The one year limit on being away rule is definitely not standard. Some are for as low as 3 months. Get injured, go into a care home for a bit. Foreclosed!
Same with widow foreclosures. The time to refi is often far less than a year!
Note that the solution to a bad RM problem is a refi. Note. Note. Note.
RMs are a crappy, crappy, crappy loan. Fees, terms, etc. are all terrible. A standard 2nd mortgage is better. A refi is even better.
Why make the worst possible choice???
OP what interest rate are you paying on your mortgage now? Suppose you now refinance with a new 30 year cash out mortgage:
http://homeguides.sfgate.com/much-money-can-out-cash-out-mortgage-refinance-41707.html
Mortgage rates are very low now. So look up the numbers:
Old lady that lived in the house next to my folks place in Vegas had a reverse mortgage. It reached the end, and she was out on the street, no money, nowhere to go.
I’m fairly ignorant about these things, but as I understand them, basically the bank is buying the house from you, an old geezer. Either you die before the end sum has been paid (bank gets house), or you have to GTFO when it does (bank gets house, it just costs them a little more). Seems like a “lose-lose” for the geezer either way.
All these commercials always stress, “And you still own your home!”. :rolleyes: Sure, right up until you don’t.
That is not how reverse mortgages work. The end is when you die. (Or move out.)
Not sure what you think the difference is between “get extra money” and “spend some of that equity.” Spending the equity as extra money is exactly what I have in mind.
As for a re-fi, that is also an option. Our current interest rate is 4.25%. The rates that come up in PastTense’s link are in that ballpark. So we could re-set the 30 year clock and either take cash out or have a smaller mortgage payment (or a little of both). Sounds like it would pay me to compare the numbers, because with our credit rating we should be able to re-fi with no points.
The first thing you might do would be to contact your current mortgage lender and see what they can do–how much cash you could get out at various repayment levels or get a lower mortgage payment.
Or fail to uphold a large number of other conditions buried in the fine print.
Remember, the goal of RM companies is to foreclose as soon as they can. They make the contract as favorable for this goal as possible. Giving someone money and waiting years to get it back is not their business model.
These people are not dumb nor ethical. They know how to take advantage of the elderly.
Some of them may be as you describe, but your assumption that all elderly are so gullible and suggestible as to fall for the worst possible deal is a trifle condescending. Or are you assuming that we should all be able to blithely sign large financial agreements without being concerned about the scruples and ethics of the loan provider? The argument against RMs that there are unscrupulous vendors is no more effective against RMs than it is against regular mortgages. That one has to be careful and read the fine print is a given in any financial transaction.
Reverse mortgages are highly regulated. There’s a lot of wiggle room with regard to the specific terms, but not much with regard to terminating conditions.
The terminating conditions allowed by current legislation are:
Reverse mortgages are essentially a form of insurance contract. They are giving you an amount of money today based on how long you are likely to live (or live independently in your house.) If that amount of money is less than they can sell your house for after you die, they win. Because they do this with a lot of houses and have very smart actuaries working for them, they will win in the majority of cases.
Are there scummy RM companies out there? Oh yeah. Just like there are scummy insurance companies or financial advisors or car dealerships anything else. But RMs are a perfectly cromulent tool for some elderly people to use, and there’s nothing inherently wrong with them. They’re certainly not a good idea for everyone, of course, it depends on your situation.
It IS worth noting that in the early days of RMs there wasn’t much regulation and lots more scummy operators were out there scammin’ on the old folks.
The consumer-unfriendly features of some of those old contracts are only now coming home to roost.
The point being that a horror story about somebody losing their house today after 15 years of payouts may well be both A) totally true and B) totally irrelevant to a deal signed today under current regs.
Subject recently to the risk that regulations can effectively be retroactively rescinded by simply defunding the agency that polices compliance with them.