Disadvantages Of A Reverse Mortgage
I could also use a layman’s definition. My grandparents are 77 and 75. They have a fixed retirement income from government pension. They have a house worth about 130k and owe about 90k on it. They have trouble finding by. Please give suggestions.
Answer by SDD
See http://seniorliving.about.com/od/housingoptions/a/reversemortgage.htm
Answer by jack of all trades
The laws differ from state to state. An benefit is, as lengthy as your grandparents are alive, they can live in their home and get some additional monthly income. However, the mortgage organization will demand that the property meet all existing developing codes. That may possibly or may not be a difficulty. Also, when they do ultimately pass on, the debt will pass on to their heirs. That might be solved by surrendering the residence to the mortgage firm. It would be very good to ask the prospective mortgage company about what is owed to them at the passing of your grandparents. It would also be important to ask what would happen ought to they have to move into a senior facility.
Associated Mortgage Details
I don’t think a reverse mortgage would be good in their situation. While it usually is beneficial for older people to get it, they still have a large amount of debt on their house. A reverse mortgage is for people that have little or no debt on their house. They don’t want to sell it to get money, because they need a place to live. So the mortgage company pays them monthly dividends, they get extra money, get to stay in the house and then there is just less money from the sale of the house for the estate when they pass away.
Basically, the bank is slowly buying the house back from someone w/ a reverse mortgage. I found this site below, it might prove helpful. I have no ties or knowledge of them, it just looked helpful. From the looks of it, your grandparents would have to bring 90k to the closing table to pay off their existing mortgage before being able to do this!
Reverse mortgages are good for older couples who flat out own their home or owe very little. It allows them to earn money from a lender every month and then once they pass and the house is sold the lender regains their portion with interest. Since your grandparents don’t own their property and still owe a huge portion of it, they probably wouldn’t qualify plus it would force whoever inherits the property to basically sell it right away to pay off both lenders. Perhaps they should try a basic refi to lower the monthly payment.