Reverse Mortgage

Talked to a lady this morning from AGT about the reverse mortgage thing. Just wondering if anyone on here has had any experience with htem. Is it a good thing or bad thing?. We don't need the money right now but might in the future. Also wondering if one of us has to go into the nursing home sometime in the future, will this prevent the Nursing home from taking our home away from the one left behind. Not real sure I'm interested in doing this, just putting feelers out. Keith

There is no such thing as free money. The way I look at the things is that you are basically borrowing money against the equity in your home. Then when you are dead, there is no house left to pass on.

Not that you are to feel guilty about not passing something one. I hope to die broke. I want to spend it all on me.

I am giving each of my boys an 80 acres farm but that is another deal.

Gene

The devil is in the details. Probably you would do well to get expert advice for that contract. A friend here signed his, then discovered that his appraisal was worthless. The new appraisal came in $100,000 less.

It did solve his cash flow problem, but cost a lot more than he expected. Unlikely he'll live long enough to need long term care, but Medicaid will be his solution.

He relied on a Realtor friend for advice. I know the guy, and would not have. There's no substitute for fully understanding exactly what you're getting into.

Another option would be to sell the house and retain a life estate.

Good luck.

Friend of mine and his wife are childless and in their late 60's ,and thought this would be a good fit for them. But reverse mortgages are not offered to farm real estate , only on homes they were told.

My attorneys answer is: It can be a good thing or it can be a bad thing. Its one of among the many different tools available regarding estate planning. If you don't mind borrowing money secured by your home you might consider it. If its not paid back you risk the security you pledged. If someone is left with no spouse and doesn't mind in effect selling their home to get an income while reserving what is similar to a "Life Estate" it may be worth looking into.

MIND YOU I have prepared several estate plans for different people in my law practice AND NO TWO HAVE BEEN ALIKE. What may be best for some gent here may be just the opposite of what's best for your situation. While a reverse mortgage may be great for one person it may be a terrible idea for another. The ONLY way to see if its best for YOU is to have a competent experienced professional estate planning attorney study YOUR OWN (not someone elses) situation and your needs then come up with a plan that best suits you. It may involve wills or trust instruments perhaps mortgages etc etc along with Medicaid planning and preparation.

I would recommend you consult an attorney's advice over a lay persons as their advice may be great for them but NOT suit your needs.

John T Country Lawyer

What you do with a reverse mortgage is, you are selling the house to them. In turn, they pay you monthly for as long as you are able to live in the house, and they can't kick you out.

But you have sold your house once you start, so it is no longer yours. You have a right to live there as long as you can.

I'm sure it can be written up how you want, that both hubby and wife have the right to live there. But that would give you lower payments, as the odds are it will take longer for them to get the house. They can be written up all different ways; sometimes your heirs could even get back to owning the house maybe..... But that is not the normal way they do things.

In general a reverse mortgage is useful for some few people; but most of us should run as far away from them as possible.

If you are in good shape and don't need now, then don't do a reverse mortgage. Sit down with a good cpa/lawyer/planner that deals in this stuff, and work out a plan.

You would be better off with trusts named to your spouse or children or grandchildren in most cases, if you are in good enough shape right now. They are tricky to set up bulletproof, but well worth the effort to work with an estate planning person who is charging you a fee; not trying to buy your house out from under you cheaply...... The cost of the estate attorney is far cheaper than the 'free' advice from the company trying to buy your house.......

Remember, these reverse mortgage companies are looking to buy real estate cheaply, and that is actually what they are doing, they are buying your house. Be careful of smooth talking..........

Paul

Properly written, a reverse mortgage is just like a forward mortgage. You own the house/property, subject to the mortgage. In a forward mortgage, you make a monthly payment, part of that payment is interest, which is calculated at an interest rate times your remaing balance. The rest of your payment reduces the principal. In a reverse mortgage, you receive a monthly payment from the bank or S and L, Each moth they will calculate the interest on your prior balance, add it to your monthly payment and to your prior balance to get your new balance . So the amount of your mortgage balance goes up over time at the rate of your monthly cash received and the interest on the mortgage loan. You still own the house subject to the mortgage. When you go to meet your ancestors, your heirs can assume the mortgage, pay it off, or sell the property,pay the mortgage, and pocket the remainder just as they would with a forward mortgage.
My opening state ment was "properly written". Like any legal contract, read it. I can't promise you that no one is trying to take advantage of the confusion on the topic.

Ron put it pretty well, with the exception that most reverse mortgages I have seen do not allow you to assume them, but do give you X amount of time to come up with the money to pay it off, either through sale or refinancing. But I've never seen one yet where the house was worth what was owed by the time the person died, so from a practical standpoint, you are pretty much just selling the house to the mortgage company. Its a pretty effective shield against a Medicaid lien, but for the same reason- Medicaid's lien will be junior to the consensual reverse mortgage, and Medicaid won't bother trying to collect its lien because in most cases the amount owed doesn't leave much, if anything, left in the way of equity.

