No. of Recommendations: 2
I don't understand the reverse mortgages. If one has a paid-off house (no existing mortgage) and wants to retire, there are other considerations. There are folks who simply won't leave the house they have lived in for XXX number of years. My FIL has said, "When I leave this house, it will be feet first!" Assuming the folks are otherwise solvent (mortgage paid off and no major debts) a reverse mortgage is otiose*. But these products are not aimed at people like that.

There are people who have used their house as a bank, taking serial mortgages to finance cars, vacations, sending little Johnny to an expensive school, major medical bills, etc. In these cases a reverse mortgage may seem attractive. But a lender won't loan money on a house which hasn't enough value to justify the loan, be it reverse or standard mortgage.

In my ideal case for a stubborn (or just not very bright) owner, a conventional loan makes more sense. Take a large conventional loan and put the cash in a safe place (even a <gasp!> bank) and live off of that lump. When they pass (to use a common euphemism) there will still be some cash left and the heirs can sell the house or whatever they choose to do. Seems cleaner than a reverse.

But it seems smarter to me to just sell the house and downsize, unless the house is already small. But if the people have had their family there, the house is likely bigger than they need, so sell it and move on. Or sell the house and use the proceeds to move in to an older folks community. The Countess and I have decided to do this. We have applied for an apartment in an Old Folks Home. (A Continuing Care Retirement Community.) Part of the move in expenses will come from the sale of our house. There are also the Del Web retirement communities which offer a community of people in similar situations, financially and socially, and ages. Any of these situations seems better (to this philosopher) than living alone and isolated in their beloved house. Some day they will die and no one will even notice until the a mail and newspapers start to stack up at the front door.

So, in a nutshell: 1. Don't get a reverse mortgage in any of my scenarios above. 2. Sell your house and move to a congenial community of your socio-economic peers. 3. Take out a conventional mortgage and put the proceeds in a safe place and live off that until you pass.


*Forgive me for taking an opportunity to strut my limited vocabulary.
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