Several years ago I looked up the fees on RMs ( Reverse Mortgages), they were very high. These are the same fees you would have if you purchased a home. I am going to assume you are talking about one person. If that person leaves the home to live somewhere else, the note is due and payable now. So, if you have a live in caregiver, and the person holding the RM has to go to a Skilled Nursing Facility, AL, or Memory Care, the house must be sold within 60 days.
A good friend of mine took out a RM to pay medical expenses for his ill wife. She died and he stayed in the house. A couple of years later, he remarried. He put the current wife on the title to the house. He could not put her on the RM because it was a done deal. 5 years later, he died. The RM company told her she had 60 days to refinance, sell, or leave the house to them. They said when they sold it, if there was any money left over after all the fees, and mortgage was repaid, they would give it to her. She had a few days to tell them what she intended to do. At that time, she had just buried her husband and had 2 broken feet. Fortunately, she was able to refinance because she was on the title. This happened less than 2 years ago.
So, if you have a live-in caregiver, maybe a family member, they will have 60 days to get out. Remember, the person on the RM has to live in the house. That is an absolute must.
my dad did it when he was widowed - what happens is you pay interest on what you took out and when you die you owe that amount plus more - my brother did same thing a few years ago - he didn't learn anything!! and now he has problems. don't do it
My understanding is that if you have an end-of-life illness and really need money a reverse mortgage is an option to finance medical care. At your death then the mortgagee then owns the property or it has to be sold to pay back the loan. I would speak to someone at your bank to get their opinion
My In-Laws had one and added my husbands sister to the deed. They also were in California.
before taking one out be aware that California does not hold real estate against you when qualifying for a nursing home.
look into all your options and consider hiring someone to help guide you.
one issue is that she would be required to stay in the home. Once she passes or moves out there is often a year grace period to sell the home. Any fees and interest would need to be payed out of the proceeds.
California prices are out of control so it might be better to take out a home equity line of credit where you are only using what you need. She might also want to just do a refinance and take the equity out and just have a payment?
This is a question for an elder attorney in your area. Not all reverse mtgs are created equal, the money you get in monthly payments has to do with equity you can borrow from, and how long you will need this additional money to pay for care.
Nothing is free......................getting a monthly allotment comes from the equity in your home ( a loan that has to be repaid one way or another): when the equity is used up, the allotment payments end. If you don't die before that happens, then you either make payments to keep your home or you sell it and move out to pay off the loan.
Pretty simple.
The borrower needs to be keenly aware of interest rates on the loan and shop around with different lenders, just like every borrower needs to be. Consulting an Elder Law Attorney may be beneficial.
It depends. First it depends on the quality of disclosure and honesty in describing the costs before the paperwork is signed. In the case of my MIL, she signed to easily and lost a lot of money in unexpected and truly outrageous charges. (Sort of her fault: she didn't read all the fine print. On the other hand, after her death I found the papers and read the fine print. Probably only one in a thousand would have understood it. This one was about 80% scam.)
Second it depends on whether the reverse mortgage meets the needs of the LO. In some cases an elderly person(s) can get the cash needed to remain in their own home by using the equity in their house to fund the payments of a housekeeper, landscape maintenance, and possibly others. If the rates and fees are fully disclosed and the health of the LO(s) are in line with remaining in the home for at least 10 to 15 years this may be a valid option, even if the fees are just a bit higher than a conventional mortgage. There will usually be little or no equity left to pass on to the next generation in this case, but if the contract is studied by a contract specialist and the doctor(s) agree that the health of the individuals are realistic for the plan, this is OK. Again, this is NOT a low risk, low cost option, but it can be right for some people. Probably not for most.
