what happened to her was horrible. Shame on the person that turned her in. I'm glad it worked out for her. On the other hand....

Yep, every 80 year old woman does do it yourself plumbing, electrical, drywall, tile and carpet!

You DOUBT that they would sue? Obviously you haven't had much experience with banks on a negative basis. Do you read the papers or listen to the news. Happens everyday. They just put a 105 year old woman out on the street...Wells Fargo. No family...on the street.

Not every house is brick, metal roof. Most are frame and here stucco. Metal roofs are NOT the norm.

"She had nothing but the house and they knew that going in". Do you REALLY REALLY think they care....If you do you are DEFINITELY the minority.