Is a Reverse Mortgage safe?
- shipwreckLv 71 decade agoBest Answer
It might prevent you from ever moving again and will cost your heirs a lot of what you might have wanted to leave them.
Say you took one at 62 the minimum age thinking you would be in that house forever. At 75 you might decide to move closer to the children but now owe half the value of your house on a mortgage. If you sell to move you will not be able to buy a new home and get much less to help pay the rent.
My mom just moved at 82 after 35 years in her old house. She is now renting from my brother and was able to sell on a contract because she didn't have a mortgage. She will be getting 1,250 a month for the next 30 years. If she would have taken a reverse mortgage at 80 not knowing she might decide to move she would have had to pay out the 15K or so in reverse mortgage cost plus the amount she borrowed and interest. This could have been 30K or more she would have had to pay to be able to sell. If she didn't have the money she wouldn't have been able to sell on contract so would have had to get the buyer to get a mortgage. The buyer already has mortgages on his house and his rental house and just wanted it as another rental. This was better for everyone she has a guaranteed income and her grandson in law got another rental house without qualifying.
- Anonymous1 decade ago
These are incredibly expensive. I've yet to see one that was a good deal for the homeowner.
Let's say you have $200,000 in equity. If I came to your door and said I'll pay you $100,000. Would you accept my offer?
In a sense that's what the reverse mortgage does. They loan you $100,000, but the loan grows over time. You have to spend money keeping the property up, paying the taxes and insurance. Then when you move (most likely) or die, you have to pay off the loan. By then, it's sitting at $200,000 and there't no additional money to be had by you or your heirs.
- kemperkLv 71 decade ago
loans are not unsafe; if the money is used to support a person's life-style, they are great.
All loans cost more than the cash to the borrower; when we
borrow to buy a $200 house, we are paying x percent more than that
in interest; from 50% more to 300% more. that is neither
good nor bad. ONE can cut the amount of interest paid by
prepaying the principle.
I suggest to all property owners who are retired, to take out
a reverse annuity. It is free money to them. Otherwise,
they will just be giving the home's value away free to their
heirs.Source(s): RE broker
- Ed AtunLv 71 decade ago
They are safe. They are ridiculously expensive..