As for how they really work, that is a bit complicated, and varies between companies offering the reverse mortgages. Basically, the house is appraised, and a loan is granted to the owner/resident that will be paid to the owner/resident for their lifetime (or a more limited time). The amounts that have been loaned are debited against the value of the house as well as interest on the loan. Usually monthly statements are sent out. When the owner/resident dies or must move into a NH there is a settlement. The amount of equity that has no debits against it will be paid to the estate of the owner or to their accounts, if they are still living. Normally the interest rates are a bit high and there may be other fees, depending on whether the owner has continued to pay the insurance, taxes, and maintenance or whether there is a holding account set up for these expenses. As long as everything works as described and understood at the beginning this is fine and not a scam. It is only a scam when there are hidden fees, exorbitant interest rates that were not made clear in the presentation, or other lack of honesty or clear dealing. As with any business transaction, it is the duty of the customer/buyer to check the honesty and trustworthiness of the seller. These things become scams when there are huge unexpected expenses and/or the presentation and advertising do not fairly describe what actually happens. Mostly, expect a scam. But read carefully and engage the services of someone who understands the legal and financial implications of all that paperwork.
I don't have an answer, but a related question; hope that's okay! MIL has a reverse mortgage since 2006, the year FIL passed. She lives alone in the home, with a paid and family caregivers supporting her. She has, and will continue, to receive monthly income from the RM until she passes or moves to a NH or assisted living. This income she relies upon to make it from month to month.
I understand that if/when she moves to a care facility, she has 6 to 12 months before the loan will come due (if the move is considered temporary). My question is, can she still get the monthly income until such time as the move is deemed permanent. If so, it could mean the difference between placing her in a substandard facility and a much nicer one. She is at the point of really needing more help than we can continue to provide, and it is so hard on her and all of us.
We would eventually sell the home. Home values in this area of Southern California are rising exponentially and when placed on the market, homes go quickly. We think there would be at least some equity left that could fund care for a while. But it would be really helpful to still have that extra income for a few months. Anyone know? Sorry for hijacking the thread! BTW, I have been Googling to get answers and not finding any.
Read the contract. If you do not understand all the terms and conditions, take it to a financial and/or legal advisor who can explain them all. In some of these contracts the mortgage holder has the right to terminate if the mortgagee does not live in the house for just 30 or 60 days. (In the case of my MIL, it was 30 days, which meant she could not spend a couple of winter months with her daughter in CA, but needed to remain in Baltimore.) Also, check to be sure that you CAN sell the home yourselves. The contract may specify that the mortgage holder becomes the owner at the end of the contract. In my MIL's contract they had the right to sell the house and were only required to give her heirs the difference between the amount of the original estimate and the amounts that had been debited against that amount. In our case, MIL passed away during a recession and the mortgage company took a massive loss as the house could not be sold for as much as the evaluation. The general term "Reverse Mortgage" covers a lot of different financial instruments. You only know what you might be able to do when you understand exactly what your MIL signed. That is part of the reason why you can't find answers. Any answers will need to come from the actual documents of your case. Good luck with this, I hope your MIL keeps a tidy drawer of financial documents.
The other complication that I see in your case may be that the amount of money that may or may not be available from the sale of the house might delay applying for medicaid or for obtaining a spot that would transition from a fully paid room/bed to a medicaid room/bed as her funds run out. This is probably something that you should not put off.
A point in your favor, though, is that the mortgage holder probably does not keep a very close eye on the property and you may have time to go through the house and take care of dealing with the contents well beyond the specified time. Although my MIL had a strict 30 day window, which passed before she died in rehab, we were able to take nearly 3 months cleaning out the house before the mortgage company contacted us. I guess they were slow to read the death notices. That could be quite different in this economy when older houses are going for really high prices. In general, though, it does usually take mortgagors time to go through their processes.
Generally, the cons outweigh any pros. High fees, only on average up to 60% of the home value and too many ways they can foreclose if they decide you aren't doing enough maintenance or fail to keep taxes/insurance current. Some people could possibly make it work, but its just too risky in my opinion. It's better to downsize like millions of seniors do every year. Sell the house, buy something smaller with some equity left to bank, or don't buy at all depending on your age. Check with your local housing authority to see if your income might qualify you for reasonable rent. Some base it only on income, some base it on income AND assets and you will have to find that out where you live. But in spite of what Tom Selleck says, don't take your financial advice from an actor. He's still acting and being paid VERY well for that commercial. Do you think Selleck would ever need to consider a reverse mortgage? Good actor, loved his westerns, but come on. He's paid to do those commercials and could have received $500,000 or more for a couple hours of acting on his back lawn. If ten people were interested in a reverse mortgage, just about all ten should avoid a reverse mortgage, in my opinion.
