Reverse Mortgage Explained
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- เผยแพร่เมื่อ 24 พ.ย. 2020
- The reverse mortgage, explained in simple and easy to understand terms. If your working years are behind you, you've got a lot of equity in your home, and you need extra cash to live on, a reverse mortgage can seem like a great option. But is it a smart choice? In this video, I go over what a reverse mortgage is and how a reverse mortgage works, the requirements to qualify for a reverse mortgage, and the three types of reverse mortgages currently available. I also share my thoughts about when reverse mortgages should be used, and when they should be avoided.
What do you think of reverse mortgages? Let me know in the comments.
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FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY. NOT LEGAL OR FINANCIAL ADVICE. The information provided in this video and on this channel is for educational and informational purposes only. It is not intended to be a substitute for legal or financial advice that can be provided by your own attorney, accountant, and/or financial advisor. Practical Personal Finance accepts no liability whatsoever for any losses or damages arising from your own personal financial decisions. You are advised to consult with your financial advisor, tax professional, or attorney regarding any and all financial decisions involving your own income and taxes.
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
The stock market is no different, to maintain profit you need to have some in-depth knowledge on the market. I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
In my opinion, it was much easier investing back in the 80s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
My partner’s been considering going the same route, could you share more info please on the advisor that guides you
Google Sonya Lee Mitchell and do your own research. She has portfolio management down to a science
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
The best explanation ever - no distracting examples with numbers, only what a home needs to know
Great video! As a financial planner, reverse mortgages, in my opinion, are neither good nor bad but simply another tool in the toolbox. They are helpful in some situations and not so much in others; it all depends on the goals and priorities of the individual/family.
Agreed! The most important thing is educating people so they can make the best possible decisions for themselves!
Agreed. It’s not for everybody, and its very situational.
@@PracticalPersonalFinance That's why they have counseling
@@michaelmarcum7637 counseling is only helpful if you know the right questions to ask, in my case counseling was not helpful, I learned more from this video than from the lenders or counseling session. My closing is coming up soon and I think I will decide against it.
@@handydandydave I have to agree with you there. I do these loans and if my client learned anything new on the counseling appointment, I reflect to see where I missed the mark. You shouldn’t be learning anything new that your loan officer hasn’t already told you on that call.
This made me a subscriber. I got spam email about reverse mortgages and was curious. I am nowhere near being able to qualify, but still useful information.
Very helpful information and definitely Food for thought. Thank you!
Glad it was helpful! :)
Such fantastic explanation VID so clearly ! Thanks so much for sharing !😁
Glad it was helpful! :)
We should talk about scenarios and costs with real numbers to help people, great video but leaves a lot of questions unanswered. One reason to have a reverse mortgage is that you want to stay in the same home, you are close to family, and selling and moving is a non starter. I think there needs to be a push to making reverse mortgage more appealing, pass proper legislation so people can enjoy what they have built in those communities that they have been in for decades.
I agree, you just stated a great case for a reverse mortgage. Most seniors want to live and pass in their own comfortable home they've lived in for years/decades not sharing a room with one or 2 people with a curtain in between at $6-10,000 per month cost. Why not stay in your home mortgage free and with the line of credit or monthly inocme you are receiving use for home care in YOUR HOME. A reverse is more about lifestyle changes then rates and cost and speaking of cost, what I find humorous is the negative that reverses are pricey. Do the math on closing costs on a reverse or paying a realtor 5-6% of the sales price and see what costs more. Where will the Senior go when the home is sold? Seniors need to get busy living, not stressing in their later years and a reverse on a case by case basis works. By the way, the cash out is tax free unlike capital gains you are hit with on a sale. carlos@myflexnow.com for more answers.
@@LOSDLF I came up with the idea for reverse mortgages before they were around in the early 70s when I was selling retrirement plans. I quickly abandoned the idea when I did the math. The numbers were so bad for a typical borrower that I didn't think I could keep a straight face selling the plan. It looked good at first but turned out to be a major screw job for the homeowner.
Anyone who actually does an Excel spreadsheet on the idea will see that the amount owed skyrockets after a couple of years. It is like getting a credit card based on your house and continually using it but never making any payments.
I have seen lots of reports that the people lose their homes within two to five years. One of my relatives lost his house in three years that way. He got some immediate cash but before long the debt was huge. He was paying interest on the amount he borrowed as well as interest on the accumulating interest. Compound interest is a killer.
If anyone actually does a spreadsheet and a graph on it they will see that about the only people it will work for is single people with a terminal illness and no heirs, likely to die in the next five years. That's just mathematical fact.
By far the best video explaining this.
Excellent presentation with clear information. :-)
Thank you so much Keith!! :D
Excellent overview - appreciated!
SO SO helpful thank you!
PPF...good job, yep.
I weigh the reverse for myself only, in that i do qualify and since for example i have no dependents, my only relatives are wealthy enough. Why not use the money now and let the mortgage company have the house when i die. thanks
exactly.... all these people are getting hung up on the fees, the interest, etc, and they miss the fact that they won't ever have to pay any of it back.
Bingo! Exactly! I have no heirs and I own my house free & clear. The only thing that makes me hesitate just a little is . . . If I should ever need 'long term care' my only a$$et$ come from my house. But I think that's something that can be clarified in a will.
Very concise and to the point. Thanks for the information.
Hi Andrew, great video I’m 70 my home is free and clear, but so many bad memories from a marriage to the wrong man. So many repairs needed, that he wouldn’t even attempt. Just a little happiness and peace in my latter years. A garage, addition upgrades of bath and kitchen, I thought would manifest with my ex, never did-Such a leech. Not much in retirement. Considering returning to workforce.
sounds like you're just here to whine . . . but, an RM might be good for you. You could afford to improve your property and get all those things done that the old bum didn't do.
A familiar story that can be shared by many of us
Hey Andrew, I appreciate your explaining reverse mortgages in a way that humans can understand. :-)
However, I felt it was incomplete and a little irresponsible to say you thought reverse mortgages are a bad idea without explaining your reasoning.
Thank you I have been deciding to save money, sell, or reverse mortgage ! You have helped me to review my. Options
Thank you for sharing all this valuable information
Very very useful info....muchas thanks,,,, blessings young man.
Thank you Humberto!
Well done video clear consise and accurately informative
FINALLY a video to explain it w/o the dribble & babble foreplay. Thank You !!
Very informative subject.
Very well executed!
Informative video, good job!
I am looking into getting a reverse mortgage right now. The biggest downfall I see are people who are not responsible with their money.
They think that won the lottery and blow threw the money to fast.
So, for me I wrote down these 3 things to help me.
1. Can I afford to live without a reverse mortgage?
2. Do I need or want money from my home equity?
3. Is Health a big issue?
I have my answer. Good luck to all.
ps My parents have had a reverse mortgage for almost 30 years. They made it work by living within their means. My Dad will be 90 in Nov. He said he never thought he would be alive this long. But him and my mom are ok.
Did your parents pay the monthly interest fees? Or did they pay no interest monthly and are just going to live out their days in the home? I'm 62 and own a (paid off) home with my parents. They have a need to get a reverse mortgage, so I am wondering whether the best way to do this is pay the interest....or live in the home the rest of MY days as we all need to live somewhere anyway!
@tamarap387
My Mom's response
"It has been a very good thing for us. It has allowed us to stay in our home and provides us with extra cash when needed. Definitely get the equity line of credit. "
They do not pay the monthly interest. They make it work.
I was wrong about the length of time. They are about 20 yrs into the reverse mortgage.
