Sometime in the (hopefully still distant) future I may have the opportunity to inherit some property. With it will come certain financial responsibilities in order to maintain it (taxes, utilities etc.) I have no intention of ever having children so the idea of a reverse mortgage interests me. A few basic questions:
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[li]Is there a minimum age you have to be to be considered for one?[/li][li]Other than not being able to will the property to anyone what is the biggest downside?[/li][li]If I got one and at some point wanted to move away can I still have the bank ‘buy me out’ early with a reasonable lump sum payment?[/li][/ol]
For reference I will be 50 this year, I live in NY state, and the house/property is probably worth around $350,000 today (summer 2015). What would this roughly equate to in terms of a monthly reverse mortgage payment starting at my age? Thanks in advance…
Minimum age is 62.
The big advantage of a reverse mortgage is being able to continue to live in your house and derive some income from it. If you aren’t going to live in the property that you are going to inherit, why not sell the property and invest the proceeds, either in an IRA if that has tax advantages for you, or in some kind of mutual fund?
There are many ways a reverse mortgage might not work out for you. The bank gets the house when you move. If this happens when you’re relatively young, the amount of money you get from the bank can be far less than if you did a normal sale of the house. For instance, suppose you get a reverse mortgage when you’re 62, and then at age 65 you develop an illness that forces you to move into an assisted living facility. You’d be pretty much screwed - the amount you’d get from three years of a reverse mortgage wouldn’t be nearly as much as what you’d get from selling the house.
Lots of misinformation here.
Yes, there is a minimum age, varies by location. When you decide to relocate, you must payout the mortgage. (No, the bank doesn’t automatically ‘get’ the house.)
If the person who took out the reverse mortgage dies, leaving the house as part of the estate, whoever inherits it will need to pay the mortgage off. They can sell the house, pay off the outstanding mortgage and take whatever equity remains, or, negotiate their own (traditional) mortgage for the outstanding amount, and keep the house.
Usually you must have paid off a certain amount of the traditional mortgage to qualify for a reverse mortgage. Often over 60%.
In addition, there are limits on the amount of equity you can use for the reverse mortgage, often 40-50% of the existing equity.
It can be a useful tool for people, especially retired people who may have little cash but equity in their home. It allows a way for them to stay in their home, or cover medical bills, for instance without having to give up their home. After they pass away, or are moved too full time care, the house can be sold and the reverse mortgage repaid. They will still get any additional equity from the house that exceeds the amount of the mortgage.
Many thanks for the replies. I should have mentioned an important factor, that the house & property are pure equity, nothing at all is owed on them. I figured the age minimum was probably a ways off. There are also complicating factors involving other family members, just wanted to know the gist of it.
Back up a sec. Ask yourself this first: What do I want to do with the asset? If you want the money from it, sell it outright. If money isn’t the goal, what is the goal? Do you want to live there? Rent it out? A reverse mortgage is a possible answer. But there may be other answers. You need to ask yourself lots of questions first.
Keep in mind an empty house will deteriorate faster than if it occupied, even if you pay the taxes and (base) utilities. Expenses “maintaining” an empty house can get pretty stiff. If you goal is to just make money off of the unoccupied asset, selling it may be your best ROI.
The problem is I’m the youngest of many kids and my dad, who owns the house, is being both sentimental but impractical. He would like to leave it to everyone, but of course the only way to do this means simply selling it and splitting the money, but sentimentally he’d like it more if someone moved into it and kept it. As it happens I’m the only sibling who does not have their own house so I’m the only one interested in doing that. But I can’t afford to get & pay a mortgage in order to ‘buy out’ my siblings.
Thing is I realize that a reverse mortgage would mean me having to own the house outright first, and my dad essentially cutting everyone else out of any possible legal inheritance of it. Needless to say this is a sticky issue… 
The 100% equity doesn’t matter, except in regards to how much could be taken out as a reverse mortgage.
But how does a reverse mortgage help you anyway? Say he takes out 60% as a reverse mortgage, what next? Payout the other siblings their inheritance? It won’t create equal shares for the siblings and you’ll still be faced with acquiring a mortgage to pay off the reverse mortgage, upon his demise. But you claim you can’t afford a mortgage. So how’s that going help?
Can you share how you’d like to see it work out, logistically? Clearly you’d like to get the house, but how are the other siblings satisfied? Can you share what your thoughts are? What would the ideal solution look like, for you?
Thanks again, but suffice it to say I already have most of my answers for now*!* 
Huh? You miss an important point.
THE HOUSE TITLE IS IN YOUR DAD’S NAME.
Thus, a reverse mortgage pays him money while he still lives there. You don’t get the house, you don’t get the money (unless he gifts it to you, which should ratchet up the sibling rivalry factor). The only benefit is that you would get to live there rent-free. You have not title, you, your age, your anything -does not matter. Nobody’s giving you money (except maybe your dad, as a gift). Your dad’s age and circumstances matter. Unless your dad needs the money - for a care home, say - why would he do so? Presumably he has enough other income currently that he does not need the income?
Someone would still have to pay the property taxes, utilities, etc.
When your dad’s RM expires however it does, then, the house is basically encumbered with the mortgage… so it’s as if your dad remortgaged the house (in fact he did) for cash. His estate would have a house worth $350,000, say, with a mortgage costing say, $300,000. And… you would have to move out.
This isn’t a reverse mortgage but it accomplishes what I think you want (and people in my family have done it) . Your father sells the house* to you,retaining the right to live in the house and you make payments to him over some period of time. When he passes, your siblings inherit the payments and you inherit the house. A variation is where the payments immediately start to your siblings. You don’t have to qualify for a mortgage, and you can set the payments and the term for whatever you and he like.
- or part of it- my grandfather gave my mother a portion of the house (what he was planning to leave her) , and sold her the rest, with payments made to her brothers.
Read the very first sentence of the OP again.
Oops, sorry. Doh!
Well, if he has to pay off one or two other siblings their share to keep the house, there likely won’t be anywhere near enough equity for a reverse mortgage?
Yeah, that’s the issue (there are six others*!!*) :eek: Though some care more about it than others. And I get that if my dad wills the whole thing to me (to maybe eventually go the RM route) I will be burning some serious bridges…
As for reverse mortgages, I see too many different ads for them on TV and elsewhere for me to believe this is a great deal for everyone and their situation. I wouldn’t even think of pursuing one without having a serious meeting with a CPA and tax attorney.
I’m not an attorney or CPA, here are my thoughts. Reverse mortgage aside, you mentioned you have others to share the inheritance of the home. If you truly want to live there yourself, you could talk to a mortgage company to get a loan for the balance and purchase it from your father, and the proceeds minus your percentage could be put into a trust fund which would be payable to the others when the Will is executed. Meanwhile you could live in it. Assuming you want to do this while your father is still living there. This is only practical if you really want to live and are not doing this simply because your father wants it. If only your father wants that, then I would encourage him to put the house in his Will for it to be sold when his estate is executed. Because at any time, whoever owns the house can always sell it. You could get a job transfer and move out of state and have to sell the house anyway. In other words, the house would have to be very special to hold on to it.
In reality, this is what occurred with my in-laws. The had a retirement home built and after his wife passed away, he became ill within a few years and had to sell the home and move into an assisted living community and then a nursing home. He needed all the equity from the sell of the house to buy a place to live so he could be taken care of. I’m not saying that is going to happen with your father, but the idea is that things need to be made flexible. Requiring someone to live in the old house locks everyone involved into a situation which might not make everyone happy.
You should meet with an attorney who does estates as their main business activity and discuss all this. They can come up with many more ideas that might be good for everyone involved.