Be very careful with reverse mortgages. They last for as long as the homeowner is in their house. But what if they need to go to a facility where they get a higher level of care? Consult with elder care advisors. It may be better to sell the house when there is a need to have more money. There are many government programs to assist older people to stay in their homes.
They are not a scam; but they are generally not a wise financial decision. the fees are very high and there are some upfront fees. Consult an elder law attorney. he/she may be able to offer better suggestions.
No, they are NOT a scam, they are reverse loans, BUT there are restrictions and you need good guidance. I would not get one without seeing an elder law attorney and discussing your expectations of a reverse mortgage. Also there are some particular situations where it can actually be DANGEROUS to have one. For instance you are aged and near needing care and you get one to stay in home, but then you have to leave home for care after all. Some reverse mortgages state that the reverse mortgage loan is due upon your leaving your home. That would mean the home would be sold. So you would have to lose that home, and you would be left with the profits on the home after the reverse mortgage is paid, and could not qualify for medicaid, would be forced into spending down to nothing. For my partner's Mom it was great. Big house in the desert of AZ--carefree. Got a reverse mortgage that with her SS and savings allowed her to stay in her home with in home help until her death. For others, it doesn't work well. Take a list of your assets, your home, its value, and speak with an elder law attorney. The 350.00 for one hour of time to discuss what would be best for YOU individually would be very well spent. Do not speak with reverse mortgage people. Do not sign one without running it past your attorney for another hour. Some people get one, need care, and are told "You get 1,500 from SS and another 700.00 from your reverse mortgage; you make too much to qualify for any help with your LTC facility BUT your LTC facility now wants 5,000 a month from you." So it can hurt such a person if you see what I mean.
I am a Financial Planner in Canada. Here a reverse mortgage is rarely an appropriate financial planning tool. There are rare instances where they may be a reasonable option, but those are the exception to the rule.
I know there are slick ads for them, that make them to be the perfect solution, but they rarely are the right solution.
Before considering one, it is important to get impartial financial planning advice, preferably from a fee for service planner who is not trying to sell you anything beyond their expertise. Some work on a sliding scale or prepare a certain number of Pro Bono plans each year, otherwise expect to pay around $5000 for a comprehensive plan.
No I am looking for clients, this is not a ad for my services.
A comprehensive financial plan will look at your income, expenses, expected longevity, upcoming expenses and longevity. It will find where the shortfalls are, and include research into government programs that may be available to you. It will run different scenarios to see how long your funds will last depending on which advice your follow.
When one spouse insists my way or the highway, that is a sign of financial abuse.
Many years ago, they were a fabulous idea. Times have changed, and the requirements/regulations have tightened immensely. The fees are outrageous, and qualifying is even more difficult now unless you have a large income. I checked them out when I turned 62 and was shocked to realize that I needed to earn more monthly income than I've ever earned in my life to even qualify for one. That wasn't the case before the regulations changed.
This does not sound at all like our reverse mortgage. The only "outrageous fee" was the settlement costs. We qualified with a very low income. In fact we were sent out the door of the counseling session with a list of agencies to contact for assistance -- we qualify for food stamps, energy assistance, and other programs -- but my husband refuses to discuss it.
Never use a reverse mortgage. They are a rip off. If the property is paid for, take out an equity loan. A second mortgage. It will put money in the hand, and the interest rate on such a loan is far less than the fees that will be paid out every month to the reverse mortgage company to access the money. No way. I know several seniors who did reverse mortgage loans and they are a joke. Sometimes up to $300 a month service charges. Reverse mortgages are as bad as student loans. Don't take one.
We have no monthly charges. In fact, if there are monthly charges, then that reverse mortgage is not a HUD-approved lender, as I understand it. We have EARNED interest each month on our balance of available funds.
A bank will not give you a home equity loan for money to live on. We tried that and we tried for a second mortgage and were denied both.
Not a scam. But definitely not a great choice either. We have one because dh refused to sell and banks would not give us a loan (because we were borrowing the money to live on, therefore would not be able to make payments on it, our income is so low). I explored all options and it came down to sell or get a reverse mortgage.