Good luck!
@@iamozzman990 Thank you SO much!
Interestingly enough for my wife and I it was a perfect choice. We have NO children and NO relatives living. it's ALL about just the two of us. This way I do not pay $900 a month any longer and have assurance that we can both or at least one of us remain in the home until we are both gone. Most people may not have this situation as we do so I get why for many it's a bad choice. Any children and the idea changes completely. But as mentioned, NO kids and NO relatives and all we can care about is ourselves is perhaps the perfect situation for having this. We save plenty to cover maintenance of the home and taxes and insurance no issues with Social Security alone. I find it interesting that none of the reviews of the reverse mortgage take our type of situation into account.
To the creator of this content you said it exactly. You are not in this situation. A reverse mortgage can be a god send to some one who is financially strapped in old age.
Except that these folks have had 70+ years to save and invest for retirement.
@@bcardamone that's pretty hard to do when because of Biden I lost $40,000 in my pension just before I retired
@@bcardamone In the mortgage business, one of our fastest growing profiles of reverse loan Borrowers are wealthy folks with -0- mortgage balance. The HECM is being used as a tool to mitigate the sequence of risks returns on one's stock portfolio. An economist named Wade Pfau has done some thorough studies on this.
@@bcardamone I'm in that situation. 71 and have been a carer for elderly parents for 25 years, with very little income myself for all that time. You assume everyone is able to work, save and invest until they retire, but that is not true for everyone. I have paid the mortgage and I'm now sitting on equity of 1/2 a million, but can't afford to fix the roller door. Why should I not use the equity I've built up? Why?
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This is the first video where it actually explains the costs involved: origination fee (once), monthly maintenance fee, monthly interest rate, special monthly mortgage insurance premium, and your monthly payment (your "income") all added to your reverse mortgage balance every month. Not to mention still paying your HOA and HO insurance and property taxes. That's a lot of expenses.
All the other videos dance around this and never actually explain anything. I'm sure there are others that do, but this is the first one I hit that did! Thanks!
Most of this is paid after you sell the house or die.
So you spend your whole life paying off a mortgage- then you want to go back in debt? Horrible idea.
Is it really debt if you don’t have to pay it back while you’re alive?
@@vistalover9607 no one knows when they will die. a responsible person would leave an inheritance to their children or family vs making irresponsible choices to die broke.
@@vistalover9607 you do pay it back, out of your estate. It's crazy to me how many people would rather leave their home to the bank than to the family.
The idea is that the debt is not yours. The big difference is if you have heirs or not. It's a great deal if you don't have any children or don't care how much you leave them.
As he said, it's not for everyone. However, if, for example, you die leaving your spouse with the house and little to no retirement savings and no life insurance or mortgage insurance policy, this could be a viable option!
They can afford “that vacation”because they have been diligent paying down their mtg for years. Equity is cash when used properly. This type of loan allows borrowers to tap that equity without having additional monthly obligations. They can also make payments towards the balance if they wanted. If a borrower wanted to grab $100k of equity in the form of a traditional LOC, in ten years they would have paid roughly $50,000 in monthly payments which defeats the purpose. Used PROPERLY, a Reverse MTG is a useful tool in retirement for those on a tight fixed income or want to protect their cash assets
Hi Gonegolfn, I appreciate you watching and leaving this comment! I understand your point of view, but I disagree on most points. I feel that a reverse mortgage should only be used in a situation where someone is near the end of their life and needs to bridge a small financial gap between where they are and when they ultimately pass away. If they're interested in attaining a more luxurious lifestyle or going on a vacation, I don't think a RM is the answer.
Good logic.
@@PracticalPersonalFinance, with all due respect, I believe your age does put you at a disadvantage on this topic in the empathy category. Unless someone is independently wealthy, I agree that they should most likely not spend their hard-earned equity on depreciating assets like luxury cars or overly costly trips. However, provided that a homeowner can cover their property taxes, insurance, and upkeep, a reverse mortgage can be a tremendous benefit. Cash flow is extremely important in retirement as you know. Whatever monthly principal and interest payment a borrower has, that immediately goes away increasing their cash flow by that amount. However, they are always welcome to make an interest-only payment to keep the balance the same, or they can make a fully amortized payment if they want the balance to go down. That is part of the beauty that you didn't mention in your video. They not only have choices on how they receive their funds whether it's a lump sum at the close, a line of credit that continues to grow, tenure payments for life, or larger payments over a set period of time... (or a combination of those,) they can also choose whether to make no payment at all, or as I mentioned above, a partial or full payment to keep their loan balance the same or reduce their loan balance. Just my 2 cents! ;)
I agree.
@@lifelonghappiness Gr8 points Ricky. This guy agrees that everyone has dif circumstances . . . then goes ahead and makes irresponsible blanket statements like he has here.
I do appreciate your refreshing stance and counter-balance to most of the reverse-mortgage pushers. I gather you have some foolish relatives, but most of us are merely considering living, not snappy lifestyles. And we’re in these crazy situations in which our little shacks are now worth 1.5M. Yes, we could buy in Detroit or Bakersfield, but that’s an uncertain future. My house is now one of the cheap ones in my area. Rent? I definitely couldn’t afford that. The one-bedroom I lived in before buying our house is now going for $3600. So what do I have - a LOT of equity. And the possibility of roommates or an ADU. And Prop.13. And by the way, have you considered the capital gains in selling?
Hey Esther, thanks for watching and for sharing your situation. Everyone's got their own set of circumstances, and that's what makes personal finance so personal! If you're set on signing up for a reverse mortgage, then my only advice to you would to make sure that the equity in your home will outlast you. It would be such a shame to see someone toward the very end of their life have their financial wherewithal cut off. All the best!!
I have a different take on the subject. I am 62, I live in a home that skyrocketed with equity growth way beyond my mere mortal money management skills - and I have no retirement to fall back on except for SS. Because I own my own small service business, and the wife does not work anymore, we can only borrow a small portion of the equity. All that equity will only be available to me when I am dead. Shall I work until I am 72 years old and pay off the house so I can reduce my monthly down to taxes & insurance, or should I do a reverse mortgage and reduce my monthly down to taxes & insurance now, and not ten years from now? My non-working wife, of many wonderful years, is content for me to work until I am 72 or until she collects the life insurance from my earlier demise (I have a curious lump on the side of my neck :) That's why I am considering a reverse mortgage. I just want to go fishing. "Is that so wrong?" Maybe, at 62, I just need to read a PMA book, pull myself up by my bootstraps and tough it out. . . until I am dead? My wife will then go on to live until she is 90, and my children can inherit my blood, sweat, and tears :)
Hey Charley, thanks for watching and sharing your thoughts. Everyone's situation is unique, so I won't judge if you go for the reverse mortgage! It's definitely interesting to think about RM's from your perspective; with a property that's gone up in value significantly over time. The one thing you need to be careful about is that with your age, you don't want to outlive the equity you're drawing out of the home. If you absolutely had to work now you could. But if you made it to age 82 and ran out of equity to draw, you may no longer be able to work. Then you'll be in trouble financially. So it's important to run the numbers, do the calculations, and understand what you're getting yourself into. The RM, from a purely financial standpoint, is kind of like selling your home to cash out on the equity, and renting for the rest of your life.
@@PracticalPersonalFinance I thought a RM means we stay in our home until we are dead? Can a RM run out?
