| Experience with Reversable morgages?
Posted: 7/4/2006 5:35:35 PM | Does anyone have any experience with reversable morgages? As I approach retirement, I am not looking forward to downsizing. There is so much of me in how I have designed my home and gardens. The thought of moving to a smaller house that doesn't have the facilities that I enjoy isn't something that I look forward to. If I remodel another home, I will have to spend my profits on renovation not my retirement plans. Here in Canada, there is a company that offers reverse morgages when people reach the age of 60 (maybe more than one). Does anyone have any experiences with these type of plans that they would like to share?
Working on our retirement plans is important. Please don't delete (this is my first post - so I hope the topic doesn't break any rules that I couldn't find). | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 5:51:18 PM | | Reversible mortgages can be a Godsend or a complete pain in the butt. IF you have a good Credit Rating, you will likely be able to find a good mortgage -- but it will be higher than the going Mortgage Rate. I took one out for remodelling and was grateful for it. However, sometimes I wonder because I now have TWO mortgages instead of one. In my case, I have no children, so no one is going to suffer should I drop dead tomorrow, but you need to think about this. As long as you have a goodly amount of equity in your home, you should at least look into it -- but DON'T go to just ONE place. Check with the banks and trust companies as well as those ads we see on TV (I'm in Canada, too). I would strongly suggest you find a Broker you can trust and have him/her do some price shopping for you. And watch out because the rates are about to go up again! | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 5:59:07 PM | Moraima,
Talk to a financial advisor. There are many catches with a reversible mortgage, so a second mortgage may work out better for you. If you don't have an advisor, your life insurance company, the bank or the people who handle your RRSP's can advise you. | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 5:59:19 PM | I don't have any personal experience, and this is just my opinion; however, I have some knowledge on the subject. The main reason people look at reverse mortgage options is to supplement their income when they can no longer work, and usually as a last resort (i.e. health, retirement reduction, spouse death, etc.) If you need extra income, and can still work, you should do this, even if it's part-time, or something from home. There may come a day when you can no longer work and you will need the equity in your home. With a reverse mortgage, your equity will be whittled away.
Of course there is always the other side, when lucky, your home value could triple, then you may still be in good shape. | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 6:07:29 PM | My understanding is that there is no payments with a reverse mortgage, while you live in your home with the one advertised on TV. Banks want interest payments monthly. I have had financial advisors that gave me bad investment advise in the past. That has taught me to chat with people and make my own decisions. It just amazed me how little true knowledge of the big picture my Mother''s Financial advisor (top person with a Federal Bank) had. It has been my experience that Financial Advisors only want to sell you the products they want sold.
Thank you for advising me to keep working. My whole point is to stop working. I am not worried about the equality devaluing. I have no family to inherit, so I am trying to die with a zero balance. Only problem with this plan is --------knowing your expiry date. | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 6:10:34 PM | mora... be very careful getting into a reverse mortgage situation. here's a helpful link that should answer your questions. just remember... if it sounds too good to be true, it usually is. 
http://www.reversemortgagemonitor.com/ReverseMortgageExplained.php | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 6:22:11 PM | | Yes, I agree. Don't work if you don't have to. I was just trying to say that you may some day need the equity for more urgent things that come up in your life. I would do my own research. Mortgage Brokers are not going to look out for your best interest. Not knowing your financial situation, its hard to say what might be best for your individual needs. Some financial advisers can help, you just may need to dig a little deeper to find a good one. Like someone else said be very careful with a reverse mortgage. | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 6:51:30 PM | Thanks for the link - will check it out. Awhile ago, I did some research about finding a financial advisor. Several companies told me , "we only plan appointments with people who currently have $300,000.+ cash to invest". Yes, that surprised me too, however, our society is drive by money.
I realize I made an error with how I worded the topic. I was hoping it would evolve into some discussion on people's experiences with down size, included how mentally hard was it to give up and start again. | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 8:10:25 PM | Financial Advisors only want to sell you the products they want sold.
Hmm...well, they are salespeople, after all. Would a Chrysler salesperson rave about a Honda?
