Warning to Boomers (and kids of boomers)..Reverse mortgages

[SoCalDem]

You might want to talk to your elderly parents BEFORE they sign up for one of these..

It's no "co-inkee-dink" that these things are being advertised as much as they are these days.. There are lots of people sitting on large amounts of equity in paid-for or nearly paid-for homes. Banks will convince the oldsters that this is a wonderful way to supplement their incomes as they age, and avoid "asking their children for help"..

You might want to help them, because that home is probably their largest asset, and does anyone think that a bank or mortgage company will think twice about tossing them out on the street if the happen to "outlive their equity"?

Most parents want to leave their home to their child(ren), and these reverse mortgages will make that all but impossible.

If Mom & Dad are lacking a few hundred bucks a month, it might be in everyone's best interest to give them the money, so their home does not get taken from them a few years down the road..

Another option might be to see a lawyer, and find out if YOU could buy their home from them, while they are still healthy, and let them "rent" it from you.. That would protect them in case one of them suddenly needs a nursing home (that will make them sign away their home).. If the home is the only real asset, NOT having it in their names could be the best asset...

We all think our parents will live forever, but it can all come undone quickly, and an asset that your parents have protected for years, can be gone in a heartbeat.

[radwriter0555]

1. Reverse mortgages are a TOTAL scam and should be avoided

at all costs.

[SoCalDem]

2. And... there are millions of 70-somethings who are struggling

to pay their bills...they are also probably ashamed to ask their kids for help.. Hell..they probably have been HELPING those kids for decades:)

[ewagner]

3. I agree

I used to sell mortgages and I wouldn't touch one of these with a ten foot poll.

[ComerPerro]

4. I'm not exactly familiar with them

[SoCalDem]

6. Banks/mortgage companies will PAY the homeowners

monthly...until the prescribed equity percentage runs out.. They are betting that the homeowner will die before the equity is "used up",.then the home is sold to satisfy the "equity loaned".. But at $900-$1000 a month, that equity goes away FAST...

[ovidsen]

5. It's legal theft by deception.

Nothing more.

[flamin lib]

7. There are a number of mechanisms

There are a number of mechanisms to purchase the property and allow them to live in it for the rest of their lives. See a Realtor or an attorney who specializes in Real Estate.

Reverse Mortgages are not necessarily evil. They are a method of using the equity in a paid for property to meet end of life needs without disposing of the asset. It does place a burden on the estate which is something to be seriously considered.

[SoCalDem]

10. If you have no "next of kin", it makes sense, BUT

if you plan to leave it to your heirs, watch out.. These slick solicitors prey on elderly people who are lonely and often like to talk to snake oil salesmen who flatter them and trick them into things they never intended.. After Mom or Dad signs the contract it's too late..

If Mom's coming up $500 short a month and has a few kids, it would make sense to each give her $250 a month, than to possibly have to add onto their houses to accomodate her, when she outlives her "new" mortgage:(

[flamin lib]

13. Of course you are right, it is always better to handle this sort of

thing inside the family. We did that for our parents.

As I said there will be a burden placed on the estate and that must be understood and considered.

Reverse Mortgages are only one tool to use at end of life. There are no "best" solutions or one-size-fits-all fixes. Know all of the options and understand the ramifications of each.

[Lex]

8. A reverse mortgage is working very well for my SO's grandfather.

He has a ton of equity in his home and it not likely to outlive the equity is receiving from the house.

He has social security and supplements it each month with a small draw off the equity in house. He was adamant that he did NOT want his kids to pay him any money and he preferred to just use the equity in his home over time.

Realistically, by the time he has drawn out all the equity in the house, he will either need to be in care facility or living with one of his grown kids anyway. (He'll be well into his 90's by then.) He could qualify for a medicaid paid facility by that time because he won't have the large asset of his home to have to liquidate first.

[pie]

9. I love this: "co-inkee-dink"

Good advice.

[salin]

11. they rather remind me of an insurance program er scam

a number of years ago that preyed upon folks with AIDS. If I recall you could cash out your life insurance policy in an annuity (get money now)... and the bet was that the policy owners would die before the $ was all paid out. Really goulish speculative markets out there. I haven't heard of these policies in years - perhaps they were banned?

[SoCalDem]

12. AIDS patients got better drugs, and started to live longer

That's probably why they are not as prevalent now:)

[flamin lib]

14. The practice of cashing out the death benefit of life insurance

before death is alive and well.

Again, it is only one of many options for end of life financing. It can be done with virtually any life insurance policy. Negotiate a slightly lower benefit to have the cash immediately for medical and other treatments to improve quality of life in the last months.

Never dismiss an option out of hand. Know what is available and understand what the ramifications of each are. Consult attorneys or other experts in the field. If you hire one of these professionals, their allegiance is solely to you. A few hundred $$ will be the best money you ever spend.

[DFWdem]

15. More info on reverse mortgages here

Pretty informative article. Lays out some of the pros & cons of these financial instruments.

http://www.usnews.com/usnews/biztech/articles/050613/13reverse.htm