That is correct, the RM would mean you would be allowed the stay in the home until you pass away, as long as you maintain the property in good shape, maintain a homeowners insurance policy, pay any HOA dues, and keep your property taxes current. If you fail to do any of those things, the reverse mortgage company may foreclose on the property. One of the dangers of the RM is that once you run out of equity, the monthly checks stop. If you live in a place with high property taxes like NJ, that may make life difficult if you're in your 80's or 90's and social security is your primary source of income. Don't forget also that as soon as you begin drawing on the equity, the RM lender starts charging interest on that loan. That interest can start to compound really quick over a long period of time, especially when the balance is going up every month rather than down.
@@PracticalPersonalFinance Like Charley expressed in his previous comment: it`s all about his current life and not so much about the hypotheticals that you seem to be hang-up on. Please, do more research about this product before telling folks that they need to be realistically concerned about "running out of equity".
@@PracticalPersonalFinance Remember! A reverse mortgage not only can provide income when and if you need it, but there are no payments on any mortgage (unless you want them). The only reason one would want any equity is to leave it to your heirs. I choose to leave other items to my heirs. And the next time I refinance, I expect my home value to jump about 25% per year. If the market should collapse, I can still obtain my equity even if the house value drops by 60%. If I decide to move, then I can walk away with all my equity.
Just subscribed awesome information
Happy to have you as a subscriber! Thanks for checking out my channel.
I just got Educated! Thank you PPF!
Explained well Thanks
I'm wondering about your reasoning for not liking Reverse Mortgagees at the end of the video.
To me, it sounds like you are looking at this from the heirs side of the equation and want to see as much equity coming from the sale of the house when the owners pass away.
What about a common situation where the heirs don't need any money from the sale of my house?
If my kids are well off due to my sacrificing early in my life to make sure they were well educated and obtained high paying jobs and their own houses/equity, why should I limit my access to the equity in my house, even if it means the net profit at the end might be zero?
Thanks so much for this viewpoint! I'm 62 and own a home with my elderly folks. We're looking into a RM and I'm not sure whether to do the interest payments each month or just ride it out til the end myself! My kids are all off doing their own lives in various places and I may find other ways of leaving something for them. A life insurance policy with good pay out might be cheaper than the monthly interest payments?
@@tamarap387 You just stated a great case for a reverse mortgage. Most seniors want to live and pass in their own comfortable home they've lived in for years/decades not sharing a room with one or 2 people with a curtain in between at $6-10,000 per month cost. Why not stay in your home mortgage free and with the line of credit or monthly inocme you are receiving use for home care in YOUR HOME. A reverse is more about lifestyle changes then rates and cost and speaking of cost, what I find humorous is the negative that reverses are pricey. Do the math on closing costs on a reverse or paying a realtor 5-6% of the sales price and see what costs more. Where will the Senior go when the home is sold? Seniors need to get busy living, not stressing in their later years and a reverse on a case by case basis works. By the way, the cash out is tax free unlike capital gains you are hit with on a sale. carlos@myflexnow.com for more answers.
I am a CPA and licensed LO. I thought the material covered was pretty well done. However, the power of the line of credit option was not emphasized. The unused portion grows (more home equity available) at the same interest rate that would be paid on any loan balance. Over time, it's possible for the available line of credit to actually exceed the value of the home! And one could draw 100% of these funds out tax free. When the loan balance is paid off (death, sale, or move) the only amount obligated would be the LOWER of what's owed or 95% of the appraised value. Downside risk is eliminated with a HECM LOC. Starting out, only 35-45% of one's home equity is even accessible, therefore if home values continue to rise through the future, it's unlikely that an amount owed would ever catch up to the appraised value.
Here's something I've been wondering: Does a reverse mortgage require an in-person appraisal of the home? If so, is it worth spending a little money to make basic repairs before an appraisal? I'm at least four years out from seriously thinking about a reverse mortgage, but I've been starting to research it a bit.
Hi@@danbennett1005 Yes, a reverse requires an in-person appraisal. General home upkeep and maintenance are always recommended. Typical items we see that require repair for an appraisal are: exterior peeling paint, damaged siding or wood trim, paint worn off (such as hail damage) and siding is starting to absorb water and warp. A reverse can be a great tool in your financial portfolio. Discuss with your financial advisor and find out how it can benefit you. :)
@@danbennett1005 Yes, an in-person appraisal will be performed. Be careful that you don't confuse "repairs" with "upgrades". Basic repairs (broken windows, missing roof tiles) are a good idea. You will not get a return on upgrades.
Thanx for making it clear…
Happy to help!
Another thought to remember is if you are a homeowner and you end up with a major health issue (most do not have long term health insurance) this may cause a major financial problem too. My grandmother had a stroke, she owned her home, ended up in a nursing home and even though she was on a very small fixed income couldn't qualify for financial assistance because she had a home. If you are on a small fixed income and own a home who do you want to give your equity to? The greater percentage of retirees will need assisted living, nursing care or a nursing home. In 1993 the cost for my grandmother was $8800 per month.
You just stated a great case for a reverse mortgage. Most seniors want to live and pass in their own comfortable home they've lived in for years/decades not sharing a room with one or 2 people with a curtain in between at $6-10,000 per month cost. Why not stay in your home mortgage free and with the line of credit or monthly inocme you are receiving use for home care in YOUR HOME. A reverse is more about lifestyle changes then rates and cost and speaking of cost, what I find humorous is the negative that reverses are pricey. Do the math on closing costs on a reverse or paying a realtor 5-6% of the sales price and see what costs more. Where will the Senior go when the home is sold? Seniors need to get busy living, not stressing in their later years and a reverse on a case by case basis works. By the way, the cash out is tax free unlike capital gains you are hit with on a sale. carlos@myflexnow.com for more answers.
I think it's, first off, very important not to treat the fruits of a reverse mortgage, as if they were the funds of a lottery win. The homeowner needs to treat a reverse mortgage with a degree of respect, as their financial stability depends on it. IMO, major home equity + choosing a conservative line of credit + (if possible for the homeowner) make a monthly interest payment back to the lending institution (which is far less than a conventional mortgage payment) is apt to be a fairly failsafe way to maneuver an RM. I always find it humorous, when watching a commercial for a reverse mortgage, or reading an RM pamphlet, it shows this well groomed, baby boomer couple, who were likely living in a nice saltbox in the Berkshires, and drive a Volvo, as their model example props. Truth be told, though that is the genre the MC would like, it is far more of an exception, than the rule.
This is the best video I have seen On Reverse Mortgages. I'd like to know of an alternative.
Thank you for the information in this video. I always thought that reverse mortgages were garbage. You just confirmed that.
Thanks for watching!! I agree with you!!
They are actually NOT garbage. They can be invaluable for some and not a good fit for others. Until you speak with someone who knows what they're talking about and is able to present without bias, one is not truly able to know.
@@lifelonghappiness EXACTLY! This guy is very irresponsible acting as a financial advisor and making these kinds of 'blanket' statements.
@@tthom2459 Yes, it reminds of Dave Ramsey who is the worst of all on this topic. He is so irresponsible with his one size fits all responses. When used properly, these products can be lifesavers and can help families tremendously.
@@lifelonghappiness yeah . . . he's the worst. It's hard when you sincerely are looking for true, accurate info . . . and you run across folks like them who think posting stuff on internet makes them feel smart. Are you in 'the business'? I still haven't made the move . . .but, I'm getting more and more serious.
