Tell me about reverse mortgages.

[waksupi]

I was discussing reverse mortgages with some folks this weekend. I am thinking ahead toward retirement in another year with any luck. Anyone have any pro's or con's to watch for, specific questions to ask? I do know to check with as many mortgage companies as possible to shop the best deal. I'd like to pull out around $12,000 per year as supplemental income. Property value is around $325,000.
I don't really have anyone to leave my things to. My brothers and sister aren't wealthy, but are comfortable, and any inheritance to them would be of no great use. Most of my estate goes to the Shriner's Hospital. So, as I see it, using the equity in my home and property would most likely be the best way for a comfortable retirement. It has been all paid off for years, so I have no current mortgage or debt to deal with.

Thoughts?

[lup]

Do you like the house? How long do you need to have the income? You may want to hire a financial advisor to see whether it would be better to sell the house.

[FISH4BUGS]

My understanding is that there are a lot of fees and costs to having a reverse mortage. I am not sure of the dollars but if you pulled out, say $300,000 you could easily pay $20,000 in fees and costs. I would seek out a financial advoisor that is FEE PAID and not someone that works on commission.

[winelover]

I hate to burst your bubble but figure on them giving you roughly 60% of what your real estate is worth....then there are fees that will cut into that. The mortgage companies are in business to make money, period. They have to figure a possible down turn in the Market....so they put a low value worth, on your property. Reverse mortgages. should be considered as a last ditch strategy. IMO

Winelover

[Blue2]

I know some people who have done it. If you want to live in your current home and have reason to expect to not be here for long as in a terminal illness then it might make sense for you. It is a secured loan. You still have the responsibility for paying the taxes and maintaining the up keep of the property. I think that when faced with a similar situation I would sooner downsize into a smaller maintenance free home or apartment. A small lot with a new trailor/mobile home or setting up in a gated seniors trailor park would be more attractive to me. A small maintenance free situation where I could spend more time pursuing my hobbies. I really do not want to replace any more roofs or mow big lawns and clear snow .

[Handloader109]

Reverse mortgages are the worse way to obtain money. You would be better served in today's market by going to a bank and getting a regular mortgage. Do a 30 year and put money in bank (or other better interest bearing accounts). Then pay mortgage and use $ to live on. Mortgage would still be there when you die, shriners can sell home and obtain whatever is left. Or downsize.. Reverse mortgage is not the way to go

[opos]

I know a woman that had her home paid for..doing fine but wanted a bit more out of retirement so she got a reverse mortgage...she planned and was frugal with her money but somehow didn't take into consideration the inflation in costs and the devaluation of the dollar..so she is stuck with a very long term situation...can't vary the amount of money coming in and is uncomfortable with the whole situation...Personally I don't want to mess with another mortgage in my senior years...there is so much hoopla about the reverse mortgages that down deep it looks like a big profit item for the banks at the expense of someone that has a nice home paid for.

[Wis. Tom]

Reverse mortgage use to be the worst thing you could do with your home, but now, with the capitol gains tax, the estate tax, and death tax, you would be better off spending the money while you are alive, because there won't be much left to give away when you die. Get a good adviser that will work up those taxes, after you pass away, and then see if it makes sense. $20,000 will be a drop in the bucket, compared to what the govt. takes.

[rbertalotto]

If you have a mortgage on your house currently, and at least 50% of current market value in equity, and making the current monthly mortgage payment is hurting your retirement standard of living, a reverse mortgage is a beautiful thing. Real-Estate will only go up over the next 15 years (the life expectancy of a retiree). Once you die, the house is sold and the extra goes to your estate.

It makes zero sense to be paying $1000 a month in a mortage payment when you could be relieved of this debt during your retirement years. For most folks in the USA, their entire "nest egg" is their real-estate. This IS their retirement account. Reverse Mortgage is one of the best things that has happened to help folks through retirement. But like everything, you need to run the numbers......

Choose a local, trusted bank to move through the process. Do not use some out of state company that will screw your estate once you die.

Be sure you have a will and all legal matters are in order if you need to go into assisted care at some point.

Good Luck!

[waksupi]

I do have my will in order, and as I said, everything is paid off.

[garandsrus]

The problem with reverse mortgages is that your interest expense goes way up every year, as you are paying compound interest on previous years interest and principle.

It's better to give the money to charity instead of the bank!

Here's a calculator that may help give you an idea what your loan balance will be in the future: http://www.mortgagecalculator.org/ca...eMortgage.html

Using a 4.5% interest rate, with no fees, your equity will be wiped out (325K) in just 18 years, even though you only received only 216K.

[gsdelong]

Here is an out of the box idea. Why not contact the Shriners and see if they can advise?

[Char-Gar]

There are many problems with reverse mortgages that would prevent me from considering one unless I had a dire need of money. The top reasons are;

1. They will give you pennies on the dollar knowing that when you croak or can no longer live there due to poor health, they have a cheap property they can sell for a large profit.

2. If you decide the sell out and move, the property is encumbered making it difficult to do so.

3. You get sick and have to live somewhere else and they swoop down and bam your asset are gone.

[waksupi]

Interesting input so far.

[popper]

Run away from anybody selling them as fast as you can. Financial advisers are NOT tax advisers. If you have farmable land, lease/to-buy. Do not let a bank handle your estate sale.

[shooter93]

Rick....Colleen and I are in a similar situation....everything paid for and took a serious hit in our IRA's and no one to leave things too. I suppose the up side is I never entertained thoughts of retiring but I'm sure it will have to happen when I'm around 100 yrs. old. And I'm putting off drawing SS until the latest date. I do have a pretty valuable property also. I've looked into the reverse mortgage thing a bit. Given what they will give you on your property unless you REALLY want to stay where you're at....sell the property and move into a mobile home and keep the proceeds from your house. We intend to stay here as long as we can....most likely leave when the absurd property taxes here drive us out. That will make the national news for sure though....lol.

[NoAngel]

.....but, but, but Fred Thompson said it was a good idea! Right there on there on the commercial!





...IT's a BS scam. Run away.

[Charley]

My son is in the financial business (American Funds), and tells me that good ol' Fred and Fonzie are lying their collective rear ends off. He tells me reverse mortgages are for people who have done absolutely no planning on their retirement income their whole lives. In a small percentage of cases, they can be good, For most people, their costs outweigh their benefits. This was a timely piece, considering your question...http://www.mysanantonio.com/business...ou-6157656.php

[Handloader109]

Guys, the point of a reverse mortgage is to give up your home for a small payment made to you over your remaining life.  The home at your death is the mortgage holder,not your estate......

[Don Purcell]

As usual when someone is promoting something like this it is to THEIR benefit not yours.