Retiring Using Your House

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    Feb 16, 2014 6:10 PM GMT
    As baby boomers age, reverse mortgages are expected to gain popularity as a means of covering living expenses. Hence, in the future, more homes passed on to children will come with a bill attached — the balance due on these equity loans.

    Federally insured reverse mortgages, officially issued as part of the Home Equity Conversion Mortgage program, are a way for homeowners 62 and older to borrow money using their home equity as collateral. The proceeds must first be used to pay off any remaining balance on the mortgage, which frees homeowners from monthly payments. Interest and monthly insurance premiums are charged throughout the life of the loan, and the total becomes due when the borrower dies (or permanently moves out of the home).

    A common misconception about reverse mortgages is that the lender takes an equity share in the house, said Vivian Dye, a reverse-mortgage consultant at Atlantic Residential Mortgage in Westport, Conn. “It’s a relationship between the bank and the borrower,” she said, “and it’s the same kind of relationship as a regular loan.”

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    http://www.nytimes.com/2014/02/16/realestate/reverse-mortgages-for-baby-boomers.html?ref=realestate
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    Feb 16, 2014 11:38 PM GMT
    Reverse mortgages don't make a lot of sense. Might be a good option for those that are hard up for money. But for everyone else, not so much.
  • FRE0

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    Feb 16, 2014 11:43 PM GMT
    Whether they are a good idea depends on circumstances. For some people, they make a lot of sense. For other people, they would not be a good idea.
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    Feb 16, 2014 11:50 PM GMT
    As the first lien holder on the property title under reverse mortgage, however, the lender must be repaid when the property changes hands. How the heirs handle repayment depends on how much equity is left in the home and whether they want to keep it.
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    Feb 17, 2014 1:05 AM GMT
    Under federal regulations, after the last borrower named on the loan has died, the lender must provide up to 30 days for the heirs to decide on a repayment method. Heirs then have up to six months to sell or arrange financing, said Colin Cushman, the chief executive of Generation Mortgage, a reverse-mortgage originator and servicer based in Atlanta. But, he noted, as many as two 90-day extensions are allowed if the heirs can show they are actively trying to sell the property.

    Should they wish to retain ownership, the heirs might choose to get a separate mortgage to refinance the home and pay off the reverse mortgage. Or, if there is enough equity in the home, they might choose to sell it and use the proceeds to pay off the loan.
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    Feb 17, 2014 1:19 AM GMT
    woodsmen said ... in the future, more homes passed on to children will come with a bill attached ...
    There will be nothing of your parents estate after the medical bills so its a big dont care.
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    Feb 17, 2014 1:39 AM GMT
    The heirs will not be on the hook for any shortfall should the home fail to sell for enough to pay the loan in full. If the loan balance exceeds the value of the home, the amount owed is limited to 95 percent of the appraised value.

    In such “underwater” situations, the heirs may instead choose a deed in lieu of foreclosure, in which they simply deed the property over to the lender.

    Heirs should be aware that the ability to draw on the reverse mortgage ceases once the borrower dies. For that reason, Ms. Dye recommends that the family consider whether enough money has been set aside for things like funeral expenses while funds are still accessible — that is, if the family discusses finances at all.
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    Feb 17, 2014 5:11 AM GMT
    I think that there will be children that realize that they're not getting what they think they'll be getting when mom or dad kicks the bucket. I'm all for living your life while you're alive rather than leaving it for the kids. I've told my kids that they need to make it on their own because anything from me would be considered a lucky day for them. I'm planning on living and spending into my retirement.
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    Feb 17, 2014 5:20 AM GMT
    “Some people don’t even know their parents had a reverse mortgage,” said Vincent Liberti, an estate planning and elder law lawyer in Hartford.

    He frequently sees financially precarious people who haven’t planned for retirement take on a reverse mortgage as a last resort, as well as those who go through the funds too quickly. It’s one of the last “tools” he recommends using.
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    Feb 17, 2014 5:48 AM GMT
    Don't recommend it. Too risky to use this approach.
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    Feb 17, 2014 5:55 AM GMT
    eb925guy saidI think that there will be children that realize that they're not getting what they think they'll be getting when mom or dad kicks the bucket. I'm all for living your life while you're alive rather than leaving it for the kids. I've told my kids that they need to make it on their own because anything from me would be considered a lucky day for them. I'm planning on living and spending into my retirement.


    Exactly.

