My mom is 74 and is behind on her mortgage due to cancer. She is concidering a reverse mortgage.?
Thursday, September 9th, 2010 at
1:52 am
She has approx 40% equity..is this a good idea?
Filed under: Retirement Planning
Like this post? Subscribe to my RSS feed and get loads more!
I am sorry for your Mum’s situation, that is really hard to deal with. May I suggest that she first talk to her lenders and see if they can offer her any help? Once they know of her situation, they might be willing to be flexible. Also, can her family members help her out for a while? I know that’s not always possible, but it is worth a thought.
Best to your Mum. Please look at all other avenues first before a reverse mortgage, as the equity isn’t very high.
No. No. No. Help her sell…..with 40% equity she has lots of wiggle room for a sales price…..help her find more appropriate housing that she could pay for outright…
reverse mortgages are never a good idea….it’s like payday loans…..just cuz it’s legal doesn’t mean anybody should EVER EVER do it!!!!
Research carefully. If she dies after getting only one check her heirs could be screwed out of the balance of the equity.
Every situation is different and your mother might be a good candidate for a reverse mortgage, but you (and she) should know all the facts first. First of all, closing costs on a reverse mortgage are quite high, so that will be deducted from the money that might come to your mother or from the equity. For example, say her house is worth $100,000 and she has $40,000 in equity. The closing costs could run as much as $5-6,000 which means her equity would be reduced by that much as those closing costs would probably be built into the loan – if she can’t afford her mortgage payments, she certainly can’t afford to pay those closing costs out of pocket. Find a loan officer that knows the ins and outs of reverse mortgages. Have that person explain everything in detail to you and your mother and make sure you understand what might happen in case of her death. With your mother’s health in the condition it is in, it might be a big relief to her to not have the mortgage payments to make especially if she wants to remain in her home.
There is some good information on the AARP site: http://www.aarp.org/money/revmort/
But the absolute best way is to sit down with someone who knows all about these mortgages and make an educated decision about it. Do it soon, or your mother’s credit rating might prohibit her from doing so. Also, call the bank that your mother has her mortgage with now and make sure they understand what is going on so you can get through this process without her getting foreclosed on.
Reverse mortgages aren’t all they are cracked up to be but neither are they horrendous. They can certainly be useful in many situations. Only you and your mother can make this decision.
I agree with the other posters.
Want to add one thing. A reverse mortgage can NOT be obtained unless the property is fully paid for. Having a mortgage on the property would disqualify your Mom.
Sorry to hear about your mother. yes we are all correct; sell the house and get her into hospice, as they will pay for everything (if she is that bad). If not, get her into assisted living as the monies from the house should cover that.
Good luck.