I need some advice on a reverse mortage
My wife is 72 and thinking about a reverse mortgage on the house to pay off our traditional mortgage and leave us with a nice chunk of money and no house payment, just insurance and taxes, which wold no be a problem. However I have read that since I am younger than her, (I'll be 60 next monthO) that if she passes away I 'll get to stay here for the rest of my life, but since I'm not on the title I wouldn't have access to the money if we use the line of credit option at the bank after to passes away. And that's a big chunk of money I could really use!
However we do have the option of taking it in a lump sum. If we do that then Joan would put it in the bank in a savings account and some secure government bonds. We are not looking to make a lot of interest or invest in the stock market in anyway. At our age it's just most important that it's in government protected accounts or bonds. But I was wonder if she put it in a lump sum in the bank and she passes away, then it seems to me that all of her bank account money and the house would become mine under community property. I already know that under a reverse mortgage, even if it's only in her name, I still get to stay at the house until I move or die.
The reason I am not on the title is because I owe about 5 more years of back child support that is coming automatically out of my disability check (They take half) and if the Friend of the Court found out they could put a lean on the house. Now that's not likely since I am paying the support every month and that's enough to make them happy and the lean would only do them good an after I die and they would have first chance to pick the bones after the house gets sold by our kids.
As for our heirs, we don't care. We are leaving them the contents of the house and if they can sell the house it at a good enough price to pay off the revers mortgage, more power to them. In our will it's only going to be about what if something happens to Joan and I and our kids can all fight each other in court for what's there, though were going to donate the better pieces of art to be sold to benefit the ASPCA. If they end up with nothing of value, fine. We both have nearly zero contact with our children and it's their choice.
Anyway I was wondering if anyone here had any experience with reverse mortgages and could off some advice on what to do and what to look out for. Any help would be appreciated.
Thanks,
Randy
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Maybe I should just go ahead and put my name on the title now? Or wait until I'm 62, which is not that far off.
I have no experience with reverse mortgages, even though I was wondering about it when my mother was so seriously ill. If you get a nice chunk of money, why don't you pay off that child support, and be free of the lien? What's left could be your nest egg.
I think you need to talk to a lawyer. In all honesty, that is what I would do. They can help guide you through this process, and would know more about the risks and benefits. But JWC is right, if your wife or you, have to go to a nursing home, they can take your house to pay off the costs of the nursing home. That's between $8000-$10,000 per month.
The best of luck to you!
I'm not a proponent of reverse mortgages. I think it's a tool to prey on the geriatric demographic. There are too many variables and it increases the possibility of doing more harm than good. Below is an article I found that will give you some things to think about. I agree with Dowser - talk with a lawyer. It will be worth the fee to find out all the liabilities you and Joan could encounter with this type of mortgage.
Randy,
Horrible idea. BF is right about it not accounting for appreciation. The bulk some they give you, will make next to nothing in the bank, but your home value, in your area will keep going up. They are akin to those people who buy out life insurance policies from people with diseases.
Here is good articles for you to read that you can do without any help:
But there are other alternatives like setting up a "charitable trust" or other kinds of trusts (they are yours till you die and they get passed on).
BTW right now, if Joan passed, your estate would go into probate. You either need to be put on the deed or put in the will.
I always cringe when a well-loved celebrity comes on a television commercial promoting this scam. Shame on them !
I have to agree, Pat. I just love how they have a whole package to calm down the children, too. Hey, kids, when mom and dad go, the bank will own the house, even if they only got 50K for it when market value is 600K. Well, at least you didn't have to visit them.
Thanks for the advice on this. I think we're going to decide to wait at the very least until I am over 62 (if not sooner) and then put my name on the title, if we do it at all. Then we'll go to a HUD required meeting (before you can get most kinds of reverse mortgages the Federal government requires by law that you meet with one) with a counselor from the HUD to help see if this is best for us at the time. Right now we have no urgent need for the money as we are able to pay all of our bills out of our SS and a small pension from when Joan worked for L.A. County with no serious trouble. We were just attracted by the no more monthly mortgage payment (they sure make it sound good on TV!) and decided to look into it, but I don't think it's right for us, at least not right now. Plus Joan has more $50k (I never ask how much more (because it's really none of my business), just that she doesn't go below that amount without us both deciding on it.) in some type of government insured bank bond account with BofA from her mother's estate that we will never touch except for dire emergencies.
Trying her to get to even discuss wills is like pulling teeth though! She says I'm obsessed with death when I bring it up, but I have got to put my foot down really soon about it! And that I'll get everything anyway since this is a community property state. Maybe if I offer to pay for it?
The Friend of the court could still put a lien on the house when I go on the title, but since I will only owe about 2 1/2 years of support there is almost no chance they will.
Randy,
The best course of action is to put the house in joint name. Yes, the court could put a lien on the house if they wanted to, but you are paying off the lien from a source that will not stop at any time. This will give you access to the equity in the home, should you need it.
FYI - a reverse mortgage is a very good idea for people who have no assets or heirs. From what you have written, the house is quite valuable and you have other liquid assets. The best way, IMHO, is to access the equity through the home equity line of credit. If you both pass, you can probably get a better deal for the ASPCA, or whatever charity it is you select.
Late but my advice is don't do it. Have a will and put joint assets in a trust. try to have no debts when you legally retire and if you want to pass down non home assets to heirs, convert some IRA assets to Roth. You pay the taxes now at today's lower rate and all they earn forever more is totally tax free to you and your heirs. Also in their favor is that you don't have to start liquidating and drawing down a Roth when you turn 70.5. Your regular IRA will cause you to pay then current rate taxes on income that was tax deferred in this present environment. I'm paying my 15% rate now and will have it free of taxes in future high debt environment years. Bottom line though, stay away from current reverse mortgages!
Thanks again for all of the great advice! We're definitely not going with a reverse mortgage and I finally talked her into us getting our wills taken care of. If I go first she gets everything (which is mostly hers anyway) and if she goes first then everything comes to me. She had thought, since this is a community property state, that everything would go to me automatically, but the truth is only the house will. The money from her mothers estate would be divided with 1/3 for me and the other 2/3rds for her kids, which she doesn't want them to get anything since she and they all got equal shares of her mother's estate, so she does feel like they deserve anymore, even though two of her sons have already burned their way through the $200,000+ that they each got. And then started asking for money from her! Of course she said NO!
We are going to put my name on the house anyway, since an attorney also told us what Jonathon did, that the state of Michigan may put a lien on the house, but won't force a sale since they are getting regular payments now. Besides if she passes away first then I'll use some of the money to pay off the back child support and then I'll be collecting 3/4ths of her higher Social Security and 3/4ths of her pension and be able to keep my home. At that point I'll probably sell the house and use the equity to buy a small condo near Cabo in Mexico and I can still collect SS while living there. And if I die first, then the back child support debt is erased completely as she is not responsible for it, so it just gets cancelled out under Michigan law. When the last of the two of us pass away we have changed charities so 1/2 will go to the AIDS Foundation and 1/2 will go to the American Alzheimer's foundation, including any money from the sale of the house (or condo, as the case may be). One of her sons died of AIDS 25 years ago and her adoptive father died of Alzheimer's soon afterward and I agree they're good causes too.