Reverse mortages can be tricky, especially if you want to pass your house along to kids or grandkids. Read the fine print carefully. | |
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ksue44
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Joined: 6/20/2005
Msg: 10 | |
| Experience with Reversable morgages?
Posted: 7/4/2006 8:15:30 PM | | OP - before you sign on the dotted line, do your due diligence and most of all, have an attorney review all documents. Remember, any contract that you sign is drawn up by someone else's attorney. The big print "giveth", but the small print will "taketh". Good luck! | |
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| Experience with Reversable morgages?
Posted: 7/4/2006 8:29:36 PM | I guess a few posters missed when I posted that I have zero family. So I could care less about leaving monies behind. I am trying to figure out what is the best way to downsize.
Lawyers, lawyers I was in the real estate industries long enough to know how many lawyers don't check the fine print either, hence a lot of closings that don't go through, and the scrambling to closes when those same lawyers "forget" something. Certainly, before I signed anything that requires legal representation, I would make sure that I had a lawyer that I trust. Thank God, there are a few of them around.
I was hoping to hear from people who had actually used this type of mortgaging to see how they felt about it.
As for unseen problem that could arise in the future to change our financial needs ie. health, none of us can see the future, only plan as best as we can for all possibilities. The down side to that is never fully enjoying our money just in case. I had two parents who did exactly that, even though I encouraged them to enjoy while they could.
No words from anyone about downsizing, so I guess I will have to start a topic on that.
Thank you all for your imput. | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 6:34:08 AM | moraima... i believe the vast majority of us are not able to share our experiences with you because we've not reached the age of having to deal with this... i do have a neighbor that's done the reverse mortgage and he recommends it to others. he and his wife are well off, travel, own property in hawaii and palm springs but that doesn't mean he's got the financial means to live day to day or handle large medical bills.
if you've got your reservations on downsizing, do things little by little. a huge change may really upset you... you won't know until you try. what exactly do you want to see happen? what are you afraid of? maybe that will help us understand how to respond. | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 8:44:20 AM | Sorry but I have not had any experience with the reverse mortgage issue yet....but I do understand about downsizing. I have just a couple more years in the home that I have lived in for 15 years and I am and will be sad to leave it! So many memories, not to mention the fact that the next place will be my last. As the others have said, just please be careful and make sure you understand all the fine print! Not knowing much about the reverse mortgage, but understanding your wish to remain in your home, heck, I think you should check it out!
Good luck! | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 10:16:31 AM | | What I am afraid of is going through the hassles of getting rid of furniture that won't fit into a smaller (darn all my furniture is huge), all the work that goes into moving etc. just to find out that I don't like what I end up with, and have to do it all over again. Have seen friends go through this. I am hoping that I can learn from other peoples experiences here in the thread, because I am sure there are various other things I haven't thought of regarding downsizing plans. | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 1:06:15 PM | I sold my big house two years ago and moved to a condo in the city. I also had a ton of furniture, artwork, you name it, I had it! And it was a huge pain in the neck, deciding what to keep and what to get rid of (although I do have children, and they took a lot of it). I sold some, gave some away, and just kept my very favorite things. It was kind of scary at the time - but also exciting. Now that I'm settled into my new place, I absolutely love it! There's so much less to maintain and worry about. If I had known how nice it would be, I would have done it sooner. I spend almost no time taking care of my place, and tons of time doing the things I enjoy.
Reverse mortgages are designed for people exactly like you, who want to die with a zero balance, so to speak. I think they're a great idea. Get a book on the subject, so you know how they work - basically you're selling your house, slowly, but you get to live in it until you die. You might feel more comfortable reading about it, than hearing about it from someone who's trying to sell you something. | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 1:15:08 PM | lots of potential probelms with those type of mortgages as well as the adjustable rate...
I never wanted to mess with any of that...
and I made sure I stayed away from them. | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 1:41:45 PM | I live in the first house I purchased; it’s about 1400 sq. ft. I’m not faced with the downsizing issue because I never upsized. However, I am considering moving into a condo when I’m older to avoid the yard work.
