Reverse Mortgage?

[dyne]

Has anyone heard of actual EXPERIENCES with a reverse mortgage? I do NOT wish to hear arguements for or against a reverse mortgage. I would like to hear of experiences with using a reverse mortgage. My daughter works for a company which offers reverse mortgages and she advised that she had heard of heirs who complained that the balance due upon a reverse mortgage had to be paid out of the sales proceeds of the house and these heirs were not happy about that.

[joanmcq]

Yeah, it does, and no, the heirs may not be happy, but its the decision of the homeowner, isn't it? If they want the house, they can pony up enough to pay off the reverse mortgage.

[JohnH]

I don't understand why the heirs would be concerned. They'd expect a regular mortgage to be paid out of the sale proceeds, so why would they have a different attitude about a reverse mortgage? It's just a matter of shifting assets & liabilties, along with giving them different labels. It looks more or less like a HELOC with deferred interest. I'm trying to keep to your point not to get into the pros & cons, but isn't a reverse mortgage just a regular mortgage with a couple of bells & whistles and a higher price tag?

[dyne]

I imagine that the heirs expect the mortgage on the house to be paid off and are therefore upset that a reverse mortgage debt exists.

[JohnH]

Guess it's true that one way to really get to know someone's character is to share an inheritance with them.

[oceanlovin'ea]

not thinking

I would likely think that children (heirs) would know that their parent(s) had done a reverse mortgage on their home. Usually it is done so that the parent(s) could stay in their own home and meet their living expenses.

Would they have preferred to have to give their parent(s) several hundred or thousands of dollars each year to keep them living independently? Or would they have preferred to have them come and live with them?

Guess sometimes people would do it without discussing it with their heirs but it is common sense that if the people got the money to live on while they were alive, it would have to be paid back at some time. I think there are provisions that they don't have to pay back more than the property is worth at the death of the owners. So they wouldn't get as much money but they wouldn't have to pay out of their pocket.'

Linda

[dyne]

I prepared a newsletter regarding reverse mortgages but have never given one out since the issue is so complicated. My understanding of a reverse mortgage is that it MAY be a good idea for those taxpayers who do not have sufficient income to live comfortably and NEED additional funds. Generally these taxpayers do not have sufficient income to be required to file tax returns but come to me to make sure they are not required to file tax returns. It occurs to me perhaps I should give my Reverse Mortgage Newsletter to these people when they come to me.

[OtisMozzetti]

not much deduction for mortgage interest paid

I would like to hear of experiences with using a reverse mortgage.

You'll have to excuse me for not being around when it has happened, but it would seem to me that the reverse mortgages seldom generate much tax benefit for an itemized deduction of home mortgage interest paid.

[dyne]

It is my understanding that the interest on a reverse mortgage is only paid after the
home owner has died or sold the house so such intererest would only be deductible
on the final return of the decedent if then.

[thomtax]

You'll have to excuse me for not being around when it has happened, but it would seem to me that the reverse mortgages seldom generate much tax benefit for an itemized deduction of home mortgage interest paid.

I don't think most of these are entered into for tax benefits - They are to get enough money to live on and pay for their medicine. Many probably do not even have to file tax returns and could care less about tax benefits.

LT

[DaveO]

I have had only 1 client enter into a reverse mortgage. They had become disabled and needed the extra income. They got the money they needed but since they only have SS disability for income I don't see them anymore.

True the mortgage has to be paid back and true that the heirs my not like it. A reverse mortgage is part of my own retirement package. I have no children and would rather enjoy the money then leave it to nieces and nephews to squabble over.

[dyne]

Good point DaveO: I have encouraged my wife to consider getting a reverse mortgage after I am gone IF she needs the funds. She will likely not need the funds from a reverse mortgage but I would rather she obtain the funds than leave the house unemcumbered to my son.

[OtisMozzetti]

I don't think most of these are entered into for tax benefits

LT

Reverse mortgage probably gets no tax benefits other than maybe some deduction on decedent's final tax return. In contrast, home equity loan gets mortgage interest deduction on up to $100,000 of borrowed amount.

If so much medicine and medical bills are necessary, then the medical expense probably exceeds 7.5% AGI; and they will be able to zero out or at least reduce whatever if any income tax they would've paid without a home equity loan.

If you're going to do anything these days, you might as well better look to see whether tax advantages can offset some part of the cost of what you do.

[Burke]

But a home equity line requires payments to be made to the bank by the homeowner. A reverse mortgage means the bank is paying the homeowner. Big difference. Forget the tax advantages/disadvantages.

[OtisMozzetti]

But a home equity line requires payments to be made to the bank by the homeowner. A reverse mortgage means the bank is paying the homeowner. Big difference. Forget the tax advantages/disadvantages.

Payments on the home equity line can in essence be made out of the borrowed money, one way or another. Most home equity lines need not be drawn down all in one chunk.