There is a lot of prelimary stuff you have to go through to get a reverse mortgage, including a several-hours-long counseling session mandated by the federal government with an approved counselor who then will provide you with an approved list of lenders.
Am I happy that we have a reverse mortgage? Nope! If I win the lottery or get an inheritance, it will be paid back first -- but I will not close it. If I leave it open and suddenly need a large amount of cash, I can always go back and tap into it.
Looking back, I would have chosen to walk away from everything than get a reverse mortage (if I'd had that option but dh calls the shots). At the rate we are spending it, in three years the reverse mortgage funds will be gone. We'd still be in the house until death or until we sell, but we would not have the income to be able to sustain living in this house.
Start by researching reverse mortgages IN AN INCOGNITO BROWSER at hud.gov. DO NOT CLICK ON THE ADS. Scroll down the search page until you reach a hud.gov link. HECM (Home Equity Conversion Mortgage) is what you want to read about.
A good friend of mine took out a RM to pay medical expenses for his ill wife. She died and he stayed in the house. A couple of years later, he remarried. He put the current wife on the title to the house. He could not put her on the RM because it was a done deal. 5 years later, he died. The RM company told her she had 60 days to refinance, sell, or leave the house to them. They said when they sold it, if there was any money left over after all the fees, and mortgage was repaid, they would give it to her. She had a few days to tell them what she intended to do. At that time, she had just buried her husband and had 2 broken feet. Fortunately, she was able to refinance because she was on the title. This happened less than 2 years ago.
So, if you have a live-in caregiver, maybe a family member, they will have 60 days to get out. Remember, the person on the RM has to live in the house. That is an absolute must.
Also, if
before taking one out be aware that California does not hold real estate against you when qualifying for a nursing home.
look into all your options and consider hiring someone to help guide you.
one issue is that she would be required to stay in the home. Once she passes or moves out there is often a year grace period to sell the home. Any fees and interest would need to be payed out of the proceeds.
California prices are out of control so it might be better to take out a home equity line of credit where you are only using what you need. She might also want to just do a refinance and take the equity out and just have a payment?
Pretty simple.
The borrower needs to be keenly aware of interest rates on the loan and shop around with different lenders, just like every borrower needs to be. Consulting an Elder Law Attorney may be beneficial.
Second it depends on whether the reverse mortgage meets the needs of the LO. In some cases an elderly person(s) can get the cash needed to remain in their own home by using the equity in their house to fund the payments of a housekeeper, landscape maintenance, and possibly others. If the rates and fees are fully disclosed and the health of the LO(s) are in line with remaining in the home for at least 10 to 15 years this may be a valid option, even if the fees are just a bit higher than a conventional mortgage. There will usually be little or no equity left to pass on to the next generation in this case, but if the contract is studied by a contract specialist and the doctor(s) agree that the health of the individuals are realistic for the plan, this is OK. Again, this is NOT a low risk, low cost option, but it can be right for some people. Probably not for most.
As for how they really work, that is a bit complicated, and varies between companies offering the reverse mortgages. Basically, the house is appraised, and a loan is granted to the owner/resident that will be paid to the owner/resident for their lifetime (or a more limited time). The amounts that have been loaned are debited against the value of the house as well as interest on the loan. Usually monthly statements are sent out. When the owner/resident dies or must move into a NH there is a settlement. The amount of equity that has no debits against it will be paid to the estate of the owner or to their accounts, if they are still living. Normally the interest rates are a bit high and there may be other fees, depending on whether the owner has continued to pay the insurance, taxes, and maintenance or whether there is a holding account set up for these expenses. As long as everything works as described and understood at the beginning this is fine and not a scam. It is only a scam when there are hidden fees, exorbitant interest rates that were not made clear in the presentation, or other lack of honesty or clear dealing. As with any business transaction, it is the duty of the customer/buyer to check the honesty and trustworthiness of the seller. These things become scams when there are huge unexpected expenses and/or the presentation and advertising do not fairly describe what actually happens. Mostly, expect a scam. But read carefully and engage the services of someone who understands the legal and financial implications of all that paperwork.
