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Old 04-15-2012, 09:31 AM   #21
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I consider RM among my plan C options...why rule it out as a last resort?
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Old 04-15-2012, 09:47 AM   #22
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Quote:
Originally Posted by MichaelB

You may wish to stay in your house but a slip in the bath or on the stairs may change that permanently. One downside I see is a RM only generates cash of 2/3 of the market value of the house and there is no guarantee the homeowner will ever see the remaining 1/3. If the house is worth $400K that could be over $100K left on the table.
There is the rub. DW's MIL insisted on staying in the house even though it was clear that assisted living was in their future. A year after starting the reverse mortgage, DW's father deteriorated to the point that they had to move. Luckily there was sufficient value left to cover the entry costs of the facility they entered but a few years along and that would not have been the case. Figuring how to handle those last few years are the killer (no pun intended).
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Old 04-15-2012, 10:30 AM   #23
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Figuring how to handle those last few years are the killer (no pun intended).
That's reality - nothing more nor less.

Let us all be "lucky" in our end-of-life decisions...
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Old 04-15-2012, 10:51 AM   #24
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Yes, Zero, it sounds like you are talking more about something like a cash out refinance. Followed by walking away from the mortgage. Can you get a lump sum out of reverse mortgage? If so, it does sound like a decent deal for Auntie.
Exactly, thanks.

I'm suspecting she is OK healthwise for maybe another 6-8 years, and in that time comfortably in her home with either a big $100,000 lump sum in the bank or an annuity from the $100,000.

If she suddenly needs a nursing home, she has $100,000 to get into the better homes and spend that down till Medicaid will kick in.

So given the facts that an outright home sale is unlikely in her town, and that a home sale would mean moving to another home and paying rent, yeah, RM is like a HELOC that doesn't have to be paid back till she moves.

She has no heirs.
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Old 04-17-2012, 07:36 AM   #25
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To me, a RM is like.... I am cold, and look at all of this wood in my house... let me burn some of it so I can be warm.... soon, you have no house and you will be cold...
Seems more like - I am cold, I live on a wooded acre of land ... let me cut a cord of wood from the woods .... it'll grow back ... it will be there forever for me. And I am never cold again.
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Old 04-17-2012, 11:34 AM   #26
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If the house absolutely cannot be sold because of location in a financially declining area how can it be worth $150K? My old fashioned thinking says it is only worth the amount it could actually be sold for. OTOH, if the house is really worth 150K and she can only get a lump sum of 100K out of an RM she is walking away from 50K right from the start. Seems to me like it is time to think outside the box. Instead of a bank or mortgage company getting the house at such a discount how about selling it to someone within the family and letting auntie stay in it for as long as she is able?
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Old 04-17-2012, 11:41 AM   #27
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If the house absolutely cannot be sold because of location in a financially declining area how can it be worth $150K? My old fashioned thinking says it is only worth the amount it could actually be sold for. OTOH, if the house is really worth 150K and she can only get a lump sum of 100K out of an RM she is walking away from 50K right from the start. Seems to me like it is time to think outside the box. Instead of a bank or mortgage company getting the house at such a discount how about selling it to someone within the family and letting auntie stay in it for as long as she is able?

Not really... there has to be some room for the interest to accrue... IOW, if she lived 20 years, the amount 'owed' is a lot higher than $100,000...
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Old 04-17-2012, 01:29 PM   #28
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OTOH, if the house is really worth 150K and she can only get a lump sum of 100K out of an RM she is walking away from 50K right from the start.
Is this really true? In addition to the interest issue, isn't there also a value in being able to continue to live in the house? I agree that can be something of a gamble as to how long the person ends up living in the house, but it still has a value.

I tend to think that a reverse mortgage is like some other things (just as annuities) something that has to be looked at for the individual situation. It probably (almost certainly) doesn't make sense for most people but there can be situation where it does and shouldn't be just reflexively rejected out of hand.
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Old 04-17-2012, 11:48 PM   #29
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Is this really true? In addition to the interest issue, isn't there also a value in being able to continue to live in the house? I agree that can be something of a gamble as to how long the person ends up living in the house, but it still has a value.

I tend to think that a reverse mortgage is like some other things (just as annuities) something that has to be looked at for the individual situation. It probably (almost certainly) doesn't make sense for most people but there can be situation where it does and shouldn't be just reflexively rejected out of hand.

Of course you are right. The ability to stay in the house is worth money. OTOH an 81 year old might not be able to stay in the house for very long. The basic idea of RMs is pretty compelling but it seems to me that a family should consider other possible options before an aging relative has to take 100K for a 150K house.
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Old 04-18-2012, 07:05 AM   #30
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Nobody is stealing equity .... when the house is sold the difference between the sale price and the RM is deposited into the estate homeowner. No different from if she only held the RM for a year or two before moving into assisted living (she only owes the $$ she took plus interest and fees).

It's a mortgage - not a sale - at 2/3's the home value.
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Old 04-18-2012, 07:24 AM   #31
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a family should consider other possible options before an aging relative has to take 100K for a 150K house.
The aging relative doesn't take 100k for a 150k house. He/she gets a 100k line of credit and retains ownership of the house. When the house is sold, the entire amount of the sale (150k or whatever it brings at the time less realtor fees, etc.) applies towards whatever portion of the line of credit was used plus interest with any residual going to the owner.

If you only stay in the house a short time, it's an expensive loan. If you live in the house a long time, to the point where the loan plus interest exceeds the sales price of the home, it turns out to be a very cheap loan since they accept whatever the house sells for as full payment.
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Old 04-18-2012, 09:29 AM   #32
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The aging relative doesn't take 100k for a 150k house. He/she gets a 100k line of credit and retains ownership of the house. When the house is sold, the entire amount of the sale (150k or whatever it brings at the time less realtor fees, etc.) applies towards whatever portion of the line of credit was used plus interest with any residual going to the owner.

If you only stay in the house a short time, it's an expensive loan. If you live in the house a long time, to the point where the loan plus interest exceeds the sales price of the home, it turns out to be a very cheap loan since they accept whatever the house sells for as full payment.

If you look at one of my earlier posts... they can take out the $100,000 as a lump sum and do with it as they wish... I had thought that they paid a monthly amount, like an annuity.... but with this thread looked at it some and found out there are other funding choices...
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Old 04-23-2012, 07:07 PM   #33
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Just saw a commercial where Fred Thompson was hawking reverse mortgages. From U.S. Senate to U.S. Presidential candidate to hawking reverse mortgages. WTF. Sad.
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Old 04-23-2012, 08:16 PM   #34
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Just saw a commercial where Fred Thompson was hawking reverse mortgages. From Watergate lawyer to lobbyist to TV actor to U.S. Senate to U.S. Presidential candidate to hawking reverse mortgages. WTF. Sad.
Fify. Seems like a normal job progression in the sales field to me.
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