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"Utilizing a reverse mortgage as a reserve line of credit is a great way to prepare for unexpected costs and events in the future and this amount grows each year and is not predicated on the future value of your home."
What grows is the amount of indebtedness that has to be paid. You failed to mention that reverse mortgages are negatively amortized (bankrate/finance/mortgages/reverse-mortgage-payments-don-t-grow.aspx).
Gee, is it a coincidence that you state in your profile that you're selling reverse mortgages?
Your profile:
"I have been there and done that with my parent and in-laws. Now as a senior myself, I am looking for ways to help those elder homeowners with questions and needs on how a reverse mortgage can help. No candy coating, I tell it like it is. Here is my bio: The choice to become a reverse mortgage professional with AAG as a second career was motivated by my desire to help seniors understand all of the beneficial options available to them utilizing a reverse mortgage. As a senior myself, I realize the need for a solid understanding of how reverse mortgages are so much more than a last resort source of funds. I can show you how a reverse mortgage can help you eliminate monthly mortgage payments, make retirement savings longer, buy a home that better fits your needs or use a line of credit to build a safety net for emergencies, home repairs and health care expenses. I look forward to discussing these opportunities with you and helping you achieve the retirement life you want. "
I guess these forums seem like good hunting grounds. Shame on you.
No, the homestead exemption remains with the Florida homeowner. The reverse mortgage does not impact that. The only thing I'd suggest is to think about the long-term. Get advice from an elder law attorney. Be prepared to stay in the home for at least three years for the reverse mortgage to be worth it as there are up-front costs and finance charges for any draw downs made. It can all add up quite quickly.
To keep a reverse mortgage, you have to live in the home as your primary residence. If you end up having to leave permanently due to incapacity to remain there, the bank will require you to sell the property within as little as three months (but that may vary; check the fine print on your loan). It's great if you get to remain at home and die at home, but if you have to leave permanently, your loved ones will be under pressure to sell the house asap (at a time when the market may not be favorable), and those assets will become exposed and can be picked off by creditors/ALFs/NHs, etc.
But, again, I would talk to an elder law atty. There is a lot to consider and you should make a very informed decision.
Sed - please think clearly & carefully before you or your elder sign off on a reverse mortgage. RM is debt. RM is a loan. RM is debt that has to be repaid if anyone wants to continue to live in the house or own it after the elders death. FHA backed RM limit the amount to about 50% of the value of a home AND the borrower has to have the ability to show they have the verifiable income to pay the required insurance, taxes, etc on the home. If they don't have the monthly income to show this ability, then either they don't get a RM or they need to place funds in an escrow-like account for those costs. RM has all sorts of fees - like since it's a new mortgage, Mortgage insurance premiums attached to the debt.
Also often elderly homeowners who have their home paid off, are underinsured. For those who get a RM, they now need to be fully insured - homeowners, flood, windstorm, earthquake or whatever coverage for their market - and homeowner needs to either pay for these directly or coverage will be force-placed with the costs added to the RM. If maw-maw's house is coastal, she may find that although she never had flood or windstorm insurance, she now is required to have both and the costs are thousands of $$ for a policy.
If you are going to do a RM anyways, the line of credit option is the better way to structure the loan.
Often RM are just a band-aid on a much bigger financial problem.
RM is debt that HAS TO BE REPAID. If homeowners, their kids or heirs want the house (or worst case scenario - have been unpaid caregivers for their parents and have no other home), then the RM, it’s fees, interest and other expenses within the RM has to be repaid once the homeowner dies (or does something to cause RM come due). Under fed rules, lenders allow heirs up to 30 days to let them know what they plan to do and up to 6 mo to arrange financing for 95% of FMV of RM’d house. If not, property can be foreclosed on &/or sold on the open market. There is no gray area, the RM has to be repaid. If it’s an FHA/HUD backed RM & house sells for less than owed, feds pay the difference to the mortgage holder. Family doesn’t have to make up the difference. But if you want to keep the house, you have to pay the RM.
