Please School Me on Reverse Mortgages

[pbarry]

I've got a family member I'm close to who is 72 and is in dire financial straights. They have minimal SS income, ($550/mo.), and are basically retired from real estate, (no listings/closings for 18 months). Savings are tapped, line of credit is maxed, as are credit cards. I've been covering the measurable shortfall for most of the last year, but my income can't get them out of the hole. Minus a small mortgage, their home equity is around $165k. Selling and moving to a rental is anathema to them..

A reverse mortgage seems like the only option to me, but it's being met with a lot of resistance. Anyone here familiar with these? I know regulations have been tightened up a fair bit. Wondering what to watch out for while shopping, and any personal experiences.

Many thanks in advance.

[Chris]

So I understand this right, instead of coming up with a solution that might provide them some help their plan is to continue to rely on you?

[pbarry]

Originally Posted by Chris

So I understand this right, instead of coming up with a solution that might provide them some help their plan is to continue to rely on you?

Yup. I'm about done tho. If I present some good information, it may help sway them towards a RM.

[MattTuck]

I don't know enough about reverse mortgages to give useful advice, but I'm generally suspicious of financial products. Banks aren't in the charity business, and your family member will end up paying one way or another.

That said, it really sounds like a case for bankruptcy. I'd look at that avenue as much or more than a reverse mortgage as a first step. Repair the balance sheet first, and then firm up the cash flows.

[93legendti]

Options:
Reverse mtg,
Sell the home,
Home equity line of credit, if they can get it,
And/or Bankruptcy.

http://portal.hud.gov/hudportal/HUD?.../hecm/rmtopten

I encouraged my Mother in 2007 to get a reverse mortgage (or obtain, but not use, a home equity line of credit) on her home, which she owned free and clear. She resisted. Depression era mentality.

[pbarry]

Originally Posted by MattTuck

I don't know enough about reverse mortgages to give useful advice, but I'm generally suspicious of financial products. Banks aren't in the charity business, and your family member will end up paying one way or another.

That said, it really sounds like a case for bankruptcy. I'd look at that avenue as much or more than a reverse mortgage as a first step. Repair the balance sheet first, and then firm up the cash flows.

Ah, the B word. That will be a tough sell but the situation calls for extreme measures. I appreciate the candor.

Originally Posted by 93legendti

Options:
Reverse mtg,
Sell the home,
Home equity line of credit, if they can get it,
And/or Bankruptcy.

http://portal.hud.gov/hudportal/HUD?.../hecm/rmtopten

I encouraged my Mother in 2007 to get a reverse mortgage (or obtain, but not use, a home equity line of credit) on her home, which she owned free and clear. She resisted. Depression era mentality.

^^ This is what I'm dealing with. Thanks for the list.

[Chris]

Originally Posted by pbarry

Yup. I'm about done tho. If I present some good information, it may help sway them towards a RM.

I can't provide much in terms of financial advise but behaviorally I know that people resist change until where they are at is currently more uncomfortable than the change needed. If they can enlist people to keep them in their comfort zone , they will do that rather than seek the solution. Good luck with your situation.

[pbarry]

^^Well said. I had an epiphany last week and came to a similar conclusion.

[texbike]

Unless you're this guy, a reverse mortgage probably isn't in your best interest.

Texbike

[Louis]

Doesn’t it come down to the expected remaining life of the mortgagee?

If they live a lot longer than expected does the RM eventually run dry?

If they die sooner than expected what happens to the remaining RM payments?

Good luck

[bargainguy]

My understanding is that most are loaded with fees on the front end, so especially nice for the financial institutions.

[pbarry]

Originally Posted by Louis

Doesn’t it come down to the expected remaining life of the mortgagee?

If they live a lot longer than expected does the RM eventually run dry?

If they die sooner than expected what happens to the remaining RM payments?

Good luck

AFAIK from the nets: borrower can live in home for the rest of their life, even if the balance of the loan has been paid out.

Upon moving to another permanent residence or death: Loan $$ paid out, interest and fees are subtracted from the proceeds; balance goes to the estate. Even if there is a negative balance, no moneys are owed by heirs. (My workingman's extrapolation from LengendTi's link..) I figure the lenders are betting heavily on actuary reports and a steady increase in home values.

[93legendti]

Originally Posted by pbarry

Ah, the B word. That will be a tough sell but the situation calls for extreme measures. I appreciate the candor.



^^ This is what I'm dealing with. Thanks for the list.

You're welcome. Good luck.

[pbarry]

Originally Posted by bargainguy

My understanding is that most are loaded with fees on the front end, so especially nice for the financial institutions.

Yes! This aspect has me nervous, but seems to be part of the deal with these products.

[Louis]

Personally, I think as you get older and older home ownership makes less and less sense. Who wants to deal with upkeep, whether it's pulling weeds or replacing a burnt-out water heater?

If they have any sense at all they'll sell.