1. Attention: We have put together a thread with tips and a tutorial video to help with using the new software. Please take a moment to check out the thread here: Trapshooters.com Tutorial & Help Video.

OT What do you know about REVERSE MORTGAGES

Discussion in 'Off Topic Threads' started by CalvinMD, Jan 24, 2009.

Thread Status:
Not open for further replies.
  1. CalvinMD

    CalvinMD Active Member

    Joined:
    Jan 29, 1998
    Messages:
    9,287
    Location:
    Northeastern MD @ the top o the Bay
    I have a family member considering one of these Reverse Mortgages and I have assisted to this point by requesting all the info I can from any source I could find.
    Please if you could my wise compadres tell me your thoughts, tips ..anything you know at all about these and whether they are good, bad or total shams for that matter or what circumstances would need to be present for it to be a smart move...Thanks in advance
  2. need to shoot more

    need to shoot more Active Member

    Joined:
    Feb 2, 2006
    Messages:
    1,232
    In general I have heard they are full of fees on the front end of the deal, I am sure there will be more specfic info given but I am guessing not much of it positive? Good Luck, Jim Z.
  3. KEYBEAR

    KEYBEAR TS Member

    Joined:
    Jan 29, 1998
    Messages:
    3,210
    All you really need to know is the date your going to die . Go over this date and you die on the street .
  4. Big Jack

    Big Jack Active Member

    Joined:
    Jan 29, 1998
    Messages:
    1,347
    Location:
    Erie, Pa
    A bit of incorrect info..Any time you refinance there are upfront carges..most will be tied right into the loan itself,,You'll receive monthly installments to the limit you borrow..70 or 80% of the property value (in will be appraised) If you should outlive the installments, you live there ubtil you die and then the property will be sold to settle the loan. The balance goes to your heirs. You will continue to pay the taxes & upkeep just like with any mortgage. Get a local broker to explain it to your relative. It does permit a senior to remain in their home for the balance of their time.

    Big Jack
  5. Big Heap

    Big Heap TS Member

    Joined:
    Jan 29, 1998
    Messages:
    1,751
    Compare REVERSE MORTGAGES to a home equity loan. Fees and interest charges might be less. Each case is different.
  6. BDodd

    BDodd TS Member

    Joined:
    Jan 29, 1998
    Messages:
    3,597
    It appears to me Jack's got a better handle on it. I also seem to see on web pages that two things happen that benefit the elders: 1, you don't have a mortgage payment any more and, 2. you receive monthly payment for the remaining equity of the home or, you can, at least in some cases, take a lump sum for the remainder of your equity. So, if your mortgage now is $1000/month and the balance of your mortgage loan is a hundred thousand, and the reverse mortgage folks agree that your home is worth two hundred thou, you pay off the current mortgage leaving one hundred thou available to you monthly or in possibly lump sum. You DO remain in the home till it's sold or you die and if you leave the home for any reason, the amount paid to you must be settled with the sale of the home and the rest goes to your heirs. In the above scenario, you'd suddenly have $1000 available a month since your mortgage is paid off plus you could be getting monthly payments or a lump sum for the remainder of your equity. Definitely you should get full explanations from your advisors....breakemall....Bob Dodd
  7. midalake

    midalake Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    1,816
    It is a scam plain and simple. If the home is paid off it would be better to take out another secured first mortgage, or some other type of fixed equity loan. Then set up a payment plan to yourself, and collect the interest. There are many lenders that will do principal payments only. This would be the better way.

    GS
  8. CalvinMD

    CalvinMD Active Member

    Joined:
    Jan 29, 1998
    Messages:
    9,287
    Location:
    Northeastern MD @ the top o the Bay
    I think the program they were considering is collecting a lump sum...I told them that I would fear that the IRS would consider that a massive capital gain and tax the bejesus out of them on the lump total.....Thanks for the advice and knowledge guys,..please keep it coming...I'm trying to make sur someone doesn't lose their home sweet home to more of these sleazy-assed swindling banker types
  9. halfmile

    halfmile Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    14,047
    Location:
    Green Bay Wisconsin
    I have been seeing the commercials, etc and I can't for the life of me figure out how this would work inless the housing market went up forever like the unknowing thought they would a couple years ago.