I understand that if/when she moves to a care facility, she has 6 to 12 months before the loan will come due (if the move is considered temporary). My question is, can she still get the monthly income until such time as the move is deemed permanent. If so, it could mean the difference between placing her in a substandard facility and a much nicer one. She is at the point of really needing more help than we can continue to provide, and it is so hard on her and all of us.
We would eventually sell the home. Home values in this area of Southern California are rising exponentially and when placed on the market, homes go quickly. We think there would be at least some equity left that could fund care for a while. But it would be really helpful to still have that extra income for a few months. Anyone know? Sorry for hijacking the thread! BTW, I have been Googling to get answers and not finding any.
The other complication that I see in your case may be that the amount of money that may or may not be available from the sale of the house might delay applying for medicaid or for obtaining a spot that would transition from a fully paid room/bed to a medicaid room/bed as her funds run out. This is probably something that you should not put off.
A point in your favor, though, is that the mortgage holder probably does not keep a very close eye on the property and you may have time to go through the house and take care of dealing with the contents well beyond the specified time. Although my MIL had a strict 30 day window, which passed before she died in rehab, we were able to take nearly 3 months cleaning out the house before the mortgage company contacted us. I guess they were slow to read the death notices. That could be quite different in this economy when older houses are going for really high prices. In general, though, it does usually take mortgagors time to go through their processes.
For my partner's Mom it was great. Big house in the desert of AZ--carefree. Got a reverse mortgage that with her SS and savings allowed her to stay in her home with in home help until her death.
For others, it doesn't work well. Take a list of your assets, your home, its value, and speak with an elder law attorney. The 350.00 for one hour of time to discuss what would be best for YOU individually would be very well spent.
Do not speak with reverse mortgage people. Do not sign one without running it past your attorney for another hour.
Some people get one, need care, and are told "You get 1,500 from SS and another 700.00 from your reverse mortgage; you make too much to qualify for any help with your LTC facility BUT your LTC facility now wants 5,000 a month from you."
So it can hurt such a person if you see what I mean.
I know there are slick ads for them, that make them to be the perfect solution, but they rarely are the right solution.
Before considering one, it is important to get impartial financial planning advice, preferably from a fee for service planner who is not trying to sell you anything beyond their expertise. Some work on a sliding scale or prepare a certain number of Pro Bono plans each year, otherwise expect to pay around $5000 for a comprehensive plan.
No I am looking for clients, this is not a ad for my services.
A comprehensive financial plan will look at your income, expenses, expected longevity, upcoming expenses and longevity. It will find where the shortfalls are, and include research into government programs that may be available to you. It will run different scenarios to see how long your funds will last depending on which advice your follow.
When one spouse insists my way or the highway, that is a sign of financial abuse.
I checked them out when I turned 62 and was shocked to realize that I needed to earn more monthly income than I've ever earned in my life to even qualify for one. That wasn't the case before the regulations changed.
It will put money in the hand, and the interest rate on such a loan is far less than the fees that will be paid out every month to the reverse mortgage company to access the money. No way. I know several seniors who did reverse mortgage loans and they are a joke. Sometimes up to $300 a month service charges. Reverse mortgages are as bad as student loans. Don't take one.
A bank will not give you a home equity loan for money to live on. We tried that and we tried for a second mortgage and were denied both.
There is a lot of prelimary stuff you have to go through to get a reverse mortgage, including a several-hours-long counseling session mandated by the federal government with an approved counselor who then will provide you with an approved list of lenders.
Am I happy that we have a reverse mortgage? Nope! If I win the lottery or get an inheritance, it will be paid back first -- but I will not close it. If I leave it open and suddenly need a large amount of cash, I can always go back and tap into it.
Looking back, I would have chosen to walk away from everything than get a reverse mortage (if I'd had that option but dh calls the shots). At the rate we are spending it, in three years the reverse mortgage funds will be gone. We'd still be in the house until death or until we sell, but we would not have the income to be able to sustain living in this house.
Start by researching reverse mortgages IN AN INCOGNITO BROWSER at hud.gov. DO NOT CLICK ON THE ADS. Scroll down the search page until you reach a hud.gov link. HECM (Home Equity Conversion Mortgage) is what you want to read about.