foshizzle LSU Fan Washington DC metro Member since Mar 2008 30166 posts
re: Are reverse mortgages a viable option? (Posted on 3/18/13 at 8:18 pm to WildTchoupitoulas)
Full disclosure - I have no direct experience in these things.
It seems to me that a reverse mortgage would mainly appeal to those who just don't want to move out. Maybe it's where she lived all her life, or maybe it's some other reason. But having that flexibility will cost money, whether it's worth the hassle of selling and renting based on the proceeds is a personal decision.
It isn't necessarily a bad deal but much depends on how long she will live. Semi-famously, the woman with the world record longest life (Jeanne Calment, 1875 - 1997, 122 years total) signed a similar deal in 1965 at age 90 with someone who himself was only 47 at the time. The monthly payments were quite high since nobody expected her to live very long, but she was still collecting from the estate of the guy who sold her the deal when she finally passed.
So it was a good deal for her but she had to greatly exceed expectations to make it pay off.
re: Are reverse mortgages a viable option? (Posted on 3/19/13 at 7:46 pm to slackster)
I recently got information from a reverse mortgage lender. You can't get 100% of the appraised value of the house. The amount you can get is based on your age and the appraised value.
You pay interest on the amount you receive plus mortgage insurance just like a conventional loan. The good thing about reverse mortgages is that you don't have to make monthly payments to repay the money; the upfront fees are rolled into the amount financed, the lender quotes you a finance rate (i.e. 3.75% on the principal plus 1.25% mortgage insurance) and it all accrues against the equity you have in the house.
The money doesn't have to be repaid until you move out of the house or die. When one of these events occurs you or your heirs have 12 months to pay off the mortgage.
Not a good deal unless you're desperate for money.