Thank you for the video. Based on the other comments made there are varying opinions about reverse mortgages and your expertise. I appreciate your time and effort on this topic and others you have spoken on. Without a doubt folks who are now chatting about reverse mortgages and grinding away at the overall negative connotation. Making complex topics simple is vital for financial success keep up the good work. If possible please reflect a little less bias or if its not bias a little more completeness on specialty products like reverse mortgage lines of credit that produce returns well ahead of the average historical bond market returns for those borrowers who do not advance all of their available balance. For those products the actual cost of interest is minimal compared to their counter part products in both the forward and reverse mortgage markets.
After listening to two reverse mortgage videos promoters I saw yours for a balance and I like the title it sounds more balanced. As the title says reverse mortgage it a mortgage that goes backward in my view, which I mean it will catch up to you later on. It is waiting you at the exit while giving you the luxury of doing what you want. Well, I rather see any problems upfront than at the end. Also I had a thought that reverse mortgage it interest free? NOT SO? Interests are accrued off site and show up on site later? I decided it won't serve me regardless how it is packaged. I like to have full control and feel I can engineer my life the way I see it fit. Thanks for the video you made many good points and lighted the whole issue.
Luigi...ok fine, i see your point , But at the time" IT catches you" , you are deep in the ground and free...yep.Might as well use that money...OR don't.
The payoff comes when you are dead. If it makes sense to leave the house to someone in need , then don't reverse...otherwise, have A good one.
It catches up to you when you're dead. That is the exit. I guess you're not old and have things you'd like to do before you're too old to do them, and the only way to do them is to use the equity you've slaved for for 30 years or more.
This is a good video. You should do one explaining how no one who is subject to property tax really owns their home or their land. We, in reality, rent the land from the taxing authorities where we live. Fail to pay our "rent" (taxes)? Lose our property.
Right MP. Just like failing to pay your income tax to the IRS can result in a tax lien and foreclosure on your property, so you must be renting from the IRS. Fail to pay your HOA dues and the HOA can file a lien and foreclose on your property so the HOA must own your home as well. Or a mechanic's lien, the mechanic owns your home too! PHEW! All these other owners of your property and you're just renting! That must be why Taylor Swift keeps buying up massive properties, because she doesn't own them! Is this an example of why the wealthy keep getting wealthier? :D
"Or you can pay it all off when you leave your home" says that guy who used to be a TV star. Now why would you want to leave your home? You wouldn't. You'll never be able to afford another. These companies know that without regular payments, people will fall behind. Eventually, they will have to leave the home plus pay off a big balance. Just keep paying your mortgage. If you want to sell your home someday, you'll make a profit. Real estate is always going up.
Anytime that I want to sell, I can then use my equity in the current home, and use a Reverse Mortgage to buy a new home. Nothing gets in the way of my choices.
What are you going to do with the profit when you're dead? The whole point is you don't pay anything until you're dead or sell up -- you can if you want, but you don't have to.
Don't ever do it, they say if you don't pay your 2nd payment you will loose your house, my grandma took it out and did it now she was forced to move out and go to a livin facility.
What 2nd payment? You mean property tax and insurance?
What payment? You don't pay any payments until you're dead or sell up.
A lot of states don't have seniors paying property taxes on their primary residences. Check the age in your state and what you need to do to be exempt.
Keep it going
Thanks Glenn!
your opinions of uses for a RM at the end represent lifestyle uses, but what about nursing care or insurance to cover end of life scenarios? That is more often what these are used for. It's good you know about these, you may see that you'd like to use one to supplement pulling from the market in bad times to pull out of the market.
Nice Job
I hear what you are saying but with the cost of housing, it's cheaper to get the reverse mtg. Also I have seen this mortgage save several families. I did a signing for one lady who lost her job at the age of 63. She was looking and looking but could find nothing. She did the reverse mtg so that she would not lose her home while she tried to rebuild her life.
I had a very elderly relative do this to help with her living expenses and it actually worked out okay since she lived in an area where property had become extremely over priced.
Exactly. I am helping set one up for my cousin. I think she would literally die if she had to leave it. She lives in an area where land and home values are skyrocketing much more than the average. I frankly don't care if she leaves anything behind when she has to go into a care home or passes....just so she is happy . But I have no doubt she will be leaving a lot to her heirs from the sale of her house.
Clean!
Thank you explained on a reverse mortgage.
We need to look seriously at a Reverse Mortage on our Condo to pay for the $11K monthly Nursing Home costs of one 99 year old partner. We have no mortgage, and do not want to leave our home to anyone. Taxes and fees are paid and current since we have no mortgage. What do you recommend?
I think your mouse cases they are outstanding
Super video
Thank you Victor!
If you're 62 + freehold with no heirs, still healthy and want to say buy a new motorcycle or whatever, you might as well use your equity before some shite hits you out of nowhere. live as well as you can while you can. There's no logic in sitting in a freehold home, with limited or no cash pondering WTF now?
Thank you😮 I wanted to know the pros and cons of a reverse mortgage and you explained it perfect I will not be getting ripped off😂😂😂😂😂❤
I'd prefer to downsize and get a part time job before considering a reverse mortgage.
Amen to that!
If you downsize, it means that you're selling your house (be sure to deduct the costs of selling your current house). Instead, you can apply the selling costs to the reverse mortgage and stay in your house (with no mortgage payments), and have a line of credit that you can draw on anytime (still no payments to worry about). You can also use the equity line of credit of your reverse mortgage and have equal payments paid to you for the rest of your life.
That doesn't even make any sense. The downsizing is ok if you are still in a home, but some folks cannot get a part time job or just don't want to. I don't need to work, but have a Reverse Mortgage to have a safety net and also to not spend my retirement funds. I use it when I need it not BECAUSE I need it.
Something that is super important to note: Reverse mortgages give you the OPTION not to make a monthly mortgage payment. If you decide not to pay the mortgage payments, the mortgage balance will grow.
HOWEVER, It can be still be treated as a traditional mortgage with mortgage insurance. You can still make a monthly mortgage payments and the balance will decrease.
Think of it as insurance.
I'm not sure I totally understand, but I'm slowly getting educated lol. So what's the difference between this, and a home equity line of credit? You just don't have to make payments until you sell? I'm curious as far as numbers.. say my home is worth 500K and I owe 200k on it, would I be qualified to take 300 total? And so then I could either make payments on all that amount, or not?
@@kbanghart they will loan you a percentage of the equity based on your age . . . and life expectancy. An HECM is good til you leave the property (ideally in a hearse) . . . . so they take a risk as to how long you're good for the amount they loan.
@@tthom2459 thank you for the information.
Also, do you know how common it is for lenders to originate mortgage loans for 100K or less, like a 30yr? Just trying to figure out what kind of payment that may look like for me and the wife, cuz we'll have a large down payment. But not sure how willing lenders are to originate a smaller one like that.
@@kbanghart you can do a reverse mortgage with a very small balance. A prime example would be someone who does not have a mortgage to payoff. Their initial balance would consist of their initial financing fees. This is usually done when they don’t have an immediate need for funds but want to setup a line of credit for it and when the need arises. A really great option in this economy.
@@evanfairbanks1020 thanks for the reply. So in that case, what is the difference between a reverse mortgage and a HELOC?
What about the interest on the loan it's outrageous we're being charged 1500.00 per month .Is there a way to cut down on that ???
Hey Mr Expert. You made a statement that one of the disadvantages of a reverse mortgage is that if you do not pay your property/school taxes the RM lender can take your house. If someone does NOT have a RM and they do not pay those propty/school taxes the town will throw you out of your house. How is that a disadvantage of having a reverse mortgage? If anything, having a RM makes you better able to pay those taxes. And the value of your credit line increases over time, allowing more room to borrow in the future.
when you site your reasons near the end for not doing a RM . . . You seem to imply that an elderly person who owns their home free and clear with tons of equity that are scraping by on a meager SSI monthly income should reserve that equity $$ for some other purpose . . . . maybe like passing it on to their kids. Why should THEY not use the $$ they have built up as equity in their own home? Why do you think their kids are more deserving than they are?
