Does anybody have personal knowledge about reverse mortgages? Like the stuff a person doesn’t find out till they get one? I’m looking it up right now but was wondering if there were things that we should know about, other than what can be Googled. Thanks in advance.
I think the best advice I could offer would be to spend a little money on this very big decision and discuss this with a financial planner.
It can be a wise choice for some or a foolish move for another because much of the decision making process involves situations that are unique to your current age, financial situation, etc.
Good advice.
Something I always wondered about reverse mortgages - what happens if your equity runs out before you die? Do they put you out on the street?
I don’t have personal experience with them, but I keep hearing how expensive they are.
Suze Orman: Know the risks, rewards of reverse mortgages.
Previous threads:
In layman terms, what’s the catch with a reverse mortgage?
Please explain reverse mortgage to me…simply!
What is the difference between a home equity loan and a reverse mortgage
Reverse mortgages and being a live-in landlord in retirement
No. I think they look at actuary tables and are betting most people will die before the equity runs out. Occasionally,however, they get stuck with that rare person who lives to age 110 and they have to keep paying.
This might be addressed in one of Patty O’Furniture’s links, but I am too lazy to read through them.
One problem I would see today is the fact that the prices of homes have sunk to all time lows. Say, for instance, that your house was worth $300,000 9 years ago - that would have made for a nice monthly chunk of change coming back to you. But now if that house is worth only $100,000, needless to say your monthly pay back would be far less.
I guess I am saying that if you don’t absolutely have to do so now, you might want to hold off for a few years to see if the prices go back up before doing this.
My parents have one, and my grandmother had one before she died. It was an extremely good decision for both of them.
What you have to keep in mind with reverse mortgages is that they are not a good long-term financial deal. If you’re looking for investment possibilities and all that, a reverse mortgage is not for you.
On the other hand, if you’re looking for more money every month right now, they’re a GREAT deal. They allow you to spend the equity you have in your house without having to actually sell your house. They do not throw you out if you exceed the value of your house; if you live longer than they figured the loan for, the bank loses, not you.
For my parents, it’s made the difference between them living comfortably but close-to-the-bone to them being able to take the occasional modest vacation and buy whatever brands of food at the grocery store they want, and when their car needs maintenance they don’t have to wonder where they’re going to get the money to pay for it. It’s been a huge asset for them. The only downside I see to the whole thing is that my inheritance will take a hit, but they did not consult me on that issue before making their decision. 
(and of course, if they HAD consulted me, I would have told them to go ahead. I want them to live as well as they possibly can for the rest of their lives!)
What happens if you have to go to a nursing home, not knowing whether you’ll ultimately die there or come back home? Do they have to continue paying you?
Often, no they are not obligated to continue paying. Most reverse mortgage contracts state that the borrower must physically reside in the house in order to continue qualifying for monthly payments.
So if you’re in a nursing home for, say, 6 months or a year . . . you may not have a home to return to?
Wow. A wealth of knowledge here to supplement what I’ve been looking up…thnx everybody!
I don’t think that’s right. The reverse mortgages I’ve seen state that the house must be a primary residence. Going into a nursing home for a temporary period of time or even spending time in a second home wouldn’t affect where your primary residence is.
Heck, to get the best rate on a standard mortgage, you have to state the property in question is your primary residence. They can’t stop your mortgage if you go into a nursing home in that situation either.
It’s best to read and understand the terms/conditions of the contract. Temporarily moving into a nursing home does not immediately suspend payments but usually there is a stated time limit one can remain in the nursing facility. The contract I was reviewing for my mother had a 12 month limit, after which the payments would cease and the mortgagee takes possession of the home.
My grandmother got a reverse mortgage after grandpa died and their savings dried up. I think it was in 2000 or so. She just passed away last year, and despite having the reverse mortgage for 10 years, after the house sold my family ended up with a surprisingly high amount of money. As in, we ended up getting about $450k of the $650k sale price of the house. Of course, the house was in San Francisco, so I’m sure the details would be drastically different if you live in Des Moines.