I read an article today about how a senior has to move out of his house because he had his name taken off the title so he and his other half could get more money from their reverse mortgage and now his other half has expired.
I saw a TV news story about a senior woman that's moving out of her home and getting nothing from the sale of her home as she did a reverse mortgage and then invested the money in something that lead her to lose the money and now she has no equity left.
both of these scenarios are due to poor advice not particular to the reverse mortgage being a good or bad financial tool.
let's rap about the 1st situation, never ever let somebody talk you into taking you off the title to your property! Even if you are not doing a reverse mortgage adding or removing folk on your property title is not something that you should do on a whim. A reverse mortgage is intended to give the folks that are on title that are over age 62 access to the equity in their property with no need to pay it back till they move sell or die. If you're not on title and live with somebody which has a reverse mortgage you'll have one year from the date of their death to refinance, sell or payoff the reverse mortgage. If you do nothing the lender will foreclose and sell the house anyhow.
My neighbor approached me to do a reverse mortgage for him, he's 66 but his other half is 58, I told him not to do it. He could get an interest only loan till his other half is 62 and then do the reverse mortgage, but to take his better half off title to do a Home Equity Conversion Mortgage would put his wife that i have known for over twenty years in danger of losing their home if he died, BTW he had just had a 4 way bypass!
if you're about to lose your house anyway as you can't afford your current mortgage payments, then the chance may make sense. Or if you can buy enough life assurance to repay the debt when you die so your partner can continue to live there that would be another option. Aside from those two scenarios you should be really wary about removing a spouse from title to get a HECM.
Situation number two where the senior is moving out of her home because she is able to no longer take of herself is a question of bad advice on two sides.
First, never borrow money on your home to invest in the stock market or other dangerous investments. Even taking the cash and putting it into a deposit account might be damaging due to the fact that the interest you earn is probably going to be lower than the interest on the loan, even though you are not paying it. Who ever advised her to take all the cash and invest it, if that is what she did, was providing terribly poor advice.
The second bit of poor counsel is from the family moving her into their home, I saw the home it was very nice and the family might have moved somebody in to live with her for a few years. Even if the relations rented out their home while they lived with Mom that would make more sense than just moving Mom in with you and walking away from her home.
I suspect both of these scenarios might have been evaded if the borrower would have sought out a finance Planner or a Loan Officer which has more experience than just offering loans. Ask more questions about what the end of this loan looks like and try to find somebody which has written more than a few
reverse mortgages.
Like all financial tools, the reverse mortgage has bad and good aspects. Nobody product is right for everybody and every monetary vehicle has a down side, ask your Loan Officer what that disadvantage is and if they fail to give you what the downside could be, they do not have your best interests at heart.
.
