In alt.home.repair, on Wed, 25 Sep 2019 15:58:13 -0500, dpb
wrote:
On 9/25/2019 2:18 PM, Ed Pawlowski wrote:
On 9/25/2019 11:57 AM, Ralph Mowery wrote:
In article ,
says...
**I considered it for a while and the thing he denies was the advantage
of a reverse mortgage. Instead of having a house that no one wanted in
my estate, there would either be money that everyone wants, or money I
would have already spent.*** (I considered an annuity too, but then I'd
still be dead and stuck with a house.* It's very hard to fix up your
house for sale, and to sell it, when you're dead.)
I have not really looked into the reverse morgage.* It might be a great
thing for the few that do not have children or others they want to leave
money to.
Reverse mortgage is good if you actually need the money and can live
better.
As for leaving money, I already gave my kids the ability to earn a
living.* If anything is left, good for them but they would rather I
enjoy life and spend as I see fit.
I know an older couple that had modest retirement income.* They had a
big expense for the septic system and took a reverse mortgage.* Took
care of that an a few other little things that made them more
comfortable.* They are gone and the house, AFAIK, was left to the nurse
that took care of her near the end.
They are made to sound good by the purveyors, but ever wonder what is in
it for them? As with annuities what you get is an actuarially adjusted
amount based on the equity held in the property at the time and your
age. Virtually always one would be far better off financially to just
sell the property on the open market,
Well sure, but then you have to move out.
take the lump sum payout of the
equity and live in a less expensive location while investing part of the
proceeds.
That's okay if you're willing to live in a less expensive location. I
don't want to. The only thing that would make me leave here is if I'm
too sick to live alone. (Or I meet a rich young babe who wants me to
live with her.)
And even with living in a less expensive place, you're talking about
investing money. Why do I want investments when I have no children to
leave them to. At least when I thought I was short of money, I wanted
to spend all my money before I died, but only one second before I die.
That's what annuities do.
Since I don't know when I will die, i can't know how to apportion my
spending.
Specific downsides include
Okay, this looks good. The last time I brought this up, all I got was
"There are a lot of charges".
- If you’ve not paid off your mortgage the interest on the reverse
mortgage loan compounds with the original interest and it can quickly
balloon out of control.
Compound interest. Works when you're earning it, and also why you're
obliged to pay it. If you can't pay it, they'll foreclose, or
whatever it's called, but inability to pay your bills, like rent, is a
big problem even without a reverse mortgage.
- Unlike a traditional home equity loan, you are not making payments on
the principle and interest. So while your heirs are not on the hook for
the loan, compound interest, fees, and fluctuations in the market can
increase the likelihood they will be unable to retain the home when you
are gone.
Of course they will need to pay all that to keep the house. But I have
no heirs.
- You must remain there and continue to pay property taxes, maintenance
and insurance.
Sure, those expenses are why you didn't have enough money in the first
place.
If you change your mind and want to move to FL or need
assisted living
the most likely, or a nursing home.
or any number of other potentially unforeseen
circumstances, if you break the covenant you lose the house and the
reverse mortgage cash flow besides.
This raises a question. You can still pay off the debt, can't you, a
debt that may be much less than the value of the house? Not that
someone with little money and no heirs can do this but someone who
should never have bought the reverse mortgage in the first place, who
has heirs who might want the house, if only to sell it at market price,
can pay off the debt, keep the house, and sell it for more, right? If
not the detective guy from Hawaii is even more misleading.
I need to learn more about this part.
Verdict:
Reverse mortgages may be a way to get financial relief if you have no
one to pass your house to when you’re gone.
There are a lot of people like that. Either with no heirs or so little
money they can't afford to leave anything to anyone, and they have to
maximize what they have. (For years I thought I was like that.)
It still seems that annuities and reverse mortgages are the only ways to
do that. A problem with annuities seems to be that their payments
stay the same but inflation raises prices, age requires one to hire
peole for things he used to do himself, and likely increased sickness
can raise costs enormously. Are there annuities that pay less at the
start and more as time goes on? If not, I guess you have to save money
in the early years, which if I die early leaves the problem I didn't
want, money in the bank when I die.
Otherwise, almost certainly
a bad idea and as noted, virtually always one could come out better by
simply selling the property straight out.
Again, then you have no place to live.
I'm sure some will try to sell annuities and reverse mortgages to people
who shouldnt' buy them.