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Old 04-10-2018, 06:02 PM   #1
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Reverse mortgage?

Has anyone done a reverse mortgage and if so how has it worked out for you?
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Old 04-10-2018, 08:37 PM   #2
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My widowed mother in law did a reverse mortgage some years ago.

It worked out ok for her at that time because it took a lot of pressure off of her, although she paid about double the interest rate vs a Heloc "home equity line of credit".

You really need to study the language in the mortgage document because they are all different, especially wrt
interest rates, margins, the requirement to maintain a certain level of insurance, compliance with county regulations, fire inspections etc. etc.

You have to realize that the mortgage company now owns your home...

What happens if property values drop? Will you get a margin call?
Who or what determines how the market value is arrived at?

Lots of things to look at.

It may be right for you or it may not.



One thing is for sure: it is not going to be cheap.
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Old 04-10-2018, 08:42 PM   #3
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Quote:
Originally Posted by Chinewalker View Post
My widowed mother in law did a reverse mortgage some years ago.

It worked out ok for her at that time because it took a lot of pressure off of her, although she paid about double the interest rate vs a "home equity line of credit".
You really need to study the language in the mortgage document, especially wrt interest rates, margins etc.
What happens if property values drop? Will you get a margin call?
Who or what determines how the market value is arrived at?
Lots of things to look at.
It may be right for you or it may not.
One thing is for sure: it is not going to be cheap.
Preliminary paperwork is an almost $200,000 line of credit and no payments as long as it's my residence. Have to pay the property taxes and keep it up. Property taxes went up $1800 in two years and very little appreciation to property value.
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Old 04-10-2018, 08:47 PM   #4
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NoNo No absolutely no!!

Dave Ramsey is a financial expert. He say no five thousand times over to a reverse morgage.
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Old 04-10-2018, 08:59 PM   #5
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Preliminary paperwork is an almost $200,000 line of credit and no payments as long as it's my residence. Have to pay the property taxes and keep it up. Property taxes went up $1800 in two years and very little appreciation to property value.
A 200K line of credit with no payments secured by your property is not a reverse mortgage.

You maintain control. As long as you understand the implications of adding monthly interest to the amount of the loan outstanding at the time of disposal.
Compounding the interest. Maybe make monthly interest only payments out of the principal?

A line of credit gives you the benefit of increasing property values.

A reverse mortgage may not.

Edit: Mr_D:

By all means, take advantage of today's low interest rates and take advantage of the equity in your real property and enjoy!
Aaaand get your legal advisor to take a look at the lending contracts.
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Old 04-10-2018, 09:10 PM   #6
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Our elderly neighbors went with a reverse mortgage as they did not have any retirement other than minimum SS... medical costs were the main issue...... DID NOT work out in their favor... the Mortgage Company made out like the bandits they are..
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Old 04-10-2018, 09:12 PM   #7
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Dave Ramsey is a financial expert. He say no five thousand times over to a reverse morgage.
Dave Ramsey says pay off the smallest debt first. Simple math says pay off the highest interest first. If you don't have the dicipline to do this, you likely won't pay off anything.
Dave Ramsey says NO to student loans. A student loan is the single BEST loan you can get as it increases your earning potential, your #1 investment.
Dave Ramsey says your home is your biggest investment. BIG REAL ESTATE LIE!! Your home is your #3 investment, 3 to 5 times as big as your home is your retirement account at #2, and your investment in earning potential is #1 by a huge margin in terms of ROI and ROI is why you invest.
Dave Ramsey sells alot of bunk.
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Old 04-10-2018, 09:21 PM   #8
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Quote:
Originally Posted by Chinewalker View Post
A 200K line of credit with no payments secured by your property is not a reverse mortgage.

You maintain control. As long as you understand the implications of adding monthly interest to the amount of the loan outstanding at the time of disposal.
Compounding the interest. Maybe make monthly interest only payments out of the principal?

A line of credit gives you the benefit of increasing property values.

