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Reverse mortgage pros and cons? Anyone have one?

greenmonster

greenmonster

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I still have 11 years left to pay on my house but I'm tired of making the high payments. I'd like to cash out and move somewhere cheaper so I don't have a mortgage payment at all but wife doesn't want to move. Like a lot of people I have a ton of equity but can't benefit from it, a reverse mortgage might do that.
I've been skeptical of reverse mortgages but I'm starting to wonder if the upside is better than I think.
Anyone have a reverse mortgage? Do you like it? Was it expensive to put together? Am I crazy?
 
My mom wanted this, but all I can think is that it's an expensive way to borrow money, and I have confidence that the reverse mortgage lenders have figured out a way to MAKE money on it. It's a closed system so that means you have to LOSE money somehow. So we loaned her the money and we will get it back at the end of her life -- it's written into the will. Basically, we're skeptical of them too.

However, if you need the cash, and are house rich, it could be a way to get the cash. My feeling is there are cheaper ways to get the cash.
 
I, too, am leary of reverse mortgages. And you have to consider the interest rate that your reverse mortgage will have.

Unless you know EVERYTHING about the mortgage details, including payback, don't do it.

I don't have one and I know of nobody who has one. I look at them as a last ditch effort.

And if you plan on moving somewhere else, why are you even considering a reverse mortgage? The normal sale of your current home would provide more than what you need to move.
 
Can you take out an equity loan on your home and use the funds to help with loan payments?

It may sound ass backwards, but would probably help you more than a reverse mortgage. Those folks sound like sharks.
 
greenmonster said:
I still have 11 years left to pay on my house but I'm tired of making the high payments. I'd like to cash out and move somewhere cheaper so I don't have a mortgage payment at all but wife doesn't want to move. Like a lot of people I have a ton of equity but can't benefit from it, a reverse mortgage might do that.
I've been skeptical of reverse mortgages but I'm starting to wonder if the upside is better than I think.
Anyone have a reverse mortgage? Do you like it? Was it expensive to put together? Am I crazy?
Click to expand...
hard to say you’re crazy, unless you’d agree to do it without running the numbers. in that case, yes, you would be crazy. you know there’s something in it for the lender, or they wouldn’t be doing it in the first place. my guess is that the benefit would go more in their favor than yours. if you’re set on finding out though, ask for a proposal, see for yourself, and then ask yourself if it’s worth it. check especially for a termination clause + penalties. once you agree to the loan, if you decide you do want to move in the next several years, your choice to do that may be severely limited.

in the meantime, since you’ve said your wife doesn’t want to move just yet - ask her if she’d at least consider looking at some options (in advance of making a decision at some point in the future). it never hurts to look, right? who knows, maybe she’ll see somewhere and something she really likes that would allow the two of you to get the full benefit of the equity you have worked hard for, and built together.
 
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Heads up.

A reverse mortgage can affect your eligibility for some government benefits, like Medicare.

And that's once you get past the higher than average fees and encumbrances.
 
A HELOC may be better for you. It gives you flexibility.

You only get charged interest if you use it.

So, even if the interest rate is higher, you may pay less interest because your principal amount is lower.
 
greenmonster said:
Well that’s just it. My wife wants to stay put, at least for a few more years.
Click to expand...
I'm in the same position (except our mortgage is paid off.) I'd like to cash-out and move, but she wants to work another 3 years. We don't "need" the extra income at the moment. A reverse mortgage would only make sense to me as a last resort if something unforseen was to happen.
 
you wanting to move vs the wife wanting to stay...imo any kind of additional loan at this time can negatively interfere with what you end up really doing.
 
I’ve just watched a few videos on reverse mortgages.
Fees are high, interest can be higher than current market rates.
As littlebeast says the advantage goes to the lender.
It’s just so damn attractive to turn off my mortgage payment. That would life changing.
 
greenmonster said:
I’ve just watched a few videos on reverse mortgages.
Fees are high, interest can be higher than current market rates.
As littlebeast says the advantage goes to the lender.
It’s just so damn attractive to turn off my mortgage payment. That would life changing.
Click to expand...
Consumer Reports' take on the matter.

