"Putting Your Mortgage in Reverse"

[Nords]

We've mentioned reverse mortgages in passing, but here's a good summary from the Sunday WSJ.

"The Federal Housing Administration insured 74,412 "home equity conversion" mortgages during the year ended Sept. 30, compared with 43,082 the previous year, according to the Department of Housing and Urban Development. Nearly half of all FHA reverse mortgages have been originated in the last two years."

 

[riskadverse]

The article was informative, but I tried the calculator referenced, and I am more confused than ever. I would guess the reverse mortgage will get alot cheaper, more competitive, and alot more transparent to the customer in the next few years. The concept interests me, having a good portion of my net worth in a house.

 

[tryan]

costs for a 74-year-old borrower in a $250,000 home in May 2006 could be about $25,000 -- not including interest. For that, the homeowner could draw about $1,000 in monthly payments.

Yikes! 10 % can go to fees! Yup we need some competition in this industry.

 

[Cut-Throat]

I also ran the Calculator with some fictitious numbers. Someone help me out reading this result. Are there 3 diff. programs with cash payouts of $122K, $54K and 138K? If so why the big Diff?

I don't get it!

 

[rs0460a]

Some more calculators/information - FYI...

http://www.aarp.org/money/revmort/

 

[Sam]

It's horribly bad from a financial point of view. I think the people who use this "Reverse Mortgage" do so for emotional reasons.

 

[Nords]

It's horribly bad from a financial point of view. I think the people who use this "Reverse Mortgage" do so for emotional reasons.

It's a small market where one or two players can set the rates and rake in as much as they can handle. The fact that it's doubled in the last year means eventual competition & consolidation that'll drive down their margins and make them a better deal for consumers (although not a great deal).

I think the people buying reverse mortgages do it for the running-out-of-money, afraid-of-outliving-their-portfolio, and can't-go-back-to-work reasons. It's probably the last resort.

 

[Cut-Throat]

It's horribly bad from a financial point of view. I think the people who use this "Reverse Mortgage" do so for emotional reasons.

It's only horribly bad from a financial point of view, if you are planning on Living forever. However, If you 'feel' you might die someday and not want to leave anything to anyone and want to live in your existing house, it is a way to spend more money when you are alive.

got a better way to do this? - I'm listening.

 

[Sam]

It's only horribly bad from a financial point of view, if you are planning on Living forever. However, If you 'feel' you might die someday and not want to leave anything to anyone and want to live in your existing house, it is a way to spend more money when you are alive.

got a better way to do this? - I'm listening.

Your "want to live in your existing house" requirement precludes other ways.

Edit to add:
Not sure what you mean by "not want to leave anything to anyone" ? With this reverse mortgage you are leaving what's left of your house to the bank. I'd rather leave it to my kids or to charity.

 

[FIRE'd@51]

With this reverse mortgage you are leaving what's left of your house to the bank. I'd rather leave it to my kids or to charity.

If there is equity left in the house at the time of your death, it can still go to your heirs. Your estate can sell the house and pay off the loan to the bank.

 

[Cut-Throat]

Your "want to live in your existing house" requirement precludes other ways.

Edit to add:
Not sure what you mean by "not want to leave anything to anyone" ? With this reverse mortgage you are leaving what's left of your house to the bank. I'd rather leave it to my kids or to charity.

What I mean, is that when my wife and I are dead, we don't care who gets the house.

We're dead and I don't plan on worrying about much when I'm dead!

 

[Sam]

We're dead and I don't plan on worrying about much when I'm dead!

Don't worry, you won't, even if you want to

 

[riskadverse]

Some more calculators/information - FYI...

http://www.aarp.org/money/revmort/

This calculator (and/or the results) was even worse than the first. I think they sold me - on giving up on the idea of a reverse mortgage.

 

[Cut-Throat]

Don't worry, you won't, even if you want to

So, you do get the idea!

 

[jazz4cash]

Yeah..... I meant to do this

Sorry, folks.....I did a search on reverse mortgages and this is the only thread I found. Nearly all the comments made seem to be relevent two yrs later esp. with regard to clarity and cost of this procedure. The best website I found was AARP.org

Background

My 68 yo brother has lots of rental properties (95% of his assets) and seems to be ready to withdraw from being a landlord, but does not wish to sell until the market rebounds. In the meantime he mentioned getting a reverse mortgage on his residence. I asked "why?", but cant get to the root of the issue (i.e. does he have financial problems). The costs involved are so high that this is a last-resort type strategy IMO. He just says the closing costs are less than a realtor's commission and based on that it's reasonable.

In doing a bit of research, I am forming an opinion that a combination of the highest cash payout and a monthly adjustable interest rate would be the best choice for him.