About the best application of them, in my experience, is the fairly elderly (75+, at least) person with severe cash flow troubles (maybe Social Security only) who wants to stay in the house, and either doesn't have heirs, or doesn't care to pass it on to them. Don't start too soon, because the amount you get won't be worth doing.

It's a regular mortgage. Hidden fees and they can take your house if your out for so many days.If you have to go to a nursing home or extended rehab
you could loose your house.

The fiancial experts advise against a Reverse Mortage.

The financial experts likely aren't trying to live on $600 per month Social Security. As I said below, 80 yr. old widow, husband just died so now his SS is gone, house long since paid for, she could get an additional cash flow of 6 or 700 per month with reverse mortgage. If kids object, let them pitch in to replace the monthly money she would have got, so the ol' gal doesn't starve to death, and might even have enough to go to Bingo a couple times a month.

I could see doing it if you did not have children that you want to leave your land/house to. But if you have children I would think it would be a bad thing since they could loose a lot of $$

Heard that a couple here in IA.,lived on farm,hubby had to go to nurseing home,wife stayed on farm,hubby then qualified for gov.assitance,Title 19,{Iowa gov. thing}When farm sold Title 19 got paid back.Just hear say.

I have no personal experience just what other with the experience have told me.
1) I guess it is OK if you are willing to take less than the house is worth.
2) And you have to get out when the last payment is made or the mortgage term is up.
3) When you bought the house it was yours right, your name in the deed. But the bank really owned it and you maintained it. Reverse mortgage bank's name on the deed but you maintain it. Ummm?
4) The nursing home can't take something you do not own. But bet they'll take the payments.

Have a friend whose buddy did a reverse mortgage and out-lived it. The bank threw him out. So my friend and a couple of his buddies bought the house so the man could live out his life in it.

Reverse mortgage is not for me!

Better check the SS thing more closely. Yes SS goes down but I think she gets the larger of his or hers.

I agree with Mike(WA), and use a known bank. IF heirs are not a priority.

I would like to clarify that I do not think it is the Nursing Home that can take a patient's house away, rather it is the Medicaid program.

If a patient is cash destitute, Medicaid pays the nursing home every month on his/her behalf. They keep a running tab on it. If the patient owns real estate, they will place a lien on the home. After the patient dies they recoup whatever expenses they can from the patient's estate.

If the patient's spouse continues to live in the home, Medicaid will not kick them out. The spouse and any other dependents can continue to live there, at least until the patient dies. How it goes at this point will depends on how the property is titled I think. But either way, Medicaid will seek to collect the money at sometime in the future.

You're correct- but many couples both have very low benefits- she worked retail, or at nursing home, or cooked or drove bus for the school- very low wages; he was a small farmer, wrote off everything imaginable, so low net income and thus, low benefit, too. Loss of benefit for one is disastrous for the survivor.

There may have been different types of "reverse mortgages" in the beginning- but as currently written, you can't outlive it- you get to stay for life, and they keep paying you as agreed until you die. Kind of like an annuity. And yes, if you go to nursing home, it can get the payments, as they are a part of your income.

As mortgage company pays you, the balance owed keeps increasing, and with the out-front fees and the way they figure it, if you live 10 years, the mortgage will probably be more than the house is worth, so the heirs will not be able to refinance or sell for the amount owed, and the mortgage company ends up with it.

Property remains in the owner's name, "subject to" the mortgage. I'm sure that the program could have been structured such that the house went into the bank's name, but for reasons that are too complicated to go into here, it is in the bank's best interest to keep title in the name of the borrower, subject to the mortgage.

Old, You are absolutely...Right about that! Larry

Icuby: That is not just hear say. I personally know a fellow that his wife went through most of their money but he was able to hold onto his farm land. Medicaid paid for most of her care the last few years of her life. After she died there is a lien on the farm for about $150K to pay for the medical cost Medicaid paid for the wife.

Keith Molden: A nursing home can not take a home away form a surviving spouse if the house is on both your names. Medicaid will pay the nursing home and then they will place a lien on the house when the spouse in the nursing home dies. The house is not forced to sell or anything until the surviving spouse dies. Then the lien is handled in the estate.

As for the reverse mortgage. Can you tell me exactly ho long your going to live???? IF you live longer than the reverse mortgage term you or your spouse could easily be home less.

A reverse mortgage is a poor plan for 90% of the people that would do one. You need to talk to a estate planner and there are much better ways to protect your spouse in the event one of you has high health care cost.

I had a neighbor about 30 years ago who was in a good financial position. There were several elderly couples that sold their property to him, with the provision that they could live there as long as they wanted. It helped them out with cash, and helped him build his portfolio.

A reverse mortgage is a great option for retirees who have NO OTHER option. The lender is taking a fair amount of risk, so you can be certain they're making it well worth their while.

There was a little article in the paper here recently about them. it advised if you think that you may need the money later that you should take it out now, while interest rates are low, and that you will qualify for much more than if you wait until rates go back up.