Night Elf Posted February 21, 2014 Share Posted February 21, 2014 I saw a commercial for reverse mortgages. When is this a good idea? I'm trying to understand it. Quote Link to comment Share on other sites More sharing options...
bolt. Posted February 21, 2014 Share Posted February 21, 2014 I imagine its a good idea for post-retirement home owners who do not want to sell their home, but would like the income from selling it off "gradually". Ideally this should not be their only asset, and they should have no other debts. It also ould not be chosen too early in retirement -- because it will eventually "run out" and the home will be owned by the bank, which has the potential to leave them both homeless and penniless. It also leaves their heirs without the home as an inheritance, which might mean leaving no inheritance at all, or perhaps a partial pay out: the remaining value of the house/property. In some cases it is very unwise because for many seniors, the proceeds from the sale if their home is how they pay for a nursing home for their final years. If the home has been already sold off for living expenses before that time, there is no nest egg to support the final phase of care (which can be expensive). At the very outer edge of possible scenarios, perhaps a young widow or widower home-owner could use a reverse mortgage to fund staying at home with their children (because the mortgage was probably life-insurance secured, therefore fully paid at the spouse's death). This could result (again) in being left with neither a home nor other assets when it "runs out" -- but a young widow/er could transition to being employed after the "staying home" years are over. Quote Link to comment Share on other sites More sharing options...
wendyroo Posted February 22, 2014 Share Posted February 22, 2014 Bad idea. You lose control of the home in which you live. But isn't that the case for all of us who have regular "forward" mortgages as well? Wendy Quote Link to comment Share on other sites More sharing options...
LucyStoner Posted February 23, 2014 Share Posted February 23, 2014 Retirement aged people who have property they want to stay in until they die but don't have the income necessary to get by each month. Not usually the best financial decision but for some it is attractive because they can remain in their house rather than selling it and moving. Quote Link to comment Share on other sites More sharing options...
OnTheBrink Posted February 23, 2014 Share Posted February 23, 2014 My pastor, who's also a financial planner, advises against them. Quote Link to comment Share on other sites More sharing options...
gardenmom5 Posted February 23, 2014 Share Posted February 23, 2014 dh has a background in finance/banking. he considers them a scam. Quote Link to comment Share on other sites More sharing options...
Melissa in Australia Posted February 23, 2014 Share Posted February 23, 2014 I have heard of people doing this when they are elderly and one of the couple needs to go into a nursing home. It can allow the other person to still live in the family home while paying the nursing home fees. Quote Link to comment Share on other sites More sharing options...
speedmom4 Posted February 23, 2014 Share Posted February 23, 2014 The only opinion I've heard on them is Dave Ramsey's. He does not like them and like an above poster believes most of the time they are a scam. They are good for the banks not for the people who apply for them. Elise in NC Quote Link to comment Share on other sites More sharing options...
bolt. Posted February 23, 2014 Share Posted February 23, 2014 DR doesn't truly approve any kind of debt, including a regular mortgage (which he seems to regard as a nessisary evil) so it stands to reason that he would object to the practice of borrowing money against your home in order to provide living expenses. All mortgages are better for the bank than they are for you -- fiscally. If they weren't, why would banks offer them? Kindness? The person's benefit from a mortgage is not fiscal... It's the privilege of living for years in a home/property that you haven't paid for. The benefit if a reverse mortgage (if it is legitimately and prudently done) would be the same: selling your house for money, yet still living in it as you recurve the proceeds if the "sale". Definitely avoid scams. If you can't detect scams by yourself (I can't) then consult a pro or walk away... But DR is not the guy to ask, "What kind of debts are good for me?" -- He thinks none, primarliy (I think) because he accepts a hyper-literal interpretation of the Bible which 'defines debt as enslavement' (a metaphor) and thus has a strong bias against anything involving borrowing/lending. Quote Link to comment Share on other sites More sharing options...
gardenmom5 Posted February 23, 2014 Share Posted February 23, 2014 not everyone is healthy enough to stay in their homes. if someone who does a reverse mortgage ends up in that group, they have nothing to fall back upon. they don't own the house, they can't sell it and get the money for their health care costs. they are limited in what they can do to alter the structure. our neighbor did this. his step-son also lives on this street, and tried to stop him. the bank sold it for far less than the house would have gotten on the open market (implying he didn't get much out of that reverse mortgage becasue the bank only cares about paying off their loan.), even in the condition it was in. (and the buyer painted it *orange*. blech.) Quote Link to comment Share on other sites More sharing options...
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