    My sisters and I have been trying to get our dad to do it; to use the money--really enjoy life or at least remodel the house so they will be able to stay there longer (special bathroom, beds, ramps).
    However, he refuses, saying it's the only thing he has to leave us.
    We have told him repeatedly that we don't want it, as it will be a fight; who does not get it, because of the excessive hording situation, I'm sure a bulldozer will be most practical.
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    Feb 17, 2014 5:55 AM GMT
    HellNo saidDon't recommend it. Too risky to use this approach.


    I agree. However, if you've reached a stage in life where you are terminal - not likely to last more than a few years, this is a viable option. The money can pay for assistance not covered by health insurance or gov't assistance allowing you to remain at home longer, or until you pass on.

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    Feb 17, 2014 7:44 AM GMT
    Who cares about the heirs? How long does one need to be on mommy's teat?
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    Feb 17, 2014 3:58 PM GMT
    Yea.. In my case.. I don't have any kids. By the time I get to old or die and if I have a reverse mortgage, there wont be anyone left in my family to pass it on to, so who cares if the state ends up with the house with money owed on it. I will be DEAD, wont matter to me.

    I do have a Nease and Nepthiews, but im not that close and they never call or talk to me on a regular basis except at family get togethers. I wont e leaving them anything in my will anyhow... LOL.
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    Feb 17, 2014 4:14 PM GMT
    xrichx saidReverse mortgages don't make a lot of sense. Might be a good option for those that are hard up for money. But for everyone else, not so much.



    Makes total sense to me. Perfect for unmarried gays . I bought a probate house which means the last owner died and the state seize the unclaimed property.
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    Feb 17, 2014 4:47 PM GMT
    Ultimately, for single gays, buying a home probably make sense versus renting because you can draw on the capital in the house when you're retired and if you were renting, you will not have build any capital to draw from in the form of reverse mortgage.
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    Feb 17, 2014 4:52 PM GMT
    dustin_K_tx saidMy sisters and I have been trying to get our dad to do it; to use the money--really enjoy life or at least remodel the house so they will be able to stay there longer (special bathroom, beds, ramps).
    However, he refuses, saying it's the only thing he has to leave us.
    We have told him repeatedly that we don't want it, as it will be a fight; who does not get it, because of the excessive hording situation, I'm sure a bulldozer will be most practical.

    I think this is a generational thing. My parents were the same until my mother became ill, then my dad did split things up to protect the assets. Funny part was that after he died, my brothers that had already received money before my dad died, accused his second wife (my stepmother) of hiding his money...of course she did not and could explain it all but that's what happens when people thing they deserve something that's not theirs.
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    Feb 17, 2014 4:58 PM GMT
    HellNo saidDon't recommend it. Too risky to use this approach.

    I disagree. I think there are some very valid times and reasons to use a reverse mortgage. A lot also has to do with where you live and what kind of equity you have. If your equity is 100K then you might run through that pretty quickly. If you live in a high cost of living area like I do, your equity could be well over a half a million so living retirement check to retirement check as you age makes no sense. Use the equity, enjoy some finer things you've earned and let your heirs make their own 'pocket full of money'.

    If you're childless (gay or straight), then by all means use the equity, especially if your income isn't that high. If you die with a bunch of equity, it's either going to a charity/friend that you've designated or the state. Just get some good financial advice before doing anything!
  • FRE0

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    Feb 17, 2014 8:27 PM GMT
    eb925guy said
    dustin_K_tx saidMy sisters and I have been trying to get our dad to do it; to use the money--really enjoy life or at least remodel the house so they will be able to stay there longer (special bathroom, beds, ramps).
    However, he refuses, saying it's the only thing he has to leave us.
    We have told him repeatedly that we don't want it, as it will be a fight; who does not get it, because of the excessive hording situation, I'm sure a bulldozer will be most practical.

    I think this is a generational thing. My parents were the same until my mother became ill, then my dad did split things up to protect the assets. Funny part was that after he died, my brothers that had already received money before my dad died, accused his second wife (my stepmother) of hiding his money...of course she did not and could explain it all but that's what happens when people thing they deserve something that's not theirs.


    Unfortunately, sometimes when parents die, heirs have ugly fights over the inheritance. Sometimes they even contest wills. Even worse, if a surviving widow or widower becomes demented, an adult child may get the power of attorney and steal everything. If there are no children, an avaricious neighbor may get power of attorney and steal everything; I've seen it happen.