Hey Tthom I really appreciate you watching and leaving this thought provoking comment for me on this video. To be frank this topic of reverse mortgages and especially your comment have significance in my own life, because one of my relatives is in a situation just like you describe. Their only income is the SSI every month, and their assets (other than their home) are dwindling as they age - to the point where solvency may come into question in a few years time. A reverse mortgage may be the best solution and it's actually what I've recommended for this family member - a single purpose reverse mortgage to cover their property taxes and keep them financially solvent for a longer period of time. In this situation, I think the single purpose reverse mortgage works beautifully.
But I also see what you're getting at about my suggestion not to use a reverse mortgage when the situation isn't quite so dire. I feel the risk with using a reverse mortgage to fund lifestyle choices is that you'll end up living longer than you might expect. And once that equity in the house runs out, you can start to get into big trouble trying to maintain a certain lifestyle that you can no longer afford. You still need to pay property taxes, homeowners insurance, etc. What happens if you need to replace your roof or make other big home repairs? I feel that if you are in a situation where you want the equity in your home to fund your lifestyle, the choice should be between your home and your lifestyle. Keep the home and live on your SSI, or downsize and have that cash to play around with.
@@PracticalPersonalFinance thanks for your reply. my personal situation is: I am widowed, live alone, no mortgage, no debt, no heirs (that I want to claim). Managing monthly expenses frugally on SSI. I have a couple lg projects that I have been putting off and I could use a newer vehicle. I'm new to this whole RM subject and am just trying to read everything I can find about it. I hate that Tom Selleck ad on TV. Everyone knows he's a crook and I cringe every time I hear him say "trust me". I've come to think I'm just lookin for stuff that makes me feel good. . . and that's not really what I want.
It doesn't seem like you're trying to go after anything too extravagant. So I think it's reasonable for you to be looking at a RM. If you told me you wanted to go travel the world for a year once this whole pandemic is over and then buy yourself a new Porsche, I'd be concerned. But as long as you approach it with a frugal attitude and think everything over carefully like you seem to be, I think you'll be fine.
Get yourself a reasonable, reliable used car like a 4-5 year old Toyota Camry that'll safely, reliably get you from point A to point B for the next 10-15 years. Make a detailed spending plan for those large projects in advance and stick to it as best you can. And keep in mind that once you get the RM, you're going to be obligated to keep the house in good condition - no leaky roof, no cracks in the foundation, etc.
Andrew. You appear to have come around in this post. Those who are financially strapped/savvy are not going on vacations or buying High end sports cars- they just don’t want to run out of money before they run out of life. RM is a smart alternative even if you have money because it’s tax free and it’s LOC can be a lifeline down the road should something unexpected happen because it’s Always available( especially if the house needs repairs or a home conversion to stay in it!- Without payments - For as long as they live!!!!)
i kaan speul my werds two
Wow! Zthis Video was definitely meant for me to view, Pay close attention too & WITHDRAW FROM MAKING A BIG SENIOR MISTAKE!!! Thanks A Million!
On Jun7th, 2021, I started the process of a Reverse Mortgage. A month & a half later if still was having issues with "the progress of my application. I was due to have a counseling session on i32021. I got so confused, and stressed'out waiting & waiting I said to hell with the dang Revetse Mortgage. I"d rather DIE ska pass on with what I already have. Than to habe money, but nowhere to live
Anyways, thanks for sharing thos bide
👍🏽👏👏👏
What company were you dealing with?
My pleasure Kia, I'm glad I could help! Best of luck with your situation!
As with any mortgage, you can apply to several lenders at the same time. Then compare, including there attention to detail. I just finished a reverse mortgage. The lender paid almost $5000 toward closing costs and the lender paid the $750 appraisal fee too. From start to finish was less than one month.
In the case of HECM loans, who determines what the fair market value of the home is? Does the mortgage servicer bring out their own appraiser, do they hire an agent? Do you know how that works? Thank you
they use a 3rd party management company to find the appraiser.
Excellent content and very clearly laid out. Keep up the great work.
For not being in the industry you did a great job! You're very clear on most details. Thank you for spreading truthful education on this! A couple of notes- there are programs that allow the borrower to be age 55+ (depending on the state and program). Also, disqualifying someone based on the generic 50% isn't appropriate because you are able to borrow more at older ages and when interest rates drop. So while people in their 60's do need around 50% equity, people in their 90's would only need about 30-40% equity in order to qualify. It might shock you to learn part of what you said is actually an old misconception, when you say that the reverse is good only for people who don't have other means. About 1/3 of people I work with do "need" more money, but the other 2/3 are being referred by financial planners to help enhance the overall retirement plan for clients who already have upwards of $300,000 in retirement accounts. Lots of brilliant minds have studied various ways to incorporate a reverse and proven how it can enhance a retirement plan with this financial tool (even accounting for the sots of the loan). Imagine if during a year like right now where the stock market is down 21%, if you draw on those retirement accounts they will not have a chance to bounce back. If you had set up a reverse mortgage line of credit, you could instead draw from that growing equity Lline of credit until your investments bounce back then continue drawing from there and you could even pay back the Line of credit even larger estate than if you had avoided it. Anyhow, if you're making another reverse video and want an expert to consult for content, I'd be happy to help connect with me through www.reverseloansolutions.com
I will 2nd what you said.
It wasn't truthful. There were some false statements and misleading comments.
Thank you so much for making this video simply, short and easy to understand! my parents were being offered & somewhat pressured I feel into getting one of these loans and so when I heard about it I started doing my own research along wiht the paperwork they left for them to review! it absolutely does not make sense at all for them to do that! The Reverse Mortgage Loan they are being offered comes wiht a VARIABLE interest rate that can go up to 7.56%! that is insane IMO and I advice for them not to do it!!!
I understand they are older, tired and even as they go into retirement because of the limited retirement money they will receive they may feel forced to still work some to cover the mortgage payments, bills etc but instead as an alternative I suggested we take a line of credit, use that money to build an ADU and rent it, with that income they can retire worry free, have enough for rent, bills, renovations and to top it off add value to the property which one day our family will get to OWN instead of putting that at risk of giving it up to one of these unscrupulous corporations!
Just curious, why do a line of credit rather than a cash out refi? Interest on the cash out is usually cheaper, spread out over 30 years of repayment (smaller monthly cost) compared to a smaller length HELOC. May be worth exploring that option with your parents as well. Sorry to hear about your parents getting pressured to do the reverse. As a loan originator myself, I cant stand to hear about people pressuring people into any type of loan.
@@dominicalvarez9053 thank you dominic! appreciate the suggestion and reply, they did a refi about 5 yrs ago in order to do some repairs on the home, would probably be hard for them to qualify for yet another refi?
it would be the 2nd one in a short period of time, their income is lower now and will be even less as they enter retirement, interest rates are starting to go back up, i feel it may have a been a good option back when the pandemic first hit and banks were still lending at very low interest rates. much more difficult now but I will research that option if there is still a chance! thanks!!!
I have my 4th refinance of my reverse mortgage. The interest rate cap of 7.5% doesn''t affect anything for me. Only my relatives would care. By the way, when I was younger, mortgages rates were typically 6-12%. With interest rates on 10 year treasury notes now approaching 2-1/2%, no problem.
