If you own a house, you are getting the equivalent of “free rent” by living in it. (Minus property taxes, maintenance, etc.) If you RM the house, you are now getting your equity plus that living rent-free.
Then you have to look at what happens when you end up in a home. Some states, IIRC, need you to count the value of the house and sell it before getting your fees covered by Medicare? So if you did not RM, there’s a possibility that the asset will disappear for a couple of years’ care, whereas if you have been getting a regular income out of it, and there’s not much equity left to sell, you get the same care, but the government pays more. There’s the image of the old timers sitting around the coffee shop doing nothing but comparing how much money they have, and doing nothing with it.
As for heirs - nowadays, a healthy capable person will likely live into their 80’s or more. That means your kids are almost retired before they get their inheritance, and unlike the generation that grew old in, say, the 1980’s but probably died of heart attacks, etc. in their 70’s - todays old folks will have spent a lot more of their assets before kicking off at 90. So junior is going to get a lot les anyway, and won’t know how much he gets until age 65 or 70. If he hasn’t done his own retirement preparation a hundred thousand, or even a few hundred thousand, isn’t going to help much.
Yeah, they’re not a scam, but they’re also not a magic fix either.
You still own your home - it’s basically a loan against your equity with no monthly payments. The catch is the balance grows over time, so it can eat into what you leave behind. That’s where most of the negativity comes from.
In a situation like yours (income uncertainty, close to Medicare), I can see why people consider it since it can ease cash flow.
I hope our usernames don’t get confused in the future! At least our icons are different!
But I agree with the sentiment. The main problem with reverse mortgages was articulated by none other than Albert Einstein who was reputed to have said “the most powerful force in the universe is compound interest!”.
A reverse mortgage can actually be a great deal for a short period of time (on the order of about 5 years or so). Because the interest you’re paying is actually a lot less than potential rent. But after some period of time, it gets pretty onerous as the compound interest builds up.
Welcome, @wolfpups . While it’s not an absolute rule that usernames can’t be similar to each other, the St. Bernard there (scratches @wolfpup behind the ears) has been around and visible for a long time, and confusion is likely between your usernames. If you’d like to change your username, contact any of us mods, and we can get it changed for you.
[Also moderating]
Oh, and I don’t remember if it was the case when this thread was active before, but we now have a rule that financial or other professional advice should go in IMHO, rather than FQ, as a way of emphasizing that you don’t know our credentials, if any, and even if we are credentialed, we aren’t on your payroll. So, moving.