A reverse mortgage may not.
A bit of misinfo here. A reverse mortgage can pay in any of three methods, lump sum of cash, equal monthly payments to you, or a line of credit (loc), or a combination of any or all of these. The amount of the loan depends on how long they think you will live (younger folks get less) and the amount of equity you have in your home (more equity = more money). Your home equity likley goes up by 3.5%/month, some RMs go up likewise. You own the home, just like a regular mortgge, and your heirs can have the home if they pay off the RM, just like a regular mortgage. The RM company does not want and cannot just take the home, they have to go thru forclosure, just like any other mortgage.
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Old 04-10-2018, 09:26 PM   #9
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A bit of misinfo here. A reverse mortgage can pay in any of three methods, lump sum of cash, equal monthly payments to you, or a line of credit (loc), or a combination of any or all of these. The amount of the loan depends on how long they think you will live (younger folks get less) and the amount of equity you have in your home (more equity = more money). Your home equity likley goes up by 3.5%/month, some RMs go up likewise. You own the home, just like a regular mortgge, and your heirs can have the home if they pay off the RM, just like a regular mortgage. The RM company does not want and cannot just take the home, they have to go thru forclosure, just like any other mortgage.
No. A line of credit is certainly not a reverse mortgage.

Check with your legal advisor.
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Old 04-10-2018, 09:45 PM   #10
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Dave Ramsey is a financial expert. He say no five thousand times over to a reverse morgage.
"His books and broadcasts advocate a fiscally disciplined approach to personal and household finances, including the strict management of debt, and often feature a Christian perspective that reflects Ramsey's religious beliefs."

https://en.wikipedia.org/wiki/Dave_Ramsey

Looks like Dave is a financial expert with a slant...
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Old 04-10-2018, 10:25 PM   #11
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Up until I retired a year ago, I was the analyst who verified all of the calculations for a RM company in CA. As TonyMac said, the amount available to you is dependent on the Home Value, how much you still owe on it, the youngest borrowers age and the interest rate. Up front closing costs are high, particularly MIP, and there is a monthly MIP that accumulates to your balance owed, in addition to interest. Interest rates can be adjustable monthly, annually or fixed, depending on lender and current interest Climate. Once you have the RM, you are required to pay the taxes, structure insurance, keep the place in good repairs and maintain it as your primary residence. You can and will be foreclosed if you violate the terms. Over the past 10 years, FHA has been slowly reducing the amount you can receive in addition to instituting rules requiring tax/insurance set asides from your available proceeds similar to tax/insurance escrow on a forward mortgage. These new rules have pointed out to some potential clients that they would be better off selling than getting a RM. And always consult a financial advisor before making your final decision.

A RM is not for everyone but depending on your financial situation, it could fit into your financial plan. I have considered it for ourselves and have decided against it because the cost/benefits were not in our favor. I have also heard a lot of horror stories of grandma getting kicked out after gramps died or was put in a care facility. Most of these can be traced back to bad advise; for example, gramps was the only party to the RM. Grandma was left off it so they could get more money.
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Old 04-10-2018, 10:52 PM   #12
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We just moved from a 55+ community that is marketing the new house builds this way. People are building $400K+ houses because they only have to spend approximately half that amount. As mentioned, the % depends on several factors.

We looked into it, but once we realized the interest accumulates and is due and payable if we were to sell, we decided it wasn't for us. The big interest bite, plus the expensive costs, would eat up a lot of the equity.

We considered it a sweet deal if you know you're never going to move and will die in your house. But, who knows that? That could be the intention, but not the reality.
Illness could force you to need assisted living or a nursing home.
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Old 04-11-2018, 12:48 AM   #13
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Old 04-11-2018, 02:04 AM   #14
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Dave Ramsey is a financial expert. He say no five thousand times over to a reverse morgage.
Dave Ramsey financial expert.
Why does he charge for his workshops then? If hes so financially secure, they should be free.
Just my .02
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