Does a reverse mortgage ever make sense?

**LivingAlmostLarge** · 01-02-2008, 08:17 PM

Well honestly it's not great, but seriously how many of us know someone whose older, stubborn, and refuses to move out of their house? And they have nothing saved for retirement? Well what other choice do they have or will they even consider?

Some of these people are so stubborn. They'll die in the house. So would you really just keep giving grandpa money when he didn't save any? Or let him use his only asset?

**Deelip** · 01-03-2008, 03:01 AM

I too dont think its just neceassry. I find some people not willing to save whatever money they have

**Broken Arrow** · 01-03-2008, 05:38 AM

There are times when it does make sense....

Like if you're someone who has very high equity, low overall debts, you don't much in the way of retirement savings, and/or you don't have children or don't plan to pass on anything to them.

Obviously, not everyone is going to be in that position going into retirement. And even if you are, it's hardly the ideal answer.

**Fern** · 01-05-2008, 02:40 PM

No one here has mentioned the age factor yet. Reverse mortgages can really enhance a homeowner's quality of life in their golden years, say if they decide to do a reverse mortgage in their 70s or later.

So when you say "someone nearing retirement," exactly what age are you talking? It would really foolhardy, i think, to do a reverse mortgage in your 50s, and not advisable even in your 60s. That's becus there's a much greater chance to outlive your money! It's not an unlimited source of income, it's just the market value of your house.

Still, i would consider this a last resort type of thing if you really have no other assets to live on.

**disneysteve** · 01-05-2008, 04:41 PM

Originally posted by Fern View Post

That's becus there's a much greater chance to outlive your money! It's not an unlimited source of income, it's just the market value of your house.

There are different types of reverse mortgages. A "tenure" type will pay you equal monthly payments for as long as you live in the home. It is possible to receive more in payments than the home is worth if you outlive the projection they use to determine the payments.

**Scanner** · 01-05-2008, 06:35 PM

We have had this discussion before but I think a better way of tapping the equity in your house vs. a reverse mortgage is this:

Sell your house to an investor with an agreement to lease back. Then take the proceeds from your home and deploy it into income producing investments (bonds, generally, maybe a smidgen of utility stock).

It produces a win/win arrangement.

Grandma gets to live in her house. Grandma gets her equity liquidated and easier for probate. THe investor gets a tenant who will take care of the house and build wealth.

I look at it this way - after about age 75 for a male and maybe 83 for a female, your life is "on lease" anyway. Yeah, I know you could live to be 90 or 100 (1 in 3 women will be centurians, I think).

But I think this sort of arrangement can buy a lot of time, considering the face many/all will have SSI coming in. Couple this with income producing investments and some financial know-how. . .the pressue of owning a home would be off of Grandma.

You could possibly take the money from a house and buy an annuity if you think you may live to be 100 but I would think you would really have to know what you are doing.

**JasonEngler** · 01-06-2008, 11:12 AM

Great feedback everyone, this is a great discussion.

Some answer for everyone...to help put this in context.

Fern - Gma is 76 and of average health.
Scanner - Creative thinking, I like this as an alternative solution!
DisneySteve - I didn't know this type of reverse mortgage existed, that is comforting.

**Ima saver** · 01-06-2008, 11:19 AM

MY FIL is 86. 15 years ago he deeded his house to his 3 sons. Now, he has no money to maintain the house. He now wishes he had the house back and he would get a reverse mortgage to help him live in the house. He only gets about $500 in social security each month!

**Broken Arrow** · 01-06-2008, 07:41 PM

Originally posted by Ima saver View Post

MY FIL is 86. 15 years ago he deeded his house to his 3 sons. Now, he has no money to maintain the house. He now wishes he had the house back and he would get a reverse mortgage to help him live in the house. He only gets about $500 in social security each month!

Are the 3 sons are not respectable enough to work something out with their own father? I don't know what kind of people they are, or what situation surrounds it, but this would upset me if it was my family.

**Tree0164** · 01-07-2008, 01:57 AM

I don't beleive you can do a reverse mortgage until you are 62. My husband keeps bringing this up as a great solution when we are retired Argh. Honestly the idea scares me but I do see what DisneySteve says in our mid to late 80s it could be an option if funds were running low.

We are not planning for it. (I do the money management in our house)

**sweeps** · 01-07-2008, 04:16 AM

Originally posted by Tree0164 View Post

I do see what DisneySteve says in our mid to late 80s it could be an option if funds were running low.

What happens if you take out the reverse mortgage and then die the next day?

**disneysteve** · 01-07-2008, 05:54 AM

Originally posted by sweeps View Post

What happens if you take out the reverse mortgage and then die the next day?

It gets repaid by the proceeds from the sale of the house. It really doesn't matter if you die the next day or 10 years later, the outcome is the same.

Keep in mind that there are various types of reverse mortgages but we keep discussing them as if they are all the same. You can get a lump sum. You can get a monthly check. You can have a equity credit line to draw from.

So it is possible, in your scenario, that if you got the credit line type, and hadn't yet drawn on it, there would be nothing to repay.

**sweeps** · 01-07-2008, 06:57 AM

I see, makes sense.

**Scanner** · 01-07-2008, 09:20 AM

With the "buy to lease-back" option, I think the main barrier is "psychological."

You don't feel like you "own the home" anymore. I think this barrier is more prevalent in a female than male but not always.

However. . .I know Robert Kisoyaki is not popular here. . .but he does have a point.

Home ownership is kind of an illusion we all have anyway.

As he notes. . .stop paying taxes on your property and see who really owns your house. You'll find out in less than 2 years where you stand.

Does a reverse mortgage ever make sense?