Reverse Mortgages | Retirement | Housing - Consumer Reports

Reverse mortgages allow older homeowners to live off their home equity. Consumer Reports Money Adviser looks at pros an cons.
www.consumerreports.org
 
I looked into these a bit. It seems if you plan to use it for 2-3 years and you really want to sell your house at that point, it might turn out ok for the home owner.

It also seemed the only way to "smartly" smoothly wrap one up is to sell your house.

For example, say you started a reverse mortgage, then 8 years later you want to stop the reverse mortgage but stay in your house ... the payoff amount is painful! And, assuming most people are retired at that point, not like you can easily go out and get a new normal mortgage.

Some example numbers: say you want $2500 per month from your reverse mortgage ... and say interest is 8% ... so each year you are getting $30,000 payments ... so after 8 years you have received $240,000 in money. Yippy! But, then you decide you really want to stay in the house, and you want to stop the reverse mortgage. Depending on the interest and how it is compounded, and other fees, you might owe something like $330k-$350K for that $240K you got.

And at that point if you assume husband & wife are not working, getting social security and other small income (dividends, etc) how the heck are you going to get a $350K loan to payoff & end that reverse mortgage?

But, say you plan to move to a cheaper place to live in 3 years, just short of funds for the next 3 years, but sitting on a lot of home equity ... you start a reverse mortgage and take that $2500 per month (just making up a number here), get a total of $90K from the reverse mortgage over those 3 years ... now that payoff amount might be $100K-$120K ... sell your 2 million dollar house, minus the $100k-$120K reverse mortgage payment and that ain't so bad.

So it seemed to me, short ish term and sell house, had some OK scenarios.
And worse case scenario is long term and want to actually stay in the house.
 
greenmonster said:
I still have 11 years left to pay on my house but I'm tired of making the high payments. I'd like to cash out and move somewhere cheaper so I don't have a mortgage payment at all but wife doesn't want to move. Like a lot of people I have a ton of equity but can't benefit from it, a reverse mortgage might do that.
I've been skeptical of reverse mortgages but I'm starting to wonder if the upside is better than I think.
Anyone have a reverse mortgage? Do you like it? Was it expensive to put together? Am I crazy?
Click to expand...
Is there a way to sell the house, take the 500k tax free capital gain, then find a new place? Maybe buy a smaller home or rent until you both decide you want move out of the area?
 
Must read
 
Neighbor had a reverse mortgage and everything was in his name. When he died, his wife had to sell everything super fast and move to her daughter’s place Wisconsin to get what little equity remained.
 
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I would question your desire to move.

For many years my wife wanted me to sell our home and move to a quieter more peaceful neighborhood. We spent time checking out other areas in other states. I pointed out to her that we already had what we wanted where we were. We had a small town vibe in a really great neighborhood that was a short waking distance from a small downtown. And a sunset view from our back yard. And our neighborhood is very quiet.

In short, we stayed where we were and I refinanced my remaining mortgage at 2.5% for 30 more years. I could have written a check and paid off my mortgage but I took the loan instead. Now I keep making the roughly 18% by keeping my money invested, rather than using that money to pay off a loan that is only 2.5%. And I absolutely love my neighborhood.

I also have my credit union make my monthly mortgage payment automatically each month. I don’t have to think about it.
 
One thing that may be a factor....the lending rates may drop this year, one way or another.
If it was me considering, I'd do a wait and see for a couple months to see if the rates drop.
 
It’s also easy to search for the pros and cons of a reverse mortgage. Just search for: reverse mortgage pros cons.
 
We can't take it with us when we die, so unless you plan to leave your home to your heirs, then spend away

ST Guy said:
In short, we stayed where we were and I refinanced my remaining mortgage at 2.5% for 30 more years.
Click to expand...


"2.5% is free money"

And we wonder why the median home price has doubled since 2012 :loco



Yet, 2.6% over 30 years is really 44% interest of the amount you borrowed.



For Example, if you borrow $1,000,000 you pay $441,223 in interest at the end of 30 years at 2.6%
 
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