UnThreaded | Threaded | Whole Thread (19) | Ignore Thread Prev | Next
Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Investing for safety Date: 10/19/2011 11:40 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
Would a reverse mortgage help out in my case? How do those work?

If she has equity in a home and is 62 or older, a reverse mortgage can supply (at a potentially steep price) a way to use that equity, instead of selling the home.

The bank will lend her money based on her home's value. The fees will be based on the value of her home, not based on the amount that she borrows, so the fees will be higher than a regular (forward) mortgage, since she won't be allowed to borrow the entire valuation of the home. If she currently has a regular mortgage, that mortgage needs to be paid off with the proceeds from the reverse mortgage. Then with any additional borrowing power left, she can either get a lump sum, monthly payments (like an annuity) or use the loan like a HELOC, and borrow additional money when she chooses to.

She is required to pay taxes, homeowner's insurance and keep the home in good repair. If she doesn't, the lender may do so and charge her for doing so, or possibly, foreclose on her home.

The balance of the mortgage will grow each month - there will be a service fee charged, plus interest on the (growing) balance. The lump sum option is the only option that allows for a fixed rate reverse mortgage, so if she doesn't choose that option, she will get a variable rate reverse mortgage.

When she moves out of the home for more than 6 months, or dies, the mortgage needs to be repaid. If the home cannot be sold for more than the value of the mortgage, the bank eats the loss. If the house is sold for more than the balance owed the bank (borrowed amount, fees, interest, etc.) plus selling costs, she, or her heirs, will get the extra money.

We looked at a reverse mortgage for my mother, but she eventually decided to sell her house and move to a cheaper locale, in part because of how expensive a reverse mortgage would have been.

AARP has some good educational information on reverse mortgages. http://www.aarp.org/money/credit-loans-debt/reverse_mortgage...

If your MIL is interested in getting a reverse mortgage, she should probably get one sooner rather than later. Lenders are getting out of the business, so less competition is likely to make them more expensive in the future.

AJ
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (19) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement