Reverse Mortgages Good or Bad?

Wed, Aug 11, 2010

Boomer Support

My son-in-law is in the mortgage industry and keeps yapping about the wonders of reverse mortgages. And now that my retirement fund is in shambles, I am actually starting to consider it. Do any of you older boomers have any experience or insight on reverse mortgages? Specifically, has it been worth it so far, pros/cons, and would you recommend it? Thanks in advance to my fellow babyboomers.com members!

Boomers, help your fellow baby boomer by answering his/her question through submitting an answer in the comment box below…

70 Responses to “Reverse Mortgages Good or Bad?”

  1. BurgerLifter says:

    While these days I normally tend to NOT trust anything coming out of the financial sector, I think any decision is worth considering as long as it is well thought out and all angles are considered.

    Couple of questions for you to consider –
    1) How long til you retire?
    2) How long do you plan on living (ie do you have health problems or a family history of health problems?)
    3) What type of lifestyle do you want to live? Continue as you are today? Peel back a little and live more conservatively?
    4) Had you done proper prior retirement planning before? Did you just put 5% into your 401k/savings account figuring it would be enough? If you did plan – how much is your retirement fund off? What’s the gap?

    While I’m no expert, my impression is that reverse mortgages aren’t necessarily bad – they just come with a cost (just like any type of financial offerings). It’s up to you to make the wise decision as to whether you are willing to eat that cost.

    Also – whats your relationship like with your son? Do you not trust him? Has he dealt with relatives in the past? Is he relatively new into his profession or does he have some practical experience?

  2. MissJackson10 says:

    I am 55, but my husband is 65, so we qualified for the reverse mortgage. I believe you have to be 62 to qualify. We have had our home paid off for years and had hoped to leave it to our daughter. That is not a possiblity anymore. I’ve heard some joke that reverse mortgages are for losers or failures in life who didn’t plan or lived above their means and are paying for it later. I like to think that is not us. We are not done the process but i already have one piece of wisdom: be diligent with the appraisals. Naturally, the banks will try to rip you off. Be prepared to appeal.

  3. sheila says:

    At the time of her death we found that my Mother had taken out a reverse mortgage. Her check book depicted that she bought new carpeting, new windows, and went to Vegas 3 years in a row. We used to kid her about her weekly bus trips to the Atlantic City casinos with her senior citizen group. Looking at her income and other assets we realized that without the reverse mortgage she could not have done all that she did.
    Sure we had less to inherit at the time of her death, but not one of us cared.

    Another example of a happy ending is one of my divorce clients who wanted to stay in his home but did not have the funds to pay off the soon to be ex. Ex gave him a Quit Claim Deed (she had to get off the deed because she was under 62 and to qualify all people on the deed must be at least 62), he then got a reverse mortgage and paid her off. That was 4 years ago and he is still happy in his home.

  4. SexyAsian says:

    I agree with the undertone in the first part of sheila’s comment…

    You worked hard, you were responsible, you built up savings in your house. It’s not like you are looking to take out a HELOC (home equity line of credit) and spend beyond your means.

    Use the money to enjoy whats left of life. That’s not supposed to sound depressing or pessimistic. Its likely that you have many years and many great adventures ahead of you. It is not your responsibility (or chore) to provide for others (grownups at that) through inheritance. Most of that money gets taxed anyway (i *believe* the cash flow from reverse mortgages is tax free) and its likely that taxes will go up in the future leaving even less to your family.

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  27. CloudBoomers says:

    Recently I was talking with a gentleman who sells reverse mortgages. I was surprised that they were still being sold because of the way the value of homes has gone down over the last several years.

    Anyway, he shared what sounded like a good idea. He said that in December there was some kind of law passed where you could get a reverse mortgage on a new home. So, if someone were going to purchase a $300,000 new home, rather than plopping the whole $300k on the purchase of the home, it might be better to pay half ($150,000) and get a reverse mortgage. That way you’d be getting monthly income and you’d still have $150k to invest somewhere else.

    I thought that sounded good for anyone who is going to buy a home outright and can qualify for a reverse mortgage.

  28. Reverse mortgages are some of the biggest scams in the world. Please do not do one!

  29. This information is really beneficial and helpful, because my in laws are basically living on as small a monthly amount as they possibly can in order to leave something for thier kids. My wife who is the oldest has mentioned a reverse mortgage to them several times and this will help me to discusee the benefits better with her.

  30. Hope says:

    For those 62 and over, owns a home but cash poor, it is a way to move to a more suitable home using the Reverse Mortgage. Down payment is 50% or less and you don’t make any more mortgage payments until you move out. With the bottom prices of homes, you can buy low and gain equity again and enjoy your new home that is more manageable and better for your needs at this age. Great thing is, you do not have to qualify on income or credit.

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  33. We’ve been helping folks who live in manufactured homes facilitate RMs for the past two decades. We’re not loan brokers albeit I’m a real estate broker, manufactured home dealer, general contractor and developer in the Factory Built Housing Industry.

    Our role has been to provide the required foundation retrofitting, installation and engineering services needed to help facilitate an FHA guaranteed FORWARD or REVERSE mortgage.

    I can tell you first hand that REVERSE MORTGAGES have literally saved many if not most of our clients from financial ruin and a very down graded lifestyle. We have seen thousands of very happy faces from folks who have benefitted from RMs.

    I don’t agree that those who’ve had to fall back on their homes through RMs are failures or losers. We’ve worked with folks who’ve had PHD’s in engineering, philosophy, aero space, doctors, attorneys, successful business executives and business owners.

    These folks were definitely not losers or failures. They just wanted to revisit some of the capital they’ve been paying into their homes for years if not decades.

    I think in important not to paint this entire niche with such a broad brush. In the coming years especially we will see thousands if not millions of BBs seeking RMs should the values of their homes meet the stringent requirements.

  34. As a Realtor in California; all I can add is this: It really depends on how much equity you have… And what is still owed on your home. For us, we did it at just the right moment and now, all we have to do is pay our property taxes! The money we got allowed us to several things we had put off and looking back, it was a wise move. Now our only (home-related) bills are our Utilities; DSL & Cable!

  35. chuck says:

    We did the Reverse mortgage about two years ago. We pay tax, insurance, and keep our place in good repair. The same as we would with a mortage payment. The only difference is we do not pay a mortage. We have no plans to move so where the reverse mortgage goes does not matter to us. It can grow as large as it wants. When we die, the mortgage company can have it. We purchased a motorhome and vacaton in Fl in the winter. Never would have been able to do it with a mortage. I highly recommend it for some people. You must decide what is best for you.

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