    NO one is going to give you money unless they are sure they will get more than they give back. Period.

    Additionally, If you get them to commit to a value of say, 200 thousand on your house, and work up a deal based on that price, what happens if the current trend continues and it's worth 135K in 2-3 years?

    Someone is going to take it in the shorts and I guarantee it won't be the lender.

    Tell them to give the house to the kids, with a life estate so they stay there for the rest of their days, and let the kids give them money.

    HM
  10. dmarbell

    dmarbell Active Member

    Joined:
    Aug 26, 2006
    Messages:
    1,535
    Here is my web site. Also go to www.aarp.com to read about reverse mortgages.

    Reverse mortgages are FHA backed programs. There are fees, like any mortgage, and then there is mortgage insurance to make sure the banks don't lose money on the deals. How else are you going to get a loan on your house, with no payments required, and you get to live in it until you die or move out? Minimum age is 62, so payments can go on for quite a few years.

    Lines of credit are ok, but require monthly payments. Itra-family transactions can make sense, but require the risk of the homeowner living too long.

    There is no fixed term, unless you want to fix the term of the payments you receive, but then you still get to live in the house until you die or move out.

    Unlike what halfmile said, there is no revaluation in the future, except upwards. If the value of the house goes up, you can refinance and get more money. The loan never requires you to make a payment, until you die or move out. Then the loan must be repaid, but never out of pocket for anyone. The mortgage insurance makes sure the loan is non-recourse.

    For those who need or want it, there is nothing else like it.

    Danny
  11. halfmile

    halfmile Well-Known Member

    Joined:
    Jan 29, 1998
    Messages:
    14,047
    Location:
    Green Bay Wisconsin
    So what happens when the payments you have received exceeds the value of the home? Somehow I can't fathom a lender willingly going underwater on the deal.

    Who decides what monthly payments you can receive? I'm sure that is not negotiable by the owner.

    Can you reverse mortgage another property like a vacation home? Or is it only available on a primary residence?

    HM
  12. Don Rackley

    Don Rackley Member

    Joined:
    Jan 14, 2007
    Messages:
    514
    A friend of mine looked into it and the real scam was, the bank valued the house about 50% off what is was worth and therefore they had very little risk.

    It is a scam.
  13. grnberetcj

    grnberetcj Active Member

    Joined:
    Jan 29, 1998
    Messages:
    5,662
    Wait until you know you only have 2 yrs. left to live. Refi the whole shabang at 125% and only make token payments. The lender cannot take the house as long as "good faith" payments/tokens are made.....spend all the excess money and have fun...then die.

    Whoever is left can worry about the pieces!!

    Curt
  14. dmarbell

    dmarbell Active Member

    Joined:
    Aug 26, 2006
    Messages:
    1,535
    FHA (HUD) guarantees the deal. The bank can't lose money, because the loan is FHA insured. The monthly payments are pre-determined, based on the age of the homeowner(s) and the value of the house (determined by appraisal). Only the primary residence can qualify for FHA reverse mortgages.

    Here's an example. Husband 75 years old, wife 72. Loan is based on wife's age. House value $200,000. Monthly payments for joint lifetimes is $760.87. Or lump sum proceeds of $126,880.98. Financed closing costs are $8,482.50, including $4,000 of mortgage insurance.

    No payments ever on the loan. Loan is non-recourse, meaning only the home will be used to repay the loan. Heirs can pay off the loan, sell the house and pay the loan, or if the house can't be sold, let the bank have it. The latter almost never happens (at least in the past), as the bank will allow sufficient time for sale, and they just want their money. Difference is paid by the mortgage insurance.

    Most folks' house is one of their biggest assets, with a zero rate of return to the owners. RM turns this large asset into cash or payment stream, without having to move or sell. Heirs are disinherited from some or all of the equity in the house, however.

    Note: my opinion follows. No one over age 62 need have a mortgage payment, if cash and income are issues, and the loan can be paid with a reverse mortgage.

