Otherwise if the homeowner dies the survivor will have to sell the house and pay it back.

I think the whole damn thing is a scam to make banks richer but if you have needs I guess checking into them would not hurt but do proceed cautiously. Anything and I do mean anything that Fred Thompson endorses has to be a bad idea. Plus Reagan signed the law so that ought to tell you something.

When I see that scumbag Thompson promoting them I want to throw up. And there are other actors who should stay away from them. My instinct is that the home owner is a loser in the end.

https://en.wikipedia.org/wiki/Reverse_mortgage#Criticism

Reverse mortgages have been criticized for several major shortcomings:

High up-front costs make reverse mortgages expensive. In the U.S., entering into a reverse mortgage will cost approximately the same as a traditional FHA mortgage.

The interest rate on a reverse mortgage may be higher than on a conventional "forward mortgage".

Interest compounds over the life of a reverse mortgage, which means that "the mortgage can quickly balloon". Since no monthly payments are made by the borrower on a reverse mortgage, the interest that accrues is treated as a loan advance. Each month, interest is calculated not only on the principal amount received by the borrower but on the interest previously assessed to the loan. Because of this compound interest, the longer a senior has a reverse mortgage, the more likely it is that most or all of the home equity is depleted when the loan becomes due. That translates to "less cash for your estate or to pay your bills." That said, with the FHA-insured HECM reverse mortgage, the borrower can never owe more than the value of the property and cannot pass on any debt from the reverse mortgage to any heirs. The sole remedy the lender has is the collateral, not assets in the estate, if applicable.

Reverse mortgages are confusing. Many seniors entering into reverse mortgages don't fully understand the terms and conditions associated with the loans, and it has been suggested that some lenders have sought to take advantage of this. 46% of seniors understood the financial terms of reverse mortgages very well when they secured their reverse mortgage. "In the past, government investigations and consumer advocacy groups raised significant consumer protection concerns about the business practices of reverse mortgage lenders and other companies in the reverse mortgage industry". But in a 2006 survey of borrowers by AARP, 93 percent said their reverse mortgage had a mostly positive effect on their lives, compared with 3 percent who said the effect was mostly negative. Some 93 percent of borrowers reported that they were satisfied with their experiences with lenders, and 95 percent reported that they were satisfied with the counselors that they were required to see.

I remember some years ago it was brought up and apparently a DU'er was "in the business"--

They were swearing up/down/left/right how aweseome they are

The income from it was good. The bad part was when the neighbor died and the family put the house on the market, it had to sell within a set time frame or revert to the bank. Unfortunately, this happened during a bad housing market, though the family sold just in time.

means a bank will give you a portion of the equity of your home--either in a lump sum or monthly payments--based on the value of your home and the projected amount of 'interest' they want to recoup for the loan. You have to be in your twilight years (62 or older, I think), and the bank will definitely reap the most benefit from the loan, including ownership of your home upon your death.

That being said, reverse mortgages can be a way to turn the equity of your home into cash. If you're cash-strapped, and you don't have children who want to inherit your home, it makes sense to explore this option.

One major thing to realize: most seniors are unaware that banks will be offering less equity than their home is worth, but that has historically been the nature of banks--they always, always, always (have I said always enough?), ALWAYS make their money. I encourage you to know the exact worth of your home, the average worth of the comps in your neighborhood, and go with whichever bank offers you the most.

Last edited Sun Aug 10, 2014, 12:26 PM - Edit history (1)

of the 99 percent to the One Percent. I put them in the same category as the offers to buy your gold or liquidate annuities to pay debts. We are deluged these days with "helpful" ways to liquidate our assets to pay debts, rather than fixes for the predatory system that keeps us in debt. It is all part of a systematic transfer of wealth that used to belong to the 99 percent, to the top.

They are cynically hailed as a way to "help" struggling people in this economy. *Real* help would mean protecting pensions and making sure wages are high enough to support life and retirement and allow you to keep the house you purchased with your hard earned money.

Instead, the "solution" is to maintain the system that keeps people struggling to afford the basics of life so that they are in debt until they die, and the banks sweep in to take the house that you spent a lifetime paying for. The system is rigged to make reverse mortgages and other gimmicks to release and transfer wealth to the One Percent necessary in order for the 99 percent to survive.

We are serfs on a feudal estate now, earning less than we are made to owe. All assets are being systematically transferred to the top, and the oligarchs like it that way.

I knew there were conditions but the interest thing is scary.

It worked out quite well and its not a scam. She wanted me to have the use of her money before she died. She took out a reverse mortgage. We only paid interest on the money we actually took. We had a cap of $350,000, which we did not use - only about $150,000. I used it to make some major changes to my property, which has enabled us as retired people, to get a nice little sum for a rental we built. The only negative was the $17,000 in points. But the interest rate was very low - 2%.

When she passed away I refinanced her house and paid it off. It is now being rented for a nice profit every month.

It paid off her mortgage, which helped her a lot towards the end. She never had to pay a penny out of pocket.

I could see how it could be a problem to the heirs if they are saddled with a large mortgage to cover the money their parents went through. But frankly, its their right to spend their money anyway they want.

Great experience!!

and he's a world class chiseler.

Seriously, you're right, if Fred likes them, they must be questionable.

mortgage. The mother is 93 and has lately been put in a nursing home, thus the monthly income she was getting to buy groceries, pay utilities, car, so forth is now going to the nursing home. The nursing home is WAITING for the house???...the daughter is still in the house but has to find another place to live and she is on disability, but not enough money to maintain the home. The mother's name was the only name on the reverse mortgage as it was the only name on the loan.

The daughter is facing homelessness, and she has no other relatives to depend on.

I would say in this case it wasn't maybe the brightest idea, but it has kept them both afloat
until the mother is in nursing home - the bank is taking the home.

The loan wil be for 150% of appraised value

There will be two liens: one from the originating lender and one from HUD. If you outlive the first lien, HUD will continue making payments. That's why the loan amount is so high.

When you die, your heirs will have 30 days to pay off the loan to avoid foreclosure. They can apply for a six-month extension to arrange financing and/or sell the house. If you die a year into the mortgage, it may be in their interest to pay off the loan and sell the house. They will pay interest and other fees on the loan during this period.

If you want to move, you will have to pay off the loan.

You will have to undergo counseling with HUD to have the process explained to you.

If the first loan is not exhausted, the payoff satisfies both liens. You will have to contact the mortgage company and HUD directly for the release of deed of title from both if the house has been sold.

Probate lawyers may not be much help to your heirs in dealing with your reverse mortgage (called HECM loan).

Been there, done that (my mother's estate, which included an HECM I had to pay off)