RM’s can work for some….like a healthy couple 63 & 65 which own 300K appraised home outright & plan 10 - 20 years there; home in an area of increasing value; & have guaranteed income to pay taxes, insurance, maintenance for 10 - 20 years; & they do line of credit RM. So when they move, home is 400K which repays RM & leaves $$ for downsized home or CCRC buy-in. But if that’s you, really you don’t need an RM as you can get HELOC or personal loan. Too often, RM is done by those in financial or health crisis who don’t understand what an RM involves. If RM’d home is lower value, the $ (may be less than 50% of value) is just a band-aid on a bigger $$ problem. They can’t pay for what is required for the RM; or end up moving to a NH. Either way RM default & foreclosure.
As of 2013 significant changes happened to FHA backed RM. Now you have to show ability to pay the “required” on the house, like insurance, taxes, etc for years. If not, then have an escrow-like account to cover these costs. If you are low income and struggling, you just can’t do this. No federally backed RM for you. Also now value & condition on house has to be verifiable.
Torie, an RM is different from other kinds of loans, which typically are paid down through monthly payments. I reviewed the application materials for a friend and was shocked to see the payment schedule. Based on what I read, the loan isn't paid down (or amortized) unless you're making payments. And the interest is cumulative, and added to each payment. That means that the monthly calculation if payments aren't made, increases every month.
In the situation of which I'm particularly aware, given the life expectancy of the mortgagor, the initial loan amount together with accrued interest would over that person's anticipated lifetime exceed by several factors the amount of the original loan. It would exceed the value of the home. There's no way the individual could ever pay it off, and it would default on his death to the RM lender.
I only saw the schedule of that one lender, but from other information I've read, I don't believe that's unusual. If I'm wrong, I'm sure someone will point that out.
FF's suggestion of downsizing is a good alternative, even if it is hard for someone to leave a home of perhaps a lifetime.
TorieJ - Out of curiosity, just how is the math working for this? If mom has 2,500 as mo. income between SS & annuity, that's 30K a year income. If she has & paying for 24/7 caregivers, at $ 15 hr = 131K a year plus taxes, FICA; or if its through an agency it would be more like $ 25 hr = 218K a year at least. Whether 131K or 218K to pay a caregiver, it's still a huge amount of $ to be paying for caregivers in a non skilled nursing situation. More than the average cost of a NH @ 8K a mo (96K yr).
Is your mom's house worth an enormous amount of $ - like 1M or more? so that the RM is actually a large amount of $$$. Is there a substantial amount of $$$ saved or invested, that is supplementing the RM and her $ 2500 mo.? When RM $ runs dry, then what?
Did you look into Medicaid and found that mom would not qualify due to her annuity? or to owing a home that is over the Medicaid limits for property value (500K or 750K)? or other Medicaid compliance issue, so RM was only option?
So your RM allows for no repayment to be done for a full year after mom either dies or does something to have the RM come due? Really? Are there additional fees added onto this limbo period? I'm pretty sure the rules for federally backed RM has its so family have 30 days to let the mortgage holder know what they plan to do and up to 6 mo to arrange financing for 95% of FMV.
It's hard for me to imagine a mortgage holder allowing a year to go by on a property that does not have the mortgage holder homeowner living in it. How would vacant dwelling insurance get dealt with? You should look into that as it could be very, very costly.
Tori, isn't it better moving now while your Mom still has clear thinking, so she could form new friendships [bet she didn't know anyone in her neighborhood when she and your Dad first moved in]. Your Mom has lived in her neighborhood for 60 years, bet that would be the case for others who already are living in that ALF, wouldn't surprised me she might find someone she knew from her past.
Moving her later will become much more difficult, especially if her memory has failed. I am dealing with that with my parents, who are in their 90's and won't budge from their home. I can't make them understand that they would have MORE freedom and MORE choices if they moved to a retirement village. I desperately want to return to be their "daughter" instead of "chauffeur/errand boy", six years is wearing on me, I can't maintain two large homes, and I am in my own age related health decline :(
Torie, I'm in the same position as FreqFlyer. I suspect she also lives in a state in which there is always something to be done on either house, but it's unlikely to get done.
The travel as well as sitting in doctor's offices is monotonous, tiring and boring. These are passive, not active chores, and they're fatiguing physically and mentally. It's primarily a chauffeur's function.
A lot of time is also spent on anxiety - such as when I can't get ahold of my father and have to call the neighbors for reports or drive close to 60 miles to ensure that he's safe, as just happened.
I'm only 70 going on 71 and I've already decided that I want a different retirement home; the house size is manageable but 1.5 stories isn't practical any more. I can't lug furniture up and down stairs as easily as I could 10 years ago.