It sounds like your main concern is how much you will inherit, and that you think your parents should continue to just scrape by so you will inherit more money. The interest rate doesn't affect them as it doesn't get paid until the house is sold or they die. I think they should access the equity and have a grand time SKIing (spending their kids' inheritance). They've worked their whole lives just so that you can enjoy their money? Really? You sound extremely selfish, frankly.
@@dennisleslie8997 So, you're not paying the interest payments each month, but are just riding it out to the end? (Am just wondering which way I might go if we do a RM) Thank you!
Thanks for the video; my parents have a decent retirement savings but a variety of unexpected events has led them to considering a reverse mortgage on the house I grew up in, so I came here to find out more about it. (I had some idea, mostly correct, but this filled in some important gaps and answered some pending questions!) As far as the "What do you think of reverse mortgages?" question at the end, I don't want/expect anything from my parents after they've passed, but in a general sense I think that it's going to really turn a lot of intergenerational progress on its head when baby boomers who took out reverse mortgages have less/no inheritance to leave to their children since their main asset was mortgaged to pay for their end of life years. The ability for the parents of the Boomers to pass down their homes paid for through veteran benefits and good union jobs should have set the present older generation up well, and to then pass that equity on to the next generation and so on and so forth to the generations after, leading to progressive capital gain over the family lineage. All it takes is one generation sucking the equity out of the chain as a reverse mortgage to set a family back to the beginning. (Though I also love my parents and want them to be comfortable and happy in their end of life, so I'm not going to be sour about them getting a RM even if it means I an executing a will of a 0 dollar estate! Just in general I think it's an overall short-sighted and relatively selfish thing in a *general* sense as a mechanism, presuming one has heirs they want to help once they are gone.)
There is no down side to a Line Of Credit HECM Reverse Mortgage whereby you become your own banker. The only thing one needs to own-up to is that 95% of the kids are just going to sell the old place anyway. You keep title to the property and you can back out by selling your property and take the difference in the price you get minus what you have already taken. Your available cash value grows each year by rates typical to Whole Life policies and your home and accessible cash borrowing amounts, continue to appreciate in value every year. You can even live in another warmer climate 5.90 months out of the year without touching your reverse mortgage contract. Even if your home looses value below what you have withdrawn, you are covered by mortgage insurance. You can still pass the unused value of your home to your heirs or their LLC or Trust.
Reverse Mortgages give seniors options down the road. One of the major points you left out is your line of credit (the most often used version) grows at the same rate as the principle owed. What does this mean? Your line of credit could out grow the value of your home and you could possible withdraw more from it than what the house is worth. (its like a hedge against the housing market) 2nd) A reverse mortgage isn't a mortgage without payments. Its a mortgage where the payments are optional. How can this be helpful? After a handful of years of mortgage interest growth against the principle you could elect to paydown the mortgage interest. This is most commonly done after a Roth Conversion or RMD's. Why? Because mortgage interest can be written off and you wouldn't have to pay taxes on the income from the conversion or RMD (or the higher Medicare coverages at higher tax brackets). Your line of credit would then grow dollar for dollar for the amount that you paid down giving you the opportunity to withdraw it when you wanted TAX FREE!!! There are so many advantages that you didn't mention in your intro video to be able to give a conclusion at the end I'm afraid. In fact the wealthy can get more benefit than even the house rich and cash poor models. Not to mention the investments or lack of withdrawals from retirement accounts you could make or not take since your cost of living went down by the amount of your Principle and Interest payments.
Can you please give an example of what you mean by a Line of Credit Reverse Mortgage, as I think I know what you mean, but something is still missing, like pay down the interest of already withdrawn funds or?????? 😊Thank you
@@CC..Jeremiah9_24 you are not alone ! i couldnt make heads or tails of it and what does medicare have to do with any of this?
Liked this video: short and informative. I'm 68y/o, single, and own my own house. I live in an eastern burb of Cleveland, Ohio, my house is worth around $100k. On a regular loan, how much can I get before the loan plus interest hits $100k? What if I split the loan up into monthly payments? I don't think I'd get very much, and putting my home at risk nixes the deal. Yeah, maybe if I lived in Southern California, and my house was worth $800+k. Nobody is in this business to lose money.
Very informative, straightforward, and to the point. Thank you for putting this out there. I'm in my late 30s and trying to understand why one of my grandparents did this a few years ago without consulting anyone first. I think you nailed it at the end - it's usually for people who don't have enough income in retirement *to maintain their desired lifestyle* ... which means they may be embarrassed and therefore reluctant to tell anyone about it.
My reverse mortgage is like having over 1/2 million dollars in the bank paying me for life.
For me it's about doing urgent repairs on my home and being able to afford to travel before I'm too old to do it. I have no dependents, so why on earth should I not use the equity I've accumulated?
@@MsBiggles51 Did you get a reverse mortgage?
If the house was already transferred into the children’s name, but the mother still lives in the house as the only resident, can she still qualify for a reverse mortgage?
2) if the house is in poor condition (dated, needs tons of work-$200,000-$250,000), but livable (barely), can she qualify for a reverse mortgage? Or will the appraiser see that there is zero equity in the house because of the current condition?
Great video Andrew. The content is very clear and concise. Unfortunately, these mortgages typically impact the elderly and I've seen it do way more harm than good.
Thank you very much Joe!! And you hit the nail on the head. Another financial product that seems to prey on the most vulnerable.
My reverse mortgage has been refinanced 4 times over the past 7 years. It's like having an extra 1/2 million dollars in the bank for life. On top of that, I have accumulated over $200k in other commodities that I can always hand down to my grandkids (if I am so inclined). Hooray for the reverse mortgage.
@@dennisleslie8997, thank you for sharing this.
@@dennisleslie8997 Thanks for sharing. I’m trying to assist an elderly parent that wants to stay in the home, but needs home repairs done. Some of the cons being explained are a little scary, but it’s nice to hear the pros and that it has benefited you for several years.
@@dennisleslie8997 please tell me where you got RM ?
Very well explained! Double the interest rate and 1 in 5 going into foreclosure is beyond disturbing especially considering they’re elderly with no other resources!
You said it!!! :)
without the reverse, the foreclosure rate could be 3 out of 5
@@PracticalPersonalFinance not me...
Those statistics are a little misleading… when you take into account the number one reason that would cause the reverse mortgage balance to be due… is when the homeowner passes away. If that homeowner does not have any heirs or if the heirs fail to contact the lender… within 6 months of the homeowner passing… the home will go into foreclosure. But to lead on to the fact that the Reverse mortgage itself is the cause of 1 in 5 foreclosures is not true. It’s typically because most homeowners and heirs… tend to “walk away”. I hope this helps.
It doesn't make any difference if the interest rates double or triple, you still have your home to live in with only taxes, insurance, and maitenance to pay. If you live to be 120, you still have no mortgage payments.
I'm 66, completely own a $520k house. Yeah the terms aren't great. I could sell but I'd be paying $15-30k in agent fees. If I was going to live forever then sure, bad deal. Or if I was going move, bad deal. But I love my garden, haved lived in many states, couple of countries. I like it here. If I stay here for here rest of my life all my equity goes to someone else. I don't have kids so no idea who gets that money. If someone wants to give me $10 and charge me $100k in fees but don't collect until I'm gone I don't see how I'm not up $10.
Worse case something happens and I have to going into a nursing home my house would be sold and I'd get less from the deal. It's not like I'd likely ever be needing to return the house. And the cash I get is going directly into paying for the nursing home until gone and then on Medicaid. So all I would have done is delayed a little while going onto Medicaid.
