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15 Feb ’12
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My wifes mother is thinking of doing it, are these things scams?
19 Feb ’12
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Generally speaking, no, they're not scams. Basically, they're buying your house now, and allowing you to live in it. When you die, they own the house. Your heirs may get screwed, because as far as I know they get NOTHING. So lets say they work out that you'll get 2k a month, then 8 months in you die, then the deal is done and they got the house for 16k. Obviously the deal depends on your age and the value of the house. Not sure if they're all structured payments, or if you could get a lump sum. Also, not sure how maintenance works.
15 Feb ’12
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the way she explained it to my wife was the mortgage is based off equity, then when she passes, they sell the house, pay off the reverse mortgage with interest I assume then anything left over goes into the estate, my question is what happens if the house sells for less than what the reverse is? I assume they protect themselves by only going like 70 percent ltv. The reason she is doing it is so that there isn't another big blow up between the siblings when she passes like when my wifes father did. 2 of the kids have already called dibs on the house. Blows my mind
19 Feb ’12
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You may be right, but I would think the estate doesn't get the excess (if there is any). I would expect that's part of the risk/benefit on their part. Now of course, just like anything, there are probably good companies and bad companies.
15 Feb ’12
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yeah, not sure if that makes sense to me either
4 Mar ’12
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two words, don't do it. Okay that was three but you get the idea.
15 Feb ’12
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easytapper said
Generally speaking, no, they're not scams. Basically, they're buying your house now, and allowing you to live in it. When you die, they own the house. Your heirs may get screwed, because as far as I know they get NOTHING. So lets say they work out that you'll get 2k a month, then 8 months in you die, then the deal is done and they got the house for 16k. Obviously the deal depends on your age and the value of the house. Not sure if they're all structured payments, or if you could get a lump sum. Also, not sure how maintenance works.
Well no, they are not buying your home and when you die, they do not own your home.
There is a calculation that is based on the age of the person, the equity left in the home, and a few other considerations. You do need an "heir" to be involved. Upon death, the reverse mortgage converts back into a normal mortgage and payments must be made.
So lets say you have a home that is free and clear but its worth $100k. They might be willing to give up to $70k. That can be a lump sum or they can break it down into monthly payments, maybe of $700 a month or whatever. If you die, that heir would then begin making payments on the $70k borrowed.
You still pay taxes, insurance, and everything else you normally would.
Its not a scam and its highly watched over.
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