If you are an elderly person and you have a paid off home but feel you need supplemental income, you may as well sell your home, downsize, and then use those funds to invest in some kind of active stock portfolio/mutual funds.
that only makes sense if your home is massively overbuilt for your current needs AND if the closing costs of two transactions (first selling, then buying), is not significant ... which for most seniors needing the income from a reverse mortgage is unlikely
otherwise, those transaction costs will eat into the gains of downsizing. and that is before the pain and expense of moving into a new, smaller home
if your desire in retirement is to reside in a tiny home, then consider the above advice. if not, such advice is only worth what you paid for it
At least then your money has a chance of growing and you can either draw money out of it or be paid dividends.
now compare that with the retiree staying in their paid-for home, and realizing about 80% of its value in cash. paying NO mortgage on said large income. that (estimated - depends on age) 80% of the home value will likely exceed what one would realize from downsizing. and those funds can then be invested, in a way suggested above, or in a more prudent fashion
And for those of you who balk at the idea of selling the house you have made your home and probably spent upwards of twenty to thirty years paying off, the reason I say "may as well" is because the way so many reverse mortgages work, you will end up losing it anyway, even if you are still alive and residing in the home.
absolutely bull****. but prove me wrong with data supporting your allegation. i will speak to why below
Speaking solely from my experience as a California bankruptcy lawyer, and though I am generally loath to do this, I would issue the blanket advice of never getting a reverse mortgage.
there are instances when a reverse mortgage makes little sense, but for a homeowner who needs a greater income than what is available from present social security, and possibly retirement/savings, a reverse mortgage probably makes a lot of sense. remain in your home at no cost and realize about 80% of its value in cash, WITHOUT HAVING TO PAY THAT INCOME BACK. where else can one realize 80% of the value of a home in cash and never have to repay those monies
Not unless your life literally depends on it.
i would revise that to say if continuing your present LIFESTYLE depends on it, then a reverse mortgage is often the best option available to the senior homeowner
Because here in California, if you fail to maintain homeowners insurance or if you fail to maintain your property taxes, you will instantly be in default and the reverse mortgage lender can move to foreclose upon the property.
i would have thought an attorney would recognize that any mortgagor would be obligated by the mortgagee to maintain insurance on the collateral securing the loan. why would the senior home owner, likely beyond the age to resume a career, not want to be insured against the loss of their residence. and as to unpaid ad valorem taxes, the tax collector will foreclose for nonpayment just as would a lender. the point being, the potential fears addressed by this "bankruptcy lawyer" are illegitimate since those taxes and insurance obligations would be borne by any rational homeowner. but significantly, the senior homeowner who has realized 80% of the value in cash on the home they are still living in, will certainly have the means to pay both taxes and insurance premiums from said reverse mortgage windfall
That is to say nothing of other vagaries of other state's reverse mortgage lenders who may be even more rapacious and predatory.
the licensing restrictions on reverse mortgage brokers are more rigid than those brokers who write conventional mortgages. possibly causing them to be more skilled, on average. and no rational person would close a mortgage, even a reverse mortgage, without the advice of counsel. in my state that counsel's signature is required at closing, as is the mortgagee's execution showing that they have been fully informed about the unique aspects of the closing reverse mortgage
The only way to win a bargain with the Devil is to not sign your soul away. The only way to profit from a reverse mortgage is to never take one out against your home.
again, bull****
if a senior homeowner is being strained financially due to the reduced income of retirement, the reverse mortgage is likely going to prove a very adequate solution to their problem
the persons who have something to lose from reverse mortgages are the heirs. that reverse mortgage provides the value of the home to the seniors to spend on themselves, thereby depriving the heirs of that home equity upon the demise of the seniors residing in that home
