Reverse mortgages?

[John Baker]

John,

Put your place somewhere in the CO rockies within an hour commute of Denver, and I'd be interested in it someday.

Very nice.

That is called single wall construction. It is made from 2" thick redwood planks. I am pretty sure it was from a kit sold by Sears Roebuck back in the forties and fifties.

There is no insulation at all, except for the three inch foam sheeting installed when I put a new roof on it about ten years ago. Not good for those little hills in Colorado. I also put in central heating and air conditioning back when I did the roof. It has three bedrooms, two baths, an attached two car garage that was added on in the early sixties.

My place was built in 1954, at least that is what the official records show. However I have come across papers that show it was built around 1945. I'd also been told it was built as a whore house during the heat of the war. That kind of makes sense. The place was very isolated in those days. The oak floors were painted bright red enamel and it had another bedroom that cut the living room in half. When I bought it in 1984, it had filthy beige wall to wall carpeting.

John

 

[Obi Heed Kenobi]

John, that's a really nice looking place.

Let me emphasize it again: make 100% sure you know what you're getting into. I don't mean a general idea - I mean the specifics of the contract. A lot of these are worded in an "if X, then Y" type of way; if a specific event occurs, there will be a specific result. Make sure you know what both the X's and the Y's are. Read that contract cover-to-cover. A couple of times. Pay very close attention to phrases containing words like "accelerate" or "default" or "at lender's sole option."

I'd offer to help, but I unfortunately don't know the first thing about Cali. law - and real estate law is one of the few things left where there are significant differences between states.

 

[Anthony]

Well, it looks nice conceptually. I like the exposed would and brick. Very cozy.

 

[mikea]

Well, after having the required counseling, I'm not so sure about not doing it anymore. I think I probably am going to go ahead with it, but not with the aggressive salesman that stepped in when another company was working with me. He is the one who did all he could into try to scare me into acting right now. According to the councilor, there is no rush at all, I will still qualify whenever I want to do it.
...

I'm sure you know better, but was the councilor another one who was selling reverse mortgages or who was recommended by them?

HIRE AN INDEPENDENT LAWYER! They have lots of lawyers. Get one for yourself.

 

[John Baker]

Well, it looks nice conceptually. I like the exposed would and brick. Very cozy.

Which is why I am not to eager to move. I spent years getting the place the way I like it, it really is my home. I have a lady that comes in and cleans the place every other week, I know my neighbors, they sorta know me. By staying I would not have to deal with a whole bunch of unknowns that I would if I moved.

I will get the contract and read it through. I'm not much of a contract reader, but this time I'm going with Davids sound advise. That however raises the question. What if I do find a blurb in all that and tell them to take it out, and they refuse, what then? Is that the deal breaker?

John

 

[jesse]

That however raises the question. What if I do find a blurb in all that and tell them to take it out, and they refuse, what then? Is that the deal breaker?

Depends on if that blurb is a deal breaker for you. I'd be damn careful about this, think it through, and listen to everyone's advice above. Don't do anything without a lawyer to fully explain the consequences of what you're signing.

 

[Anthony]

What if I do find a blurb in all that and tell them to take it out, and they refuse, what then? Is that the deal breaker?

Spend the money and get some legal advice from a person that knows these deals. Determine your personal needs, and discuss your "walk away points" with that individual. Determine which of these points are ones you'd walk away and make a deal breaker.

Depending on the lender, they may be willing to modify certain language. Their agreement will be VERY one sided to THEIR benefit. If there are points you need modified, don't just rollover, tell them you are willing to go elsewhere. You are in control here, they want YOUR business.

 

[Tom-D]

Spend the money and get some legal advice from a person that knows these deals. Determine your personal needs, and discuss your "walk away points" with that individual. Determine which of these points are ones you'd walk away and make a deal breaker.

Depending on the lender, they may be willing to modify certain language. Their agreement will be VERY one sided to THEIR benefit. If there are points you need modified, don't just rollover, tell them you are willing to go elsewhere. You are in control here, they want YOUR HOUSE .

Fixed that for ya..

 

[TripleZ]

Get the Lawyer. He will be the ONLY person on your side during the negotiation. The counselor is on the banks side (without the reverse mortgage counseling requirement, they'd have no job). The bank or mortgage rep is ONLY in it for HIS PAYCHECK. Don't think for a second he's on your side or making a good deal for you. If it wasn't a slam dunk for the bank and him.....he wouldn't be selling it to you.

