Reverse Mortgages Now Good per Scott Burns

[jclarksnakes]

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?

 

[Texas Proud]

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...

 

[Katsmeow]

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.

 

[jclarksnakes]

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.

 

[tryan]

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.

 

[youbet]

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.

 

[Texas Proud]

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...

 

[pb4uski]

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.

 

[harley]

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.