Reverse Disaster

I read an article today about how a senior has to move out of his home as he had his name taken off the title so he and his wife could get more money from their reverse mortgage and now his other half has snuffed i.

I saw a TV stories story about a senior girl that is moving out of her place and getting nothing from the sale of her home as she did a reverse mortgage and then invested the money in something that forced her to lose the money and now she hasn't any equity left.

both these situations are due to poor advice not specific to the reverse mortgage being a good or bad fiscal tool.

let's chat about the 1st situation, never let somebody talk you into taking you off the title to your property! Even if you're not doing a reverse mortgage adding or deleting folks on your property title isn't something you should do on an impulse. A reverse mortgage is designed to give the folks that are on title that are over age 62 access to the equity in their property while not having to pay it back till they move sell or die. If you're not on title and live with somebody which has a reverse mortgage you'll have one year from the date of their death to refinance, sell or payoff the reverse mortgage. If you do nothing the lender will foreclose and sell the house anyhow.

My neighbor approached me to do a reverse mortgage for him, he is 66 but his other half is 58, i told him not to do it. He could get an interest only loan till his wife is 62 and then do the reverse mortgage, but to take his wife off title to do a Home Equity Conversion Mortgage would put his better half that i have known for over 20 years at risk of losing their home if he died, by the way he had just had a four way bypass!

if you're about to lose your home anyway because you can't afford your current home loan payments, then the risk may make sense. Or if you can buy enough life assurance to repay the debt when you die so your other half can continue to live there that might be another alternative. Aside from those 2 situations you should be very wary about removing a spouse from title to get a HECM.

Situation number 2 where the senior is moving out of her home because she can no longer take of herself is a question of useless advice on 2 sides.

First, never borrow money on your home to invest in the stock market or other dodgy investments. Even taking the cash and putting it into a deposit account might be damaging because of the fact the interest you earn is most likely going to be lower than the interest on the loan, even though you aren't paying it. Who ever suggested her to take all the cash and invest it, if that is what she probably did, was providing terribly poor advice.

The second bit of poor advise is from the family moving her into their home, I saw the home it was very nice and the family might have moved someone in to live with her for some years. Even if the relations hired out their home while they lived with Mom that would make more sense than just moving Mom in with you and walking away from her home.

I believe both of these situations might have been avoided if the borrower would have sought out a Financial Planner or a Loan Officer which has more experience than just offering loans. Ask more questions about what the end of this loan looks like and attempt to find someone which has written more than some reverse mortgages.

Like all financial tools, the reverse mortgage has bad and good aspects. No one product is right for everybody and every financial vehicle has a down side, ask your Loan Officer what that disadvantage is and if they fail to give you what the downside might be, they don't have your best interests at heart.
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