Get a lawyer, best $300 you'll spend.

And if you don't like the contract, walk away. A good bank will modify the contract.... a scuzzy one will pressure you with phrases like "last chance", "best option / deal", "Im not making money on this one".

Think of it as buying a used car......except 100 times the price.

 

[John Baker]

I have an appointment with a lawyer on Monday at 11:00 am. I have the contract in my hand and will read it thoroughly between now and then.

John

 

[flyersfan31]

John.

Don't do it.

You clearly have NO idea what you are getting into.

If they can't explain it to you like you are a kindergartner (Denzel Washington used that line in a movie, i can't remember which) then you don't want to do it.

You are fine as is.

You can sell it in a normal process, rent somewhere, or just stay as is.

Don't do it. Again. If you don't understand, DON'T DO IT!!!!!!!!!!!

 

[Anymouse]

How much money will you get on the reverse mortgage (over time) versus what you would get at today's market. If the difference is negligible, consider just selling outright rather than doing the reverse mortgage.

Either way, the house will no longer be yours, but if you sell it, you have all the money at once. You can invest that money and potentially live off the dividends. Or you can simply do withdrawals equivalent to what the bank would have given you.

 

[Lawreston]

I'm sure you know better, but was the councilor another one who was selling reverse mortgages or who was recommended by them?

Why would you listen to any advice from a councilor(member of a council) who may not know crap about reverse mortgages? Better to talk with a counselor who is equipped to counsel re matters specific to your concern. Talk to an expert, not a committee member.

HR

 

[mikea]

Why would you listen to any advice from a councilor(member of a council) who may not know crap about reverse mortgages? Better to talk with a counselor who is equipped to counsel re matters specific to your concern. Talk to an expert, not a committee member.

HR

Because she's nice to look at.

 

[John Baker]

Here is my thinking. I will get out of having to pay $2,090.00 house payments. I will get up front, from 20,000.00 to 50,000.00 dollars depending on what it appraises at.

I will be 69 in just a couple of weeks. My chances of living to 80 are slim to none, although I am in great health now. I have a chronic pulmonary condition that will deteriorate with time, but is fine now. My older sister just died from it at 74. Even if I make it to 85, it is still only 15 years away.

I have lived in my house for 27 years. It is comfortable, warm in winter, cool in summer. My neighbors for the most part are quiet and pleasant.

Moving to a smaller, lower priced home, with noisy or quarreling neighbors, which would be a real possibility, is not how I want to live out whatever years I have left.

I, if I wasn't so fond of flying, could actually live off my social security if need be. So I would not even have to work, if I didn't want to.

If I choose to keep working, I could build up a decent nest egg by just letting my SS accumulate in my bank account.

I have worked continuously for over 45 years. During that time, I have had a total of three weeks off. That's right, just three one week vacations in 45 years. I'm tired, I want to quit worrying about other people and their problems.

That is the basis of my thinking.

John

 

[n20junkie]

I am paying on a modest house, in a wonderful neighborhood.


I was raised under the mindset that we car for the things we own. This house will be maintained. It will be given to my children. I believe that in the future, not many people will be able to do this. But for me, i think that giving the gift of a home, is more than a college education will ever provide. Its giving the single biggest purchase of a persons life to the next generation.

No one can sell me on reverse mortgages for me.

 

[John Baker]

I am paying on a modest house, in a wonderful neighborhood.


I was raised under the mindset that we car for the things we own. This house will be maintained. It will be given to my children. I believe that in the future, not many people will be able to do this. But for me, i think that giving the gift of a home, is more than a college education will ever provide. Its giving the single biggest purchase of a persons life to the next generation.

No one can sell me on reverse mortgages for me.

If I had a family, I would feel the same way.

John

 

[skidoo]

John,

One thing to keep in mind is that you may not fully get out of your $2090 payment, unless that amounts is just for P&I. You may still have to pay for taxes and insurance. For example, if your taxes are 7000 per year, that would still be $583 per month. Then, say if your insurance was $1000 per year, that would be another $83 per month, for a total of $666 per month. So, if you live 15 years, that $2090 that would have been worth $376,200 (2090*12*15) has been reduced to being worth $256,320 (1424*12*15). Now, this doesn't take into account tax implications, inflation, or deflation. The point is the devil is in the details. It may or may not meet your needs. Look over the details thoroughly.