    Danny
    [For full disclosure, I make a fee when someone uses my bank for the reverse mortgage.]
  15. Trap2

    Trap2 Active Member

    Joined:
    Jan 29, 1998
    Messages:
    3,139
    Location:
    Redding, California
    I spent almost a year investigating the pro's and con's of a reverse mortgage. I, too, had heard the horror stories of people losing their homes, etc. This was all true when reverse mortgages first became available. The company that originally set them up, Trans-America, was, how shall I put this: Questionable ethics? This company alone put the stigma into the phrase "Reverse Mortgage". Once the government, FHA, became involved, it became a whole different ball game. Jack, Bob Dodd, and Danny, above are all correct. In the end, I decided a reverse mortgage was the best way to go for me, as I had set some goals in my life that can now be accomplished quicker now that I have no house payment. Those of you that say it's a scam, or a ripoff, really have no first hand knowledge what a reverse mortgage can do for you, or how it works. While not for everyone, they are a valuable tool if you know what you want to do. The up-front fee is high, but the benefits far outweigh the fee in my case, and I would venture a guess it would be for others as well. The only way to find out if it is right for you is to talk to a reverse mortgage broker, or lender. We took ours out with Wells Fargo, as they offered us the best package with the lowest fees. I have not made a house payment in over a year and have been extremely happy with my decision. Would I do it again, knowing what I know about how they work and what's involved? Absolutely!! Dan Thome (Trap2)
  16. Tron

    Tron Active Member

    Joined:
    Jan 29, 1998
    Messages:
    4,709
    Well, if Robert Wagner thinks it's a great idea, then that's all you really need to know. Wasn't he in a series called "It takes a thief"?
  17. BAD 303

    BAD 303 Active Member

    Joined:
    Apr 13, 2006
    Messages:
    3,541
    Those of you insisting it is a scam either have no understanding of the process or don't want to understand it. It works great for the people it is intended for. Those over 62 that have a home paid for or lots of equity. It can provide instant income while the heirs never have to worry about paying back or owing money on the home after the owners death. The FHA insures that the process never puts someone on the street. If you outlive the value of the home then the insurance policy kicks in. It can supply the owners with fixed incomes some extra money until death. It however seems to work best if you take the lump some amount out and invest it yourself in a safe enviroment so your heirs get that amount upon your death. The house will most likely not have any equity but the lump sum should still have a portion left for the heirs. Not a scam of any kind. But also not for every home owner either.
  18. stokinpls

    stokinpls Active Member

    Joined:
    Jan 29, 1998
    Messages:
    5,159
    They had a radio show on this last Saturday when I was driving back from the gunshow.

    They give you between 50-60% of the value of your home in either payments or a lump sum. They cannot evict you from your home if "the payments run out", otherwise they wouldn't be able to offer you a lump sump payment. If the bank that does the transaction actually loses any money, good ol' Uncle Sugar picks up the loss. If you go into a nursing home prior to the payments ending, guess who gets the payments. Sounds like a guaranteed 50% end sum game. Not sure I like losing 40-50% on the home's value. It'd be a little better to have a crystal ball.
  19. dmarbell

    dmarbell Active Member

    Joined:
    Aug 26, 2006
    Messages:
    1,535
    Don Rackley,

    The appraised value of the house is used as a starting point for the loan. No one is going to lend you 100% of the value of your house, with no repayment required until you die or move out.

    The appraised value in my example above is $200,000, determined with an appraisal just like any other mortgage loan. The lending limit for the loan was just over $140,000. That ensures that the loan never exceeds the value of the house in the future, within limits. Then fees and service set-asides reduce the loan to $126,881. What other possibilities are there for getting 63% of the value of your house, tax free and non-recourse, meaning no out-of-pocket ever? Unless you live too long, and all the equity in your house is used up, there will always be some money left over for heirs.

    By the way, the loan is "negative amortization," which means the interest is added to the principal, and becomes principal for the subsequent calculation. The loan balance grows instead of coming down, thus "reverse mortgage."

    Danny
  20. BT-100dc

    BT-100dc Active Member

    Joined:
    Nov 7, 2008
    Messages:
    1,483
    If they're advertising to draw in the 62 plus generation, it cannot be to your benefit. What I've learned so far would not fit in my scheme of things. However, why not let us reverse mortgage our shotgun? Darrell
Thread Status:
Not open for further replies.