I am also considering a reverse mortgage. I live outside of LA where a 1400 sq. ft. house is worth about $650,000. However, in the U.S. you must be at least 62 years old to get one (don’t know about Canada) so I have a few years left to decide.
Check out this site on reverse mortgages, it helped me quite a bit – http://www.reverse.org | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 3:42:08 PM | The Canadian one that I am refering to has just dropped the age to 60. Adjustable rates and non open mortgages are definately something to stay away from like to plague in a situation like this. I was still selling real estate years ago, when a building development had given their purchasers mortgages that had to be refinanced 5 years later with any finance company the purchases decided to go with. The orginal interest rate was approx. 5% which at the time was the current rate. 5 years later, second mortgages had gone up to 22%, with first just a little lower. Most people in the development lost their homes. That will be imprinted in my brain forever. I can remember the top real estate professor giving a lecture in which he said "If you want to figure out which way the interest rate is going, pick the opposite of what I pick". In other words no one can predict interest rates.
I think that when we discuss something that we can't make up our mind on, it is more a process of us thinking out loud to find the answer for ourselves, but the other peoples imput is great because they may think of someone we have forgot to consider. I have always lived by "Never blame someone else if you took their advice and it didn't work out. You are the one responsible for the decision". | |
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| Experience with Reversable morgages?
Posted: 7/5/2006 7:55:29 PM | it's my understanding that the reverse mortgage works like a loan that does need to be repaid by someone. i could be wrong but i'm thinking i do definitely recall that... that's where you need to be careful. now... if you got a reverse mortgage on your current property and they paid you to live in it and you died years before that money was paid back or before your equity covered it and the interest and you have no family... who cares, you're dead. they can't get money from a dead woman. morbid but true if you want to look at it like that.
if you downsize first, you may have to wait on the reverse mortgage. i believe you have to have equity in order to obtain the reverse mortgage. | |
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| Experience with Reversable morgages?
Posted: 7/25/2007 5:10:12 PM | A reverse mortgage may be perfect for you. You can quit making mortgage payments, but you are still responsible for the property taxes + insurance. You can stay in the house until the day you die, but if you stay elsewhere for 12 full months, they can call the loan. You cannot rent your home or any part of it. Since it is a government backed program, they put a "cap" on the amount you can mortgage. In the U.S. this is set by your zip code. In other words, if your home is worth $350,000, but the cap is $260,000 for your area, thats all you can borrow. The reverse mortgage will pay off your current mortgage, and give you either the remainder in a lump sum, or you can take monthly payments. If you take the lump sum, yet leave it in the bank, it earns interest and grows. When you die, if you have heirs, they do not have to pay off more than what was borrowed when they sell the home. I have been looking into doing it myself in a few years, if the present housing slump doesnt clear up.
If anyone knows more, please post it. I am very interested in what you have to say also. | |
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ksue44
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Joined: 6/20/2005
Msg: 21 | |
| Experience with Reversable morgages?
Posted: 7/25/2007 5:20:55 PM | Here's the scoop on reverse mortgages. Will I plan on getting one? Nope, as I plan on retiring in Belize. You can downsize without taking a reverse mortgage. As far as the furniture goes, it's just "stuff". This is a decision that you don't want to enter into lightly. Shop around for a smaller place, such as a condo, etc. that you can move into, and pay for with cash. Name of the game is "due diligence".
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A reverse mortgage is a loan against the equity in the home that provides tax-free cash advances, but requires no payments during the term of the loan. Since there are no monthly payments during the life of the loan, the balance grows larger and the equity gets smaller. Meaning the interest in accrued to your balance.
The loan is not due and payable until the borrower no longer occupies the home as a principal residence, e.g. the last surviving borrower sells, moves out permanently or passes away.
You must be at least 62 and own your own home or condominium in order to qualify for a reverse mortgage. There are no income or credit requirements to qualify. Based on the amount of benefit, which you qualify for, you may be eligible for a reverse mortgage even if you still owe money on your first mortgage.
Another benefit of these loans is that they are "non recourse," which means that no matter how high the loan balance grows, the borrower or their heirs never owe more than the home's market value.