 

[skidoo]

Another thing to consider. What happens in say a few years or more and the house needs some major maintenance such as a roof or plumbing. When one realizes that the home is not really yours any more, where is the incentive to keep it maintained. In other words, when one makes repairs or other maintenance, one usually expects to improve or retain the home's value. But, on a reverse mortgage deal, I don't see that incentive, so your living space may degrade along with your health. I think there are a lot of unknown, or unintended consequences of these type of deals that won't show for years to come, but they will...

 

[weilke]

John, you seem a bit young to consider this. A more typical situation where this is beneficial is for someone who has 10-15 years on you, burned through his retirement fund and has mounting medical expenses. The RM is similar to the deals where you can sell your life insurance policy. The older you are, the more money you get up front.

You would basically pay someone a sizeable commission to permanently value your house at the currently depressed market price. If you live another 10 years what you receive now will look paltry and you won't be in a financial position to just pay off the RM to get control over your property.

Btw. there is something else that may be interesting for you (and not so much for the bank :wink2: ). There is now a way to use a reverse mortgage to purchase a smaller home ('hecm for purchase'). You take out the RM on the new home, move into the new home and sell the current one at whatever price you can get. In the end, you are in the new (cheaper) home without a monthly mortgage payment and you liberate the equity in your current home to do whatever you please with it. Of course, as you are still in a situation with a negatively amortizing loan, the size of the loan will keep growing until the new house is owned by the bank. Unless you have enough cash sitting around to pay your share of the new home, you may have to borrow further against your current residence (e.g. through a refi) to have enough liquid assets to do this (dont ask your current aluminum siding salesmen for this, it's not a quick buck for them so they are not going to recommend it).

Did someone mention that you should get an attorney familiar with elder-law and real estate law to go over any scrap of paper put before you before you sign it ? If the credit counselor was someone recommended by either of the mortgage salesmen, he is in on the proceeds of the transaction. The fees for credit counseling are not that high, consider getting a second counseling session with someone you get referred to through someone like a senior services organization.

 

[John Baker]

You can not get a reverse mortgage unless you have equity in the property. My taxes are $2,200.00 per year, so that works out to 183.00 per month. My insurance is around a thousand dollars a year, I don't have that number in front of me right now, I think it is more like $800.00 per year, anyway, another $85.00 per month.

Telephone and utilities average around $300.00 per month. Medicine is about $200.00 per month with my insurance. That works out to be $768.00 per month. My SS is $1,723. per month. That leaves me a remainder of $955.00 per month for groceries, mo gas for my jeep, but no money for an airplane.

The FAA has been asking for complete pulmonary workups every year, this year I had to do an MRI and some sort of imaging thing with my heart. I have passed everything looking pretty darn good. They also want some sort of overnight monitoring test done this year as well, I'm still waiting on that one, to make sure I breath when I'm asleep.

I hardly ever fly my airplane when I'm sound asleep. There is a reason for that. I would have to drive my car all the way out to the airport, pre-flight my plane, go through the start up check list, holler clear, start my engine, and so on, all without waking up. I don't think I could do that.

Anyway, the year will arrive when they say nope, we ain't gonna let you fly no more.

In the meantime, I am still working, so I can afford my airplane for now.

Also, my SS is going up another sixty dollars in January, I can go out to dinner, or buy some 100LL.

John

 

[weilke]

You can not get a reverse mortgage unless you have equity in the property. My taxes are $2,200.00 per year, so that works out to 183.00 per month. My insurance is around a thousand dollars a year, I don't have that number in front of me right now, I think it is more like $800.00 per year, anyway, another $85.00 per month.

You are doing great on your RE taxes, the only thing not expensive in Cali it seems.

 

[John Baker]

I forgot about repairs to the property. Your right, I doubt if I would feel like a homeowner anymore. That part is bugging me. The contract does clearly stipulate that I must maintain my home, so I guess I would maintain it.

I will definitely have to have a savings pool for emergencies. I've always had a savings account for such things, although I understand most people have a charge card for emergencies. I don't have any charge cards.

