9/9/2014 10:55:52 AM

what's the deal with reverse mortgage? Do they take the house after the people die?

9/9/2014 10:57:37 AM

yes

9/9/2014 11:13:59 AM

Reverse mortgage done right:

Quote :

"In 1965, at age 90 and with no heirs, Calment signed a deal to sell her apartment to lawyer André-François Raffray, on a contingency contract. Raffray, then aged 47 years, agreed to pay her a monthly sum of 2,500 francs until she died. Raffray ended up paying Calment the equivalent of more than $180,000, which was more than double the apartment's value. After Raffray's death from cancer at the age of 77, in 1995, his widow continued the payments until Calment's death. During all these years, Calment used to say to them that she "competed with Methuselah"."

http://en.m.wikipedia.org/wiki/Jeanne_Calment

9/9/2014 11:28:40 AM

They send you money every month, once you "leave" them home (presumably by dying or going in to a nursing home) they will either take the home, or the executor has to sell it and pay the loan.

Quote :

""The lender will send a repayment notice to the executor, administrator or heirs stating that the loan is due and must be paid. Most lenders will also mention the options available to satisfy the loan. One option is to sign a deed in lieu of foreclosure, if the loan balance is more than what the property is worth. The other option is to sell the property, pay off the loan balance and keep the difference. Read more: http://www.finweb.com/mortgage/how-does-a-reverse-mortgage-work-after-the-owner-dies.html#ixzz3CphK2rFl""

9/9/2014 11:32:14 AM

Fred Thompson reminds me of

9/9/2014 3:12:51 PM

This is a great tool for seniors to leave their heirs with no inheritance and a damn house without any equity to sell after their parents are gone.

9/9/2014 7:06:51 PM

Do you people actually expect to inherit anything from your parents/grandparents/whatever?

I don't.

9/9/2014 7:10:21 PM

Dave Ramsey does not agree with this.

9/9/2014 7:43:28 PM

my dad brought this up to me once, I told him to not do it. I don't know if he will or not but I fucking hope he doesn't.

9/9/2014 8:09:04 PM

This is an option for people who did a shitty job of saving for retirement....selfish in life, selfish in death

9/9/2014 9:07:10 PM

^buy an ad Sharia Bank

[Edited on September 9, 2014 at 9:22 PM. Reason : .]

9/9/2014 9:22:04 PM

Wat

9/9/2014 9:29:11 PM

9/9/2014 9:43:46 PM

Quote :

"Do you people actually expect to inherit anything from your parents/grandparents/whatever?"

Nope

9/9/2014 11:06:33 PM

once i get past the whole sleaze factor of it, since, in my opinion, this exists to take advantage of elderly who do not know any better, I can see it's value.

the question lies within if it is the right thing for an owner to maintain their home to pass to progeny when they die or if it's acceptable for the owner to use all of their wealth themselves.

if an owner using their wealth to provide for themselves is acceptable, then reverse mortgages offer a great way to get additional income and remain in your current home. sure, the owner could also get money by selling the home but they lose the comfort of a place they've come to know for 30+ years.

i believe the eventual executor of the home benefits as well due to the n+ years of appreciation.

could be totally wrong here but based on the above i don't see reverse mortgages as THAT bad. i suspect they get a bad rap because a bunch of entitled kids want to get the $300K (in present dollars) pay out form their parent's home.

9/10/2014 8:31:21 AM

The thing that is not clear is how bad the owner is getting raped on fees and snowballing interest. Normal mortgages are VERY heavily regulated these days, there is plenty of transparency and there are safeguards against getting screwed. Not sure if that is the case for a reverse mortgage.

Dave Ramsey told a caller who wanted to do this (and understood the risks) to take out a regular mortgage and throw their money in an investment account. Since fixed mortgage rates and fees are so low he figured their money would actually last longer doing it that way (since it would be generating a return possibly more than the interest rate they are paying) while slowly being drawn down. There is risk of losing money in an investment account too though so I dunno...

Every grandparent in my family had at least one paid off house when they were retired and never messed with it. (not wealthy by any means, just conservative with money) That seems like the safest bet, you cant get thrown out of a house that you don't owe money on, and if shit really gets bad with your long term care (nursing home, hospital) you have an asset to sell to pay for your care in final days.

9/10/2014 11:42:36 PM

Quote :

" you cant get thrown out of a house that you don't owe money on, and if shit really gets bad with your long term care (nursing home, hospital) you have an asset to sell to pay for your care in final days."

If you can trust your family it would be smart to start transferring assets away from elderly people during their last decade or so for that exact reason. Healthcare/elder care can be insanely expensive and will quickly strip a modest life savings leaving the family with nothing.

For example, an elderly person might sell their home, owner financed, to their children for $150k. If they can gift $14,000 tax free per year, and there are two kids, they might make the mortgage on their purchase exactly $28,000 per year. After 5.5 years or so, a $150k home would have fully transferred into the children's hands. There's no interest, closing costs are minimal since there is no bank involved, and you never have to actually make a payment since it's all coming out of the gift funds. As long as all parties hold up their end of the deal the parents get to live out their years without worry of losing their home to medical bills or nursing home costs and the kids get to secure an inheritance with minimal taxation. It takes a great deal of trust for obvious reasons.

[Edited on September 11, 2014 at 11:12 AM. Reason : l]

9/11/2014 11:09:41 AM