The proceeds from a reverse mortgage can be used for anything: daily living expenses; home repairs and home improvements; medical bills and prescription drugs; pay-off of existing debts; education; travel; long-term health care; retirement and estate tax planning; and other needs you may have.
The proceeds from a reverse mortgage are available as a lump sum, fixed monthly payments for as long as you live in the property, a line of credit; or a combination of these options. The amount of benefit that you will qualify for will depend on your age at the time you apply for the loan, the type of reverse mortgage you choose, the value of your home, current interest rates, and, for some products, where you live. As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be.
The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs can be financed as part of the mortgage. In other words, fees are collected at the back end or when the property is due. The interest on these mortgages are typically adjustable, so be clear with which types of ARM loans you are tied to.
You must first meet with an independent reverse mortgage counselor before applying for a reverse mortgage. The counselor's job is to educate you about reverse mortgages, to inform you about other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product would best fit your needs if you elect to get a reverse mortgage. This counseling session is at no cost to the borrower and can be done in person or over the telephone.
Advantages of a reverse mortgage :
a) Avoid having to make mortgage payments and managing the account.
b) Cash out money upfront and still collect a monthly distribution of your equity.
c) No qualifying loan.
Disadvantages:
a) Slightly higher closing fees.
b) Fewer choices on the terms of the loan.
c) Have to qualify for the loan. | |
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| Experience with Reversable morgages?
Posted: 7/25/2007 5:52:33 PM | I'm in the States so things are a little different. After a thorough investigation and running the numbers, I am better off when the time comes, to sell the house. I can buy something smaller outright, plus have money left over for investment, plus, take a reverse mortgage on the new place if I wish.
I have no family, so it is likely I will eventually end up in an assisted living situation. I would rather make the decisions while I can, rather than stay in this barn, and have someone who doesn't care about my things, make them later. | |
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| Experience with Reversable morgages?
Posted: 9/7/2007 8:23:02 PM | | Interest rate will work out to be higher.. Better to get a line of credit secured by the house for a lower interest rate | |
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| Experience with Reversable morgages?
Posted: 9/8/2007 8:14:53 AM | I live in Canada and I have no objection to the principal behind the reverse mortgage. Naturally, the rate at which the equity that is locked into the house transfers to the lender is probably higher than I could easily stomach.
Like with life annuities without a guaranteed minimum payment and survivor benefit, and company pension funds, there are some people with reverse mortgages who eventually emerge as clear winners.
If and when the time comes when all the equity in your house has been transferred to the lendor, then the fact that you can continue to live indefinitely in your house after that moment makes you a winner. The losers are those who die or move out early prior to all the equity being transferred. In these cases, the amount of equity already transferred versus the amount of time gone by makes the lendor more profit than you would have preferred.
But for people like myself with no heirs, this is an excellant way to finish off one's life in much the same way as one started it, with zero equity and a lifetime lived to the maximum.
Before jumping into this, you might want to make sure you have some kind of insurance plan against the cost of long-term health care brought on by a catastropic illness such as a stroke. These LT health insurance policies are new and the premiums cost between one and two thousand dollars a year. That could be the subject for another thread as POF members well over 45 will need to consider this option. | |
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| Experience with Reversable morgages?
Posted: 9/9/2007 6:32:47 AM | I'm looking at all the options right now. Similarly, in the UK you can get plans where you effectively sell the equity in your home - and get a lump sum - or something called a drawdown mortgage where you just take money as and when you need it. Generally they are not recommended (and mostly not available) to under 55. There are all sorts of pitfalls to consider - ie wanting to move and finding you have no equity left or being eligible for benefits. But you can also get plans which at least guarantee no negative equity. And as you say, it doesn't matter whether you have anything to leave or not.
Other options for releasing cash in your home include selling up and moving to a motorhome, narrow boat or mobile type home on a residential site.
Just get independent advice. Here you can get information from the FSA (Financial Services Authority) and from organisations for older people. This is a UK site but it might help.
http://www.napier.eclipse.co.uk/equityrelease/ | |
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