There's also the issue of the increasing burden of keeping up 2 houses as the parent(s) grow older. Men of the age of FF's and my father don't see that women can do DIY projects, so it either has to be a friend or the chore doesn't get done. That can lead to some safety as well as discomfort issues.
Windy, well, seeing some of the other posts today, I guess people have passions for different things. I have heard the commissions on reverse mortgages are pretty good though. Given all the so-called movie stars hawking these products, maybe there's something that especially appeals to washed-up actors as well.
GardenArtist, you are so right about projects around the house. My projects are gathering major dust because I am just too tired to even think about calling someone to come out to fix something.... [sigh].
Yes, I want to sell my home eventually and downsize to something easier to take care of. I am exhausted worrying about wind storms and what tree will come down next and land where... worried about what major appliance will break next [already installed a new furnace/air conditioning unit.. new deck as the old one broke away from the house... replaced all the windows a couple years ago as I could no longer open the old ones... etc].
If I had really deep pockets and wanted to invest more into the stock market, maybe I would use the money from a Reverse Mortgage if I knew my stock investment would be a high return compared to the monthly mortgage payback.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
B.
APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
C.
APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
E.
This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
"Utilizing a reverse mortgage as a reserve line of credit is a great way to prepare for unexpected costs and events in the future and this amount grows each year and is not predicated on the future value of your home."
What grows is the amount of indebtedness that has to be paid. You failed to mention that reverse mortgages are negatively amortized
(bankrate/finance/mortgages/reverse-mortgage-payments-don-t-grow.aspx).
Gee, is it a coincidence that you state in your profile that you're selling reverse mortgages?
Your profile:
"I have been there and done that with my parent and in-laws. Now as a senior myself, I am looking for ways to help those elder homeowners with questions and needs on how a reverse mortgage can help. No candy coating, I tell it like it is. Here is my bio: The choice to become a reverse mortgage professional with AAG as a second career was motivated by my desire to help seniors understand all of the beneficial options available to them utilizing a reverse mortgage. As a senior myself, I realize the need for a solid understanding of how reverse mortgages are so much more than a last resort source of funds. I can show you how a reverse mortgage can help you eliminate monthly mortgage payments, make retirement savings longer, buy a home that better fits your needs or use a line of credit to build a safety net for emergencies, home repairs and health care expenses. I look forward to discussing these opportunities with you and helping you achieve the retirement life you want. "
I guess these forums seem like good hunting grounds. Shame on you.
I can hear you now, "She's NEVER let me do that!" It's not her call. she doesn't get a choice. Please to tell me how she will stop you. ;)
To keep a reverse mortgage, you have to live in the home as your primary residence. If you end up having to leave permanently due to incapacity to remain there, the bank will require you to sell the property within as little as three months (but that may vary; check the fine print on your loan). It's great if you get to remain at home and die at home, but if you have to leave permanently, your loved ones will be under pressure to sell the house asap (at a time when the market may not be favorable), and those assets will become exposed and can be picked off by creditors/ALFs/NHs, etc.
But, again, I would talk to an elder law atty. There is a lot to consider and you should make a very informed decision.
Also often elderly homeowners who have their home paid off, are underinsured. For those who get a RM, they now need to be fully insured - homeowners, flood, windstorm, earthquake or whatever coverage for their market - and homeowner needs to either pay for these directly or coverage will be force-placed with the costs added to the RM. If maw-maw's house is coastal, she may find that although she never had flood or windstorm insurance, she now is required to have both and the costs are thousands of $$ for a policy.
If you are going to do a RM anyways, the line of credit option is the better way to structure the loan.
Often RM are just a band-aid on a much bigger financial problem.
RM’s can work for some….like a healthy couple 63 & 65 which own 300K appraised home outright & plan 10 - 20 years there; home in an area of increasing value; & have guaranteed income to pay taxes, insurance, maintenance for 10 - 20 years; & they do line of credit RM. So when they move, home is 400K which repays RM & leaves $$ for downsized home or CCRC buy-in. But if that’s you, really you don’t need an RM as you can get HELOC or personal loan. Too often, RM is done by those in financial or health crisis who don’t understand what an RM involves. If RM’d home is lower value, the $ (may be less than 50% of value) is just a band-aid on a bigger $$ problem. They can’t pay for what is required for the RM; or end up moving to a NH. Either way RM default & foreclosure.
