Have or thinking about a Reverse Mortgage? Some thoughts for you.

[Paper Roses]

Every year at this time when I get my tax stuff in order, I get angry about one of the stipulations of the Reverse Mortgage on our house.

Background:
House paid for.
Needed new siding and chimney work.
Fell for ad about RM's.
Went to counseling about process. Proceeded to take out the mortgage because we could not afford the work otherwise.

All would have been different if our future plans had not been so abruptly and devastatingly altered.
My husband was retired and I was to retire in Oct. 2008. Our plan was to put the house on the market, buy a much smaller house and use the proceeds of the sale to pay off the RM and to live on. We would have 2 Social Security checks each month. Enough to get by and be able to do a few things we had long wanted to do.
Well, my husband died suddenly in June of '08 and 3 months after that tragedy, I was laid off. Now only one SS check and my unemployment will run out permanently soon. I will be living on next to nothing.

But, now I have the reverse Mortgage. Yes, if I use it, I will have some extra money but there are some clauses in the contract that bug the heck out of me.

1) You are not allowed to deduct the interest you pay annually on your taxes. It compounds and is added to the amount of the mortgage. It is a deduction when your estate is liquidated. It amounts to quite a bit of money each year if I could deduct it and save a little on income taxes.

2) Our town has a program where you (over 65) can defer your RE taxes until you die or your house is sold.
Would love to do that, be cheaper and I would not have to find money to pay the quarterly taxes.
Can't do it. Clause in contract. Holder may not have RE taxes deferred. Of course, you can always borrow more on your RM to pay the taxes. Nice!!

I'm sure there are other clauses with which I would have an issue. These mortgages are very costly to write, it is impossible to call the company that holds my RM mortgage. Lines are always busy, told leave message and we will call you back. Never, ever got a call back.

Both of these factors are unfair and only benefit the RM company.

I guess my advice to anyone thinking about a RM is to get good counseling and assess if it really is a good deal. I accumulate over $1000.00 a year in interest on a loan that I wish we never took. We would have taken an Equity loan to do the work if we were younger.

I now have this thing looming over me with never a hope to pay it off. Dying is the answer. Maybe I will put the house on the market soon but houses in my price range are for sale in my area in must be the hundreds, Every other house has a sign. I feel I would be better off just trying to hang on than to sell at some of the prices comparable houses here are going for.

Quandary. RM's were new when we took ours. Now you can read all about the good and bad points everywhere on line. Ask the right questions and save yourself a lot of grief.

[havocmom]

1. Gut instinct on Reverse Mortgages: If US financial institutions are pushing them...

they are bad for the consumer.

[katmondoo]

2. You have to pay closing costs

that can be high. I sent for the information and I find it scary. I am not sure I understand it totally but understand it enough to not do it. The existing mortgage has to be paid off first, therefore you need enough equity left to provide income to pay repairs,taxes etc.

[AndyA]

3. Sorry to hear about your situation. Even the best laid plans can get

messed up at times through events beyond our control.

Have you considered following through on the plans you and your late husband made? (Selling house and buying a smaller place.) I don't know if you have access to HGTV, but they have some great shows on that cable network about getting houses ready to sell.

Even though there are lots of houses for sale in your area, you can make your house stand out while spending very little money. It sounds like you have the time to do it, even though you hadn't planned on being home.

Basically, you pack away all the nick nacks and pictures, really clean stuff up, and make it look like a hotel room. (Depersonalize, no family pictures, etc., as it makes it harder for people to imagine themselves living there.) It seems houses that are "staged" in this manner are more memorable and sell faster for more money.

There are some good shows on there that will help you. A friend did this and finally sold their house after being on the market for almost a year. The tips they share really do work.

At any rate, just an idea you might want to consider.

Sending good thoughts your way that the way forward works out well for you. :hug:

[old mark]

4. I am very sorry about your situation. I wonder if it is possible to find

a lawyer who might get you out of that contract?
We were thinking about a RM, but we are doing better than we expected, so decided not to do it. The more I hear about them, the better I feel not having one.

My philosophy is that if the banks or mortgage co's really want you to do something, it is to their advantage, not yours.

I hope you can resolve this short of death.
Thank you for posting this.
mark

[Mira]

5. Possibly a really ignorant question

but your social security check ought to increase with widow's benefits. If you have not checked into it, that may help.
But the RM is never a good deal. Once they got their hands on your equity they grab it from you with the clauses and spend it like you never would.

Did someone suggest a lawyer to get out of it?

Can you rent a part of the house?

I hate it for you. Don't leave any stones unturned, there may be some money under one of them.