I retired 21 years ago and by far the hardest adjustment for me has been "you're done". I'm done having to earn, I'm set for the rest of my life. I have to switch from thinking about making money and be more of a spender.
I've created a 1 bed, 1 bath apartment in my house where I already live. The rest of the 3/1 house I used for woodworking and hobbies. I can rent the 3/1 part of the house for $2000-2500 /mo (central Phoenix) and get about $1000/mo from a reverse mortgage and stay in my house. With a $3600/mo SS check (not taken yet) I'd be at $6600/mo income with rent being all or mostly tax free and the reverse mortgage being tax free.
Yeah the fees are high. But I have to wrap my little brain around the concept I'm unlikely to ever see the bill for those fees. Mortality is hard concept to fully understand.
Hi Andrew! Thanks for a thorough & thought provoking presentation! I watched a couple of other videos that made no mention of possible monthly costs associated with this type of mortgage. I knew there had to be costs somewhere!!! I recently retired & I am fortunate to have several life-time forms of retirement income - I won't ever be rich, but I can cover my expenses. I want to get a loan to either tear down my delipidated old house and replace it with a modern, modular home that will have amenities that a senior person may need to live out their years comfortably or to do a total remodel with similar amenities. I am wondering about how the loan amount might be affected by demolishing the house. Certainly, there would be some effect, since the value of the house itself is tied into the equity. The annual property tax statements do indicate what value the county government places on the land versus the structure for purposes of taxation - any idea how it might affect the loan amount? Thanks much! Anne
Hi Anne! Thank you so much for watching and sorry it took me so long to reply! There are definitely fees associated with the reverse mortgage and they definitely eat away at your equity, especially in the long run. It seems like you wouldn't necessarily need one since you have the retirement income that will last you for your entire life. I don't have a clear, definitive, "do this" answer for you, but if I were in your shoes, I would explore this from all angles; including getting something like a new construction loan to build a new home, or a HELOC to complete some renovations. Work with a financial advisor who's a fiduciary to help you run the numbers and make the best possible decision given your situation. Wishing you the best of luck!
thats a good one..lol,like your thinking,,,i say knock it down,,,but if the bank finds out you better have enought bread to pay back the reverse...
One thing that seems shady as hell is that a person has to be 62 to get a reverse mortgage. That meaning at age 62 , isnt your house damn near paid off at that age? How many payments would a person have left anyway ? Reverse mortgage company can swoop in and get you house for pennies on the dollar.
@@randybonner9870 Get the facts before making such inaccurate comments, or why bother commenting at all..."just saying".
@@ronaldcambridge3126 Why don't you enlighten me about what is so inaccurate about a 62 yr old homeowner not having an abundance of mortgage payments left and a reverse mortgage company swooping in for a relatively quick kill instead of coming across like you know something and not give any details with your empty opinion saying basically I should keep my opinion to myself in a public open forum as if I butted in on a private conversation. Jst saying .
Sounds pretty risky to me. Would you suggest to take out a personnel loan instead? Seems the interest is high but the risks are less. What are your thoughts?
The problem with a personal loan is you need to make loan payments. There are NO loan payments with a reverse, only a payout once the house sells or the person passes away. Most people who take out a reverse are retired (in fact you have to be 62+ to get one) and don't have an income stream anymore, or at least not a large one.
So say you need a new roof but you don't have the funds to pay for it, nor enough income to pay the loan payments. But you have, oh, say, 500K equity in your house. A reverse lets you fix the roof, say in your house, and pay that (plus interest) debt after you pass away (or sell).
So there are real good reasons to get a revserse mortgage.
Great video! That person below sounds like a lender. Most people that get reverse mortgages are cash poor. They don't have saving, 401k, or retirement accounts. My Mom and Dad got a reverse mortgage on their home in 2003. They were AA that did not plan well for the long and rather unhealthy life. they had health issues. They had that line of credit which after borrowing from it for years left them upside-down with the loan. When I sold it after they passed I barely made 5,000 from the sale of 130,000 home.
If you made $5000 from the sale, how were your parents upside-down in the loan?
Thanks you sold me ... getting one next spring ... for many reasons not discussed but there are time limitations
Whatever works best for you! I’m glad I helped you come to a decision.
Were you able to close on your Reverse?
@@emmettmortgageno, missed my window .. going to have to wait for interest rates to come back down into range. I have a young wife so the longer we can wait the better. The offer that I regret not taking was paying off the mortgage and 50k in funds over time. At the time my wife was unsure if she would want to stay here if I passed ... now she says yes
@@Inseparable724365 Yeah rates have really changed the numbers on Reverses, particularly for couple like you guys with a younger spouse. Keep an eye on the 1 Year CMT (Constant Maturity Treasury). Thats the index used after LIBOR was abandoned.
Thank you for the breakdown! Really useful information.
A few factors I wish you had included... The state of the market when you consider a reverse mortgage. The current interest rates versus the interest rates on your original mortgage. The affect of health issues that can cut an older persons work life short. All of these things are as important as the nuts and bolts of a reverse mortgage. Truthfully, few people take out reverse mortgages to buy a new car or go on that dream vacation. Mostly it is because they realize that they will not be able to work much longer, but their mortgage is still looming. Others have experienced devastating health issues that cut their work life short and leave them with no income except some meager retirement benefits. Things to consider... Is the current interest rate significantly lower than when you originally mortgaged your house? Will the RM interest rate still be lower than what you are paying? You can either refinance and continue making payments OR get a PM. Sometimes a PM is a better choice. If you have no heirs, have no real retirement benefits and are unable to work and pay your mortgage, a PM might be your ONLY choice.
I'm sorry but what is a PM
@@Scoeknow oops... should be RM!
@@usetobeasurferchick lol I was so confused haha thank you
i think,if i do one...and take the cash(got to buy a safe),,then the hospitals and doctors cant get it?...and maybe any lawsuits?
I think I understand how it works, but I would like an example with numbers. Let's say I have a home worth 400K and a mortgage of 200K. My mortgage payment if 1K/month with 5% apr, so I am amortizing the loan at let's say 5K per year (I know these are hypothetical values, just using to illustrate a process). So I receive , let's say, 15k from the reverse mortgage lender. Fees aside, the lender will charge interest to pay the 1K per month plus interest on 15K at 7% apr. (continue on next comment)
Have a situation, my daughter has a disease and her 14-year son live with us. She is trying to get a disability but has just been denied. Her mother and I are coming up short every month, and I felt a reverse mortgage would be the answer. What are your thoughts?
Hey Pure Remedy!! Sorry it took me so long to reply. That’s a really tricky situation you’ve got on your hands there. Based on the age of your grandson, I’d guess that you’re in your 70’s (sorry if I’m wrong on that!). With a reverse mortgage you need to be careful with using one before you’re in your mid to late 80’s, because of the fact that your equity might run out before you pass away. Personally, I would explore other options to try to close the gap. Are there any other family members who may be able to help? Other government programs? Is anyone able to pick up part time work?
If she was denied then she needs a job
Andrew - I am considering a RM. I qualify on all fronts: I'm 70, own my house free and clear, no mortgage, house is worth about $1.8M. Plan on living here till I die. So the loan looks good... TOO good! I'm STILL scared shitless! I don't know enough about High Finance to feel secure about any dotted line I'm supposed to sign. A friend recommended a "Home Equity Line of Credit" as an alternative. This looks equally scary! Differing opinions abound. Whom can I trust? What should I do?
