Reverse mortgage

Factual Questions
1

I’m 65 with no heirs. My partner lives next door in his own house, and assuming I die first, he has no use for an additional house. So I’ve been thinking about the possibility of getting a reverse mortgage. It seems like a panacea for someone in my situation . . . in fact, too good to be true. So what’s the down side? What bad thing am I not anticipating?

2

What I have not seen is a reverse mortgage that was an actual annuity. That is, here is my house worth $500K that I will sign over to you in return for an annual payout of $30K for the rest of my life. In effect I am selling it to you in return for a life tenure. That would be what you want. In fact, as I understand how current reverse mortgages are currently structured, you get some money every year and the amount of the mortgage increases until some point that you have to start paying it off, doubtless by selling the house. Not a pretty scenario. On the other hand, when you die, your heirs (or the state if there are none) gets whatever equity is still left in house, while in the case of an annuity, if you fall down the steps and kill yourself the next day, they own the house. That’s why insurance companies, not mortgage companies ought to be in that business.

3

You can read some threads here, here and here about reverse mortgages.

4

No nephews, no nieces?

5

If you believe your partner has no use for your house or the value it represents upon your death, then a reverse mortgage would provide revenue for you.

Understand though, that you are relinquishing your ownership rights to the mortgagee. This could mean that if you enter a long term care facility you may face some financial pitfalls. A best case scenario involves your continuing to receive your monthly payments while in the facility. Depending on the fine print in the reverse mortgage agreement, these payments may stop since your are no longer “occupying the dwelling”.

If I were you, I would seek out a financial consultant (or two) and have this reverse mortgage discussion. These professionals should be able to consider your current financial situation and project it to potential future (age related/financial) scenarios that may give you a better understanding of your options.