John

 

[mikea]

...
The FAA has been asking for complete pulmonary workups every year, this year I had to do an MRI and some sort of imaging thing with my heart. I have passed everything looking pretty darn good. They also want some sort of overnight monitoring test done this year as well, I'm still waiting on that one, to make sure I breath when I'm asleep.

I hardly ever fly my airplane when I'm sound asleep. There is a reason for that. I would have to drive my car all the way out to the airport, pre-flight my plane, go through the start up check list, holler clear, start my engine, and so on, all without waking up. I don't think I could do that.
...

It's not so much they're worried about you flying in your sleep. They're worried about about falling asleep while you're flying. A sleep study is no big deal, except you have cameras and lotsa wires on you while you're trying to sleep in a strange bed.

I hate the MRI lots more because I'm big and get claustrophobic. I'm not strong enough to smash out of all of that iron.

 

[denverpilot]

My respectful thoughts John from a much younger guy...

If you can knock out 45 years of work, two months isn't long at all.

Put off these jackals for at least that long and talk with an Estate/Probate attorney who specializes in real-estate. Also talk to a professional financial advisor. Listen to what they have to say and tell them you're open to options.

They do this stuff all the time for tons of clients every year. They'll have networks of other pros they can refer you to if they smell anything fishy with either of the two RM companies.

Making the RM companies wait a couple of months puts you back in the driver's seat negotiation-wise too. Alter the terms. Just like a used-car deal at a dealership, make the front line guys have to get approval from a real decision-maker and a better deal. Until you make them squirm that their margins are too tight, you're leaving money on the table. Twist that screw then back it off to make the deal a win-win for both sides. Otherwise I feel that they're offering you a they-win you-lose as their initial offer because they know you want cash flow. Also like a car deal, be prepared to walk away. Fully committed to it in fact, until they meet your price (or one you can live with).

Two months. And hard work crunching numbers, getting some retirement planning networking going, and resetting who owns the asset and who's in charge to these sales guys. The deal isn't going away. Make 'em sweat a little. You've earned it.

 

[skidoo]

snip.. The contract does clearly stipulate that I must maintain my home, so I guess I would maintain it.

snip...

John

I can see it now. The RM company sends you a notice that someone will be there on such and such date to "inspect" your home to ensure compliance. They make a list of repairs that you must make and pay for. How does one feel then? Certainly not like a homeowner. As a homeowner, I get to tell such person to go pound sand. How often may they want such an inspection? How do you resolve any such dispute as to weather something needs repair or not?

What happens when inflation takes hold and everything costs twice as much as they did just a few years before, the value of your home has risen, maybe not twice, but say 50%. The value of your SS is essentially halved, etc... What happened to the equity you had? All gone? Will you be able to sell at the higher value and pay back all the mortgages? Or, will you be stuck there for life?

 

[John Baker]

I have a meet with an attorney on Monday at 11:00 am.

John

 

[weilke]

I can see it now. The RM company sends you a notice that someone will be there on such and such date to "inspect" your home to ensure compliance. They make a list of repairs that you must make and pay for. How does one feel then? Certainly not like a homeowner. As a homeowner, I get to tell such person to go pound sand. How often may they want such an inspection? How do you resolve any such dispute as to weather something needs repair or not?

If you carry homeowners insurance (and most people with a conventional mortgage will), you can still get those love-letters from your insurance company. Trees hanging over the roof, water drainage issues etc. The difference is that I can switch carriers and tell them to pound sand, if they own your home it is more difficult.

 

[weilke]

I have a meet with an attorney on Monday at 11:00 am.

I assume that you got this atty based on recommendations not affiliated with the RM sales system in any way.

 

[John Baker]

I assume that you got this atty based on recommendations not affiliated with the RM sales system in any way.

No she is not affiliated in any way whatsoever. She runs a family practice here in my neighborhood. She has done work for me for years, including setting up my trust. She is up on geriatric law and reverse mortgages. I will pay $300.00 for this counseling. See http://www.virginiaweber.com/

John

 

[John Baker]

I'm also going to print out this thread and give it to her along with the contract, if that is OK with you guys.

John

 

[weilke]

No she is not affiliated in any way whatsoever. She runs a family practice here in my neighborhood. She has done work for me for years, including setting up my trust. She is up on geriatric law and reverse mortgages. I will pay $300.00 for this counseling. See http://www.virginiaweber.com/

John

Best $300 you'll ever invest.