Hey Mr Superbatone, thanks for watching! Great question. That's an amazing piece of real estate you got! Congrats on being a millionaire. :)
I hate to answer a question with more questions, but what does your income look like? What other assets do you have? Any retirement accounts? And most importantly, what will the proceeds from the reverse mortgage be used for?
@@PracticalPersonalFinance Thanks for taking this time with me! Sad to say, I have very little in the way of assets or income. I am a musician! (That should explain everything.) I drive a 1973 Volkswagen Beetle. Besides the house, my other major assets are a world-class collection of twenty thousand ‘20s and ‘30s 78 jazz & blues records, and a couple of pianos. My paltry income is derived from eBay sales of the above, and actual paying gigs, which mostly have been swallowed by COVID. I was receiving unemployment from the State of California until last week. I’ve saved about $25G, which should keep me off the ropes for a few months. I buy NOTHING but necessities, but it still costs a hefty three grand or so each month to float my boat.
I imagine that your property taxes are a fairly significant portion of those monthly expenses! Well, first off I'd definitely stay away from a home equity line of credit (HELOC) or any sort of home equity loan because those are going to require that you repay them, which it doesn't appear you have the means to do. From an outside perspective, a fairly simple solution would be to sell your home and purchase another, less expensive home for cash. The way I came to that conclusion is with a simple thought experiment - if I were in your position, but instead of a home I had $1.8 million in cash, would I spend all of it on a $1.8 million home? Probably not. I'd probably try to find something for $500-600K and invest the remainder so I could live comfortably and never have to worry about money again.
But we both know in life things are rarely so simple. If you're set on staying in that home at all costs, then a reverse mortgage might be your only option. And if you do decide to go that route, I would suggest you look into programs run by the state or by a non-profit organization and get a RM though them to cover your property tax and upkeep expenses and that's it. Keep the monthly amount you pull out of your home equity to an absolute minimum. Because there are limits to the amount you can "owe" on a reverse mortgage. If you live another 20 years and you hit that limit before you pass away, you're going to be in a pickle. Hope this helps!! Let me know if I can explain any of my thoughts further!
@@PracticalPersonalFinance I don't pay property taxes on the current market value of my house. They are quite low, actually, thanks to Proposition 13 (grandfathered in since 1978!). I pay about two grand a year, which is not bad at all. Does this affect what you wrote above?
@@MrSuperbatone I believe you have a great opportunity here. Instead if listening to blowhards here who all have opinions that you may or may not care for….do the sane thing and look up a reverse mortgage professional and spend an hour. They will not Force you to take out a loan. Its about education…I think you will be pleasantly surprised at what you learn.
I bought a home in 2011 and 10 years later got a heloc after the mortgage was paid off. Sold the house for more than double what I paid and got a nice place up near the lake for less than 1/2 what I paid origionally for the 1st home! My profit allows me to go fishing and work around the new place and I'm never going back to live in the big town! Buy low, sell high, and work as hard as you can while you can. The reverse mortgage scenario could help but do the math on how much it's going to cost you in the long run. And those companies expecting YOU to have mortgage insurance that YOU pay and they benefit from should be illegal. If THEY want protection THEY should realize that cost.
I need help where ar3 you located? I own my home.
Owning a home paid off without intending to will it? What's wrong with the monthly payments if you plan to stay in the house for life?
Nothing’s wrong with it at all! In fact, in some situations I think it’s a good idea. But you never know how long you’ll live for. If the equity runs out and you can’t manage to pay the property taxes or keep the home in “good condition” then you might have a problem on your hands!
@@PracticalPersonalFinance then they can sell the home at that time. The equity is not going to "run out". The guidelines are such that no one can borrow more than the life expectancy of the youngest borrower and current rates of the day. The PLF factors change with the market conditions so you confuse me!
@@PracticalPersonalFinance As a real estate investors and professional for over two decades, I would advise anyone to buy at a good location where the property value will continue to rise so you don't have to worry about running out of equity. Buy in Florida!
My SSDI check barely covers my condo fee. I don’t want to have to move out just because $1000 a month income is not enough.
You can't afford to live there buddy
As a father and provider and a home owner with a ton of equity I don’t think giving my child’s inheritance away for myself is a good thing. You can equate how it is supposed to be for you.
That works for you. But lots of people don't have kids.
Seems to be the kids who hate hecm's (reverse mortgage) because their parents had the audacity to use the money for themselves. LOL.
What is Fannie's involvement with Reverse Mortgages? Do they just service the loans and sell them to investors? similar to regular Mortgages (MBS)?
A HECM Reverse (Vast majority of them on the market) are an FHA Product, ie by HUD
Neither Fannie nor Freddie currently offer reverse, only FHA (an a few private holders), as Emmett notes. :)
Fantastic video! As a mortgage broker for last 20 years, I 100% agree with Nathan. Reverse Mortgage is just anothr tool. When it introduced to the market back in a day, I was 100% against its principals. There are good stories and bad stories on the subject. Yet after all said and done, I do not do it unless I have no other choice. You are very right, its best to let go of that house and downsize with the proceed.
I too am a mortgage broker and I can say that some of the things he said in the video were false or misleading.
Downsizing isn't always possible or desirable. Not everybody has greedy dependents who want to maximise their inheritance either.
Can we add "credit life" insurance? This means that the reverse mortgage balance can be paid off by the "credit life" insurance upon death of the home owner.
Great presentation and good information. The bottom line is, where there is profit there will be predators, so the more information out there the better. (This message was composed with Snark Filter(TM) engaged, so sarcastic comments about grumpy old folks dismissing the message due to the age of the messenger have been suppressed)
Thank you for watching Jack! My hope is to educate people so they can make an informed decision based on their situation.
Predators, you clearly don’t understand the benefits of reverse mortgage and neither does Andrew. It’s proven over and over that you will have more lasting funds for retirement. It’s also tax free income. If used properly you can be kept in a lower tax bracket. Andrew also neglect to mention that if you own your home free and clear you still need to be paying your own taxes and insurance. If you forget to pay your taxes the county will foreclose on your home. So it doesn’t matter whether you owe on your home with a reverse mortgage or own it free and clear. You still need to be paying your tax and your home will be taken if you don’t pay them. And again predators? A good loan officer that does Reverse only usually cares deeply about the seniors and does what’s best for them. Not saying that there’s not a few greedy ones out there. Every industry has a few people that should not be selling what they’re selling.
@@soreniaskinwellness5720 Thanks for agreeing with me, even if you din't have time to actually read my post. 👍
Of course I disagree with everything you said, you seem to be a novice at financial planning.. You are taking a very valuable tool out of the hands of those that can better themselves greatly thru the use of this type of instrument, and that's a bad thing.
. when i listen to the chip reverse mortgage commercial it sounds like gifting my property to the mortgage company . i don't trust it .
Magnum would never sell out!!!!
You cannot lose your house. If the interests go higher than the value of the house you cant lose your house. Thats when HECM puts a stop and pays a certain amount so you will not lose your house. This is a Goverment funding reverse mortgage. You have built up your credit. Reverse mortgage is good as long as you live in your house pay your taxes and home insurance. 😊
How much will I eventually have to pay back, at the end of five year of not making payments (including all the upfront fees), with a $400,000 reverse mortgage compared to taking out a regular $400,000 mortgage on my house.
How much one cost over the other is not ever mentioned. All we hear is, here’s a bunch of money to spend now and worry about paying it back someday. No mention of what your total out of pocket amount will be?