Author Topic: Is a reverse mortgage a good idea for my mom?  (Read 1475 times)

rob in cal

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Is a reverse mortgage a good idea for my mom?
« on: April 11, 2017, 02:42:46 PM »
   So my mother fits into the category of asset poor house rich.  She is 76 years old, with a fully paid off house with a value of around 600k, and not much in savings left.  Her monthly SS income is about 1500.  In a perfect world she would have another 1000 to 1500 dollars a month in income. She doesn't want to sell the house and would like to live in it as long as possible. Would a reverse mortgage be an option worth looking into? How much of a mortgage would she need to have for say 1500 dollars a month for the next several years? What would a sample mortgage look like for this scenario?

TheAnonOne

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #1 on: April 11, 2017, 02:53:27 PM »
As I understand it, reverse mortgages are just bad ideas with high fees and such.

Why not take a regular mortgage and just keep the cash in your bank?

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FIPurpose

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #2 on: April 11, 2017, 03:00:49 PM »
While it is family, and it's likely your inheritance anyways, what about setting up your own reverse mortgage with your mom? Pay her $1,500 a month for a $250,000 30 year mortgage at about 6% interest. Total cost of the mortgage over 30 years would be about 540,000. If you have siblings, it may be something you want to discuss especially with inheritence issues in that.

http://www.latimes.com/business/realestate/la-fi-harney-20150503-story.html

GizmoTX

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #3 on: April 11, 2017, 03:16:46 PM »
I agree about RMs being very expensive & usually a poor idea. The minute your mom needs independent living or worse, you will have to sell the home & pay off the mortgage in full within a short period of time. It cannot be rented. While everyone says they want to stay in their home forever, stuff happens. My MIL sold her home at age 90 & moved into a CCRC (continuing care retirement community), which we credit with allowing her a safe & social life until 99. The catch is that you have to be reasonably healthy to get into one, but you can transition later to their assisted living once you are there. In the meantime, a cash-out refinance would be a better alternative to a reverse mortgage, IMO.




rob in cal

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #4 on: April 11, 2017, 03:47:58 PM »
  Yeah, I've thought about the other options.  One question, why do people do reverse mortgages anyway instead of just remortgaging the house in a conventional manner?

Catbert

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #5 on: April 11, 2017, 04:27:25 PM »
  Yeah, I've thought about the other options.  One question, why do people do reverse mortgages anyway instead of just remortgaging the house in a conventional manner?
Because payments are required and without sufficient income they can't get a regular mortgage.

GizmoTX

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Re: Is a reverse mortgage a good idea for my mom?
« Reply #6 on: April 11, 2017, 05:05:12 PM »
While it is family, and it's likely your inheritance anyways, what about setting up your own reverse mortgage with your mom? Pay her $1,500 a month for a $250,000 30 year mortgage at about 6% interest. Total cost of the mortgage over 30 years would be about 540,000. If you have siblings, it may be something you want to discuss especially with inheritence issues in that.

http://www.latimes.com/business/realestate/la-fi-harney-20150503-story.html

This is an excellent idea, but only if you &/or other family members have the funds. Another consideration is how able your mother is & will be with dealing with all the maintenance issues of an aging house. My MIL, while sound of mind, got to the point where she was a hermit, was no longer eating well, & really shouldn't be driving anymore -- that's when being solo is no longer feasible. Throw in cash flow problems & it's high time to liquidate.