As of 2013 significant changes happened to FHA backed RM. Now you have to show ability to pay the “required” on the house, like insurance, taxes, etc for years. If not, then have an escrow-like account to cover these costs. If you are low income and struggling, you just can’t do this. No federally backed RM for you. Also now value & condition on house has to be verifiable.
In the situation of which I'm particularly aware, given the life expectancy of the mortgagor, the initial loan amount together with accrued interest would over that person's anticipated lifetime exceed by several factors the amount of the original loan. It would exceed the value of the home. There's no way the individual could ever pay it off, and it would default on his death to the RM lender.
I only saw the schedule of that one lender, but from other information I've read, I don't believe that's unusual. If I'm wrong, I'm sure someone will point that out.
FF's suggestion of downsizing is a good alternative, even if it is hard for someone to leave a home of perhaps a lifetime.
If mom has 2,500 as mo. income between SS & annuity, that's 30K a year income. If she has & paying for 24/7 caregivers, at $ 15 hr = 131K a year plus taxes, FICA; or if its through an agency it would be more like $ 25 hr = 218K a year at least. Whether 131K or 218K to pay a caregiver, it's still a huge amount of $ to be paying for caregivers in a non skilled nursing situation. More than the average cost of a NH @ 8K a mo (96K yr).
Is your mom's house worth an enormous amount of $ - like 1M or more? so that the RM is actually a large amount of $$$. Is there a substantial amount of $$$ saved or invested, that is supplementing the RM and her $ 2500 mo.?
When RM $ runs dry, then what?
Did you look into Medicaid and found that mom would not qualify due to her annuity? or to owing a home that is over the Medicaid limits for property value (500K or 750K)? or other Medicaid compliance issue, so RM was only option?
So your RM allows for no repayment to be done for a full year after mom either dies or does something to have the RM come due? Really? Are there additional fees added onto this limbo period? I'm pretty sure the rules for federally backed RM has its so family have 30 days to let the mortgage holder know what they plan to do and up to 6 mo to arrange financing for 95% of FMV.
It's hard for me to imagine a mortgage holder allowing a year to go by on a property that does not have the mortgage holder homeowner living in it. How would vacant dwelling insurance get dealt with? You should look into that as it could be very, very costly.
Moving her later will become much more difficult, especially if her memory has failed. I am dealing with that with my parents, who are in their 90's and won't budge from their home. I can't make them understand that they would have MORE freedom and MORE choices if they moved to a retirement village. I desperately want to return to be their "daughter" instead of "chauffeur/errand boy", six years is wearing on me, I can't maintain two large homes, and I am in my own age related health decline :(
The travel as well as sitting in doctor's offices is monotonous, tiring and boring. These are passive, not active chores, and they're fatiguing physically and mentally. It's primarily a chauffeur's function.
A lot of time is also spent on anxiety - such as when I can't get ahold of my father and have to call the neighbors for reports or drive close to 60 miles to ensure that he's safe, as just happened.
I'm only 70 going on 71 and I've already decided that I want a different retirement home; the house size is manageable but 1.5 stories isn't practical any more. I can't lug furniture up and down stairs as easily as I could 10 years ago.
There's also the issue of the increasing burden of keeping up 2 houses as the parent(s) grow older. Men of the age of FF's and my father don't see that women can do DIY projects, so it either has to be a friend or the chore doesn't get done. That can lead to some safety as well as discomfort issues.
Windy, well, seeing some of the other posts today, I guess people have passions for different things. I have heard the commissions on reverse mortgages are pretty good though. Given all the so-called movie stars hawking these products, maybe there's something that especially appeals to washed-up actors as well.
Yes, I want to sell my home eventually and downsize to something easier to take care of. I am exhausted worrying about wind storms and what tree will come down next and land where... worried about what major appliance will break next [already installed a new furnace/air conditioning unit.. new deck as the old one broke away from the house... replaced all the windows a couple years ago as I could no longer open the old ones... etc].
If I had really deep pockets and wanted to invest more into the stock market, maybe I would use the money from a Reverse Mortgage if I knew my stock investment would be a high return compared to the monthly mortgage payback.
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