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Reverse Mortgages
Old 08-16-2017, 08:28 PM   #1
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Reverse Mortgages

So... Whaddya know about reverse mortgages?

Most of the advertised websites lead to wanting to "get back to you" which usually leads to harassment. The ones that don't require that are very confusing to me. Putting the same numbers into three different calculators brought back 3 widely different results... by as much as 50%.

Am not looking to cash in or borrow, but mostly from curiosity, wondering about the availability of cash, or a line of credit.

How much:
loan initiation cost
amount of credit
amount of loan
percent... what does that mean?
surrender value
buyback costs
legal costs
when credit/loan is exhausted, what happens?

Here's what I put into the calculator (not my numbers, example only)
Age of DW and Self 65
Home value $250,000
Current Mortgage None

This is what came back:

Quote:
You Can Be Mortgage Payment FREE For Life
And Have Access to an Additional
$136,000 Line of Credit
With a guaranteed growth rate of 5.72%*
And $112,750 in Remaining Home Equity

If you would like more information on our exclusive programs via email please request your FREE, no hassle quote today!
Please Send My Free Quote!
What's Included With Your Quote?
Side-by-side comparison of our best programs Expert recommendation & decision guide "Line of credit growth rate guide" How this guaranteed growth rate can add security to your retirement
.................................................. .................................................. ....

Here's another site that gives more informqation, but with more explanation about availability and costs. Putting in the same numbers as above, gave very different numbers.

Reverse Mortgage Calculator - Interest, Payment, Purchase
.................................................. .................................................. .....

I guess what I was hoping for was a real life scenario, to see if it would be reasonable to use a reverse mortgage to be able to keep nest egg investments intact while staying in the homestead. Of course we know that it's a losing proposition... no free lunch, but what if... the
"IF" happened.

Any thoughts? Or a website that explains Reverse Mortgages as a practical matter, as well as what heirs would expect.
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Old 08-16-2017, 09:21 PM   #2
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One of my favorite actors, Tom Sellek, is advertising for a reverse mortgage company. Near as I can tell from what he says in the ads (and what I've heard elsewhere) is that the loan is paid back when the last person on the loan leaves the house. My assumption is that most folks at that point sell the property to accomplish the repayment. I think the key is that the gummint guarantees the loan so if the sale of the house isn't enough to repay the loan, the gummint makes up the difference. I could be wrong so YMMV.
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Old 08-16-2017, 09:26 PM   #3
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It's probably great LTC insurance strategy.

If you go into a home, the State is going to take your home if that is your major asset. If you have already spent the money, and had fun with it, who cares about the house and any liens put on it by the nursing home.
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Old 08-16-2017, 09:36 PM   #4
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My aunt and uncle took out a reverse mortgage to buy a motorhome. He became ill, they sold the motorhome for much less. Then he passed away and she used the $$ to put in granite countertops and wood flooring in her home. They never had much in savings, their home is their biggest asset, maybe $250K tops. I didn't think it was a good idea but they didn't ask me. If she sells the home now, she'll have less after the sale. No pension income, only social security and a small IRA.

Also heard a story about a woman in FL who took out a reverse mortgage on her condo. The economy tanked, the bank repossessed the condo and she had to move in with her daughter.

I would very leery about pulling $$ out of my home.
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Old 08-17-2017, 04:01 AM   #5
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Quote:
Originally Posted by Senator View Post
It's probably great LTC insurance strategy.

If you go into a home, the State is going to take your home if that is your major asset. If you have already spent the money, and had fun with it, who cares about the house and any liens put on it by the nursing home.
at 10k a month here it would not come close to footing the bill .
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Old 08-17-2017, 04:05 AM   #6
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the problem with them is situations change and you can end up with no house and no money . .

having a reverse mortgage in an area with no public transportation and suddenly no longer being able to drive could be an issue .

needing some care and wanting to live closer to family can be an issue .

these mortgages eat up home equity way to fast . you even agree to make any major repairs the bank tells you to make whether you can afford them or not .

another problem is the majority of reverse mortgage receivers are now taking lump sum.

that reverse compounding interest can be killer.

even here in long island with the typical home worth more than 500k it can be quite painful.

On a $250,000 lump-sum in ten years the balance will climb to $465,841. Assuming 3% home price appreciation, that would leave about $72,000 in equity based on a home's $537,566 value. In 20 years, the loan balance would reach $868,031, exceeding the home's $722,444 value.


there are just so many negatives to using your home as a piggy bank that we all could make a never ending list as life plays out. many who took these loans just have not reached the point where their location has been a problem health wise or family wise yet..
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Old 08-17-2017, 04:44 AM   #7
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MIL and FIL took out a reverse about 2 years before the housing crash. Not much cash out, just to remove the house payment from retirement. Then, FIL died. 2 years later, MIL needed to move in with family (out of state) due to health problems. House would not sell for close to amount owed due to lousy market. (Only viable offer we received was refused when appraiser said house was worth much more.) SIL offered to move in and wait out the market. No, says bank. We suggested renting out house and waiting out market, no again. MIL moved out and allowed bank to foreclose. Bank harassed DW by phone and mail for 2 years demanding private information on siblings "to contact them and determine how they affect the estate". Home finally sold as a repo 2-3 years after MIL moved out.
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Old 08-17-2017, 09:18 AM   #8
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Which ever way you look at it, it is basically a high interest loan with high fees. A BAD DEAL!
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Old 08-17-2017, 09:46 AM   #9
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There's an active thread on Bogleheads about reverse mortgages right now, with some interesting commentary about how since 2008 the reverse mortgage realm has cleaned up its act (somewhat).

https://www.bogleheads.org/forum/vie...p?f=2&t=221187

There's also this WSJ piece from last year:

New Math on Reverse Mortgages
Advisers now are promoting them as a valuable tool for retirement planning, thanks to recent safeguards
https://www.wsj.com/articles/new-mat...ges-1458525888
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Old 08-17-2017, 01:59 PM   #10
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Quote:
Originally Posted by googily View Post
There's an active thread on Bogleheads about reverse mortgages right now, with some interesting commentary about how since 2008 the reverse mortgage realm has cleaned up its act (somewhat).

https://www.bogleheads.org/forum/vie...p?f=2&t=221187

There's also this WSJ piece from last year:

New Math on Reverse Mortgages
Advisers now are promoting them as a valuable tool for retirement planning, thanks to recent safeguards
https://www.wsj.com/articles/new-mat...ges-1458525888
+1
Thanks... That bogleheads thread was really good. It cleared up a lot of things I didn't understand, and one of the threads covered a number of other websites that went into even more easily understood detail. While not a part of our current plans, I can see where a reverse mortgage could be beneficial, and perhaps not as costly as I had feared.
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Old 08-17-2017, 02:08 PM   #11
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Quote:
Originally Posted by imoldernu View Post
+1
Thanks... That bogleheads thread was really good. It cleared up a lot of things I didn't understand, and one of the threads covered a number of other websites that went into even more easily understood detail. While not a part of our current plans, I can see where a reverse mortgage could be beneficial, and perhaps not as costly as I had feared.
I am way too young (51) for one, and would probably not live out my days in this house (stairs/no full bath on ground floor), but I read this stuff with interest because I have no direct heirs and my capital gains if I want to stay in this house even just another 10 years or so will likely be astronomical (unless DC gets nuked). So I'm always thinking about ways to get the huge pile of equity out of this house in a way that maximizes my nest egg without really caring much about what happens when I'm gone. Of course, at that level, just selling and paying the dang CG taxes is probably really the way to go, but, well, it's fun to ponder the options. I've got time.
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