Should I get one?
No JOB, NO pension, yadda yadda,yyaddda. ., Lived frugally, but.
How much equity do you have in your house?
Do you have heirs you want to leave anything to?
I’m not in the US and am not familiar with the state and federal laws down there nor with the specific providers of reverse mortgages, though I have heard that some of these providers can be a bit shady.
The whole business is generally frowned upon by financial analysts, but in the right circumstances it can actually be quite beneficial, assuming first and foremost that you’re dealing with an ethical lender. One thing to keep in mind is that from the lender’s standpoint it’s a risky long-term venture that sees no returns until the deal ends, either because you die or you sell the place, so the assessment of the sole asset that secures their loan – your house – is pretty thorough, and reverse mortgages can be denied if the place is in bad shape, or if there is a history of property tax arrears, or any other risk factors.
The other thing is to have all the fine print reviewed by a competent lawyer, which covers things like penalties for early termination by you, as well as the conditions under which the lender may be able to foreclose.
Termination penalties are really key here, because the whole deal is premised on the lender getting large amounts of compound interest over the life of the contract. Given that the alternative to a reverse mortgage if you can’t afford to live in the place is to sell it and rent, a reverse mortgage looks like a great deal, and it is – for the first few years. Eventually the compound interest gets really onerous, though, so you’ll want to get out. The cost of that is key.
If you don’t – which is a choice that some people make – the interest can eventually mount so that you owe more than the value of the house, even though you originally received less than half its value from the lender. Most jurisdictions that I know of legally prevent the lender from ever claiming more than the fair market value of the house, but this may not be the case everywhere. If you don’t have that legal protection, your heirs would actually be on the hook to repay the balance, which is totally unconscionable and why those laws exist in most places.
Debt is not inherited in the US. Your heir would have had to have co-signed or otherwise been a party in the contract.
Concerning the reverse mortgage, I would talk to a good financial adviser and not a reverse mortgage salesman to find out if it’s sensible.
This may be the case in general, but there are exceptions (which probably wouldn’t apply to dropzone):
Close to 30 states have what’s known as “filial responsibility” statutes. Those require adult children to pay for a deceased parent’s unpaid medical debts, such as those to hospitals or nursing homes, when the estate cannot.
The link in that piece is dead, but here’s one:
I believe dropzone is in Illionois, which apparently doesn’t have filial responsibility statutes.
Well, shoot. I stand corrected. Thank you for the link and I apologize for the bad advice.
You should talk to a financial expert, but I think the general consensus is that from a strictly financial standpoint you’re better off selling the house than doing a reverse mortgage. Cash out, use the proceeds to get your finances together and start renting something significantly downsized. Reverse mortgages aim to profit off the fact that moving out of a long standing family home is scary and traumatic for the elderly, but make no doubt you’re paying for the privilege in the form of interest.
I have no affection for the dump, especially after the amount I’ve spent on it the past few years. Selling is looking better.
I can’t afford to fix it. Are those we buy anything today o.k.?
Do talk to a lawyer or other “elder” specialist first (even though you’re not elderly, you’re close, and you have specialized medical needs). With your medical problems and possibility of longterm nursing home needs, you may have ramifications your weren’t aware of in keeping vs selling your house.
I’m no expert but I think those types of companies make the selling process easy by making lowball offers. I think you may be able to get more money via a conventional sale. (That is, hire a real estate agent, listen to their advice about how to prepare the house and list it for sale.)
Just sell it as-is, though a conventional sale.
You won’t ever make your money back fixing it up, although it might sell faster.
dropzone will likely be having longterm Medicaid/Medicare needs and is currently in a facility (or maybe recently released after a very long stay) iirc. There are serious ramifications to home selling/home-owning which he needs to take into account. He must talk with an expert.
Yeah, that’s becoming obvious.
Maybe the village has someone to recommend.
We sold my mother’s house as-is through a realtor. She staged it very nicely. I wasn’t expecting to even get asking price but it sold way over in 5 days after a bidding war. Surprised the hell out of me. It seems that finding a really good realtor is key.
My earlier post was just taking your OP at face value and setting out what I knew about reverse mortgages. Your medical situation and the fact that you don’t much care about staying where you are may greatly change what you should do. I agree with the others about getting expert independent advice.
One other point is to carefully check out the rental market in your area. Around here it’s very tight and it’s hard to find a decent place. Meanwhile the real estate market has been soaring, so home ownership is a good position to be in. There’s not much point in deciding that selling and renting is the right thing to do if you can’t find a rental that you’ll be happy with.
Absolutely pay attention to this advice.
The fact that “elder law” is a specialized standalone field of practice tells you what a minefield this is. You need to get expert state-specific advice on the ramifications of what you do with your assets, how the sale of your house would affect Medicaid eligibility etc.
No. Don’t do a reverse mortgage. There is not an independent financial advisor on earth that would tell you to this.
Reverse mortgages work for the reverse mortgage company. Not you.
Regardless of the details of your financial situation, there are better alternatives.
I am not a certified financial planner.
wolfpup, you’re Canadian, iirc. Sadly, Medicaid/Medicare rules in the US are complicated. They often expect you to spend down your assets before they’ll pay for care, EXCEPT for your house, which they may allow you to hold on to. I don’t understand how it works nowadays. But if dropzone sells his house, the money could end up going straight to medical care rather than having Medicaid/Medicare pay, so it may be to his benefit to hang onto it if possible.