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texasmom33

Reverse mortgages

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A relative on dh's side is going to reverse mortgage their primary residence. Dh just heard and is much less than thrilled. It seems anything we've heard about reverse mortgages is negative and they seem rather scam-ish.  Do these ever turn out well for the reverse mortgagee? Banks are in business to make money, so it seems they will be the one coming out ahead in the end. But are the cases where this is a good decision as opposed to selling the house and downsizing? Person in question is early 70's and not married. I don't know if it's to be a lump sum or paid out. 

 

My main concern is what happens if person needs to go into assisted living or a nursing home in the next few years. At that point have they forfeited on the value of the house and the bank makes a killing? I've looked online but it's a bit overwhelming.

Edited by texasmom33

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I have heard of a couple situations where it worked just perfectly.  More often I've heard where it becomes a nightmare later on or for the heirs.

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Nightmare. Better check the implications of qualifying for Medicaid. Reverse mortgages within the 60 month lookback period are the #1 reason to decline someone admission to a skilled nursing facility and possibly disqualify oneself from Medicaid. A HELOC or outright selling the home would be much better. If there's not already an elder law attorney or estate planner involved, might want to consult one.

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Nightmare. Better check the implications of qualifying for Medicaid. Reverse mortgages within the 60 month lookback period are the #1 reason to decline someone admission to a skilled nursing facility and possibly disqualify oneself from Medicaid. A HELOC or outright selling the home would be much better. If there's not already an elder law attorney or estate planner involved, might want to consult one.

 

I was just wondering about assisted living, so thanks for mentioning the Medicaid.  

 

We're unfortunately not in a strong position to give advice to this person- or rather it would not be well received, but we will be in the clean up position when this all goes to hell in a hand basket as it's a very small family and we're the only ones really in a position to help if it happens.

 

 Everything I've seen on financial sites and my books is citing this as a last resort, to only be leveraged under circumstances. In my view, if people were good at planning and adhering to special things they wouldn't need a RM in the first place, so it seems like a set up that they would stick to doing this the "right" way in most cases. The only pro-RM stuff I've found so far are on banking and mortgage broker blogs and websites. Figures. 

 

Ugh. 

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My grandparents did this, and it worked out fine for them.

I'm sure that under the right circumstances, for the wise and well informed homeowner, it can work. But many people get themselves into trouble over it. RM companies often add extra fees (i.e., mortgage insurance) to the monthly statement, which causes the homeowners' equity to be whittled away at a faster pace. It's definitely sonething to thoroughly research, especially with its potential to affect Medicaid eligibility.

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My sister's aunt-in law did this and it turned out to be a very bad deal for her.  The house stayed in her name and therefore she did not qualify for any kind of aid.  She has gone to a nursing home now and the bank is taking the house over.  It has been very difficult for the family.

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This afternoon I told my Mom what is going on and she has echoed Seasider's advice and encouraged us to contact an Elder Attorney ASAP since the relative in question won't. She's worried we're going to end up with this person living with us, or having to pay for them to live elsewhere. I guess the Elder attorney is the next step we will have to do. She gave me a name, so now at least I have someone to call. Maybe we can drop enough comments to make a difference. 

 

What stinks is we don't have the full picture of course. We only know what this person is choosing to tell us, and obviously they made some poor decisions to need a reverse mortgage in the first place. It's a very expensive place to live in due to taxes and fees, and I just don't see it working out well. Of course they're an adult and entitled to their choices. It just seems like a better option would be selling the place and using that to fund retirement in a more affordable locale without going into debt. 

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I wouldn't do it.

 

a neighbor did one - the step-son lives next door, but wasn't able to talk him out of it.   after he died - the bank owned the house.

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I'm sure that under the right circumstances, for the wise and well informed homeowner, it can work. But many people get themselves into trouble over it. RM companies often add extra fees (i.e., mortgage insurance) to the monthly statement, which causes the homeowners' equity to be whittled away at a faster pace. It's definitely sonething to thoroughly research, especially with its potential to affect Medicaid eligibility.

 

This is a huge deal. I am so glad you mentioned it. I have a feeling this person is counting on Medicaid eligibility down the road. 

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I just recently saw a commercial and the spokesperson was Henry Winkler.  Henry was very persuasive. He said reverse mortgages are not a scam.  Really, if you can't trust the Fonz, who can you trust?   :coolgleamA:

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This afternoon I told my Mom what is going on and she has echoed Seasider's advice and encouraged us to contact an Elder Attorney ASAP since the relative in question won't. She's worried we're going to end up with this person living with us, or having to pay for them to live elsewhere. I guess the Elder attorney is the next step we will have to do. She gave me a name, so now at least I have someone to call. Maybe we can drop enough comments to make a difference.

 

What stinks is we don't have the full picture of course. We only know what this person is choosing to tell us, and obviously they made some poor decisions to need a reverse mortgage in the first place. It's a very expensive place to live in due to taxes and fees, and I just don't see it working out well. Of course they're an adult and entitled to their choices. It just seems like a better option would be selling the place and using that to fund retirement in a more affordable locale without going into debt.

Maybe talk up how great the national real estate market is currently?

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Maybe talk up how great the national real estate market is currently?

Long story short-they have had place on market for several weeks, but it isn't selling, or getting much traffic. I think there are many reasons for that. But ultimately I think lack of patience is combining with unrealistic market expectations and reverse mortgage is the easy out. Personally I think selling the place is the better solution. But I talked to dh tonight and he agreed for us to see an elder care attorney, so that's a step in the right direction, at least for our position. I can't control anyone else, but in stead of them taking sound advice, I can at least cover our asses in the meantime if we do and know the possible outcomes.

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