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Off Topic :
What do y’all know about reverse mortgage?

Topic is Sleeping.

 WhatsRight (original poster member #35417) posted at 3:33 PM on Tuesday, June 27th, 2023

I’m a worrier, as many of you may know.

With all of the hospital visits, we have experienced recently, and other financial obligations, I lie awake at night worrying about money. I know lots and lots people do.

Anyone familiar with the "ins and outs of reverse mortgages?

I think I get the jest of it… You basically take a loan out for whatever they value your home, and you may either choose to pay it back however you are able, or not pay at all, and your home belongs to the bank when the last owner is gone.

I guess that is an option for us because we are fortunate to own our home outright at this point.

I am concerned about 2 things. What if we outlive the life of the loan? A prolonged old age illness haunts me.

And…if we do need the reverse loan, when the 2nd one of us goes, the bank takes the house and my sons are homeless.

Am I understanding the concept correctly?

"Noone can make you feel inferior without your concent." Eleanor Roosevelt

I will not be vanquished. Rose Kennedy

posts: 8089   ·   registered: Apr. 23rd, 2012   ·   location: Southeast USA
id 8797092

 WhatsRight (original poster member #35417) posted at 4:11 PM on Tuesday, June 27th, 2023

Also, if we both pass away before the loan amount equals the entire value of the house, would our sons be able to repay the loan and keep the house?

And if we live so very long that the loan has equaled the entire value of the home, and more, does the bank get only the home, or would our sons have to pay whatever inflation has affected the value of the home?

"Noone can make you feel inferior without your concent." Eleanor Roosevelt

I will not be vanquished. Rose Kennedy

posts: 8089   ·   registered: Apr. 23rd, 2012   ·   location: Southeast USA
id 8797097

sisoon ( Moderator #31240) posted at 5:13 PM on Wednesday, June 28th, 2023

The last time I looked (15 years ago), it's the loan for the house. If the loan is more than the house can be sold for, the taxpayers eat the loss. At the same time, if the house is worth more than the payoff, your heirs/sons could pay off the loan and keep the house.

The loans used to be written so that the mortgage holder could take possession of the house in case of an extended absence by the owner(s).

When I looked, the consensus by independent finance people was that reverse mortgages were good deals for the lenders, not so much for the borrowers.

fBH (me) - on d-day: 66, Married 43, together 45, same sex ap
DDay - 12/22/2010
Recover'd and R'ed
You don't have to like your boundaries. You just have to set and enforce them.

posts: 29247   ·   registered: Feb. 18th, 2011   ·   location: Illinois
id 8797242

 WhatsRight (original poster member #35417) posted at 6:27 PM on Wednesday, June 28th, 2023

Oh, phooey!

I had heard that they couldn’t take the home till the last owner was no longer living there. They made it sound like a great solution.

Probably was written by a financial lending corporation.

Well, thanks for the info.

[This message edited by WhatsRight at 6:30 PM, Wednesday, June 28th]

"Noone can make you feel inferior without your concent." Eleanor Roosevelt

I will not be vanquished. Rose Kennedy

posts: 8089   ·   registered: Apr. 23rd, 2012   ·   location: Southeast USA
id 8797258

SackOfSorry ( member #83195) posted at 10:44 PM on Wednesday, June 28th, 2023

This is what our financial person sent to us when we asked about it. Keep in mind we are in Canada so there may be some differences. We don't have any kids, so when we were making our wills we kind of got thinking about the reverse mortgage because we really don't care if there is anything to leave to our siblings and nieces/nephews. We don't owe them anything. Anyway, here is the info:

While we are happy to provide general information on reverse mortgages, we would recommend your client consult with an accountant and/or lawyer for advice on their specific situation.

A reverse mortgage is a loan secured against an individual's primary residence, but (unlike a traditional mortgage or Home Equity Line of Credit) does not require regular payments. Interest accrues and is added to the balance of the loan on a regular basis.

How a reverse mortgage works

To be eligible for a reverse mortgage, all the individuals listed on the home's title must be at least 55 years old. The home used to secure a reverse mortgage must be the applicant's primary residence. This usually means the homeowner(s) must live in their home for at least 6 months a year.

There are two financial institutions that offer reverse mortgages in Canada. HomeEquity Bank offers the Canadian Home Income Plan (CHIP), which is available across Canada. A reverse mortgage can be applied directly from HomeEquity Bank or through mortgage brokers. Equitable Bank offers a reverse mortgage in some major urban centers.

Before getting a reverse mortgage, any outstanding loans or lines of credit that are secured by the home must first be paid off and closed. These can include a mortgage and a home equity line of credit (HELOC).

Depending on the homeowner(s)'s age, and the location, type, condition and appraised value of their home, eligible homeowner(s) can access up to 55% of the equity in their home. Proceeds of the loan are tax-free and can be taken in one lump sum or multiple advances.

Homeowners that have a reverse mortgage don't need to make any regular payments on a reverse mortgage. However, they have the option to repay the principal and interest in full at any time. However, the lender may charge a fee if they pay off their reverse mortgage early.

Homeowners generally have to repay the amount of the reverse mortgage left owing when:

they sell their home
they move out of their home
the last borrower dies
they default on the loan

Each reverse mortgage lender may have their own definition of defaulting on a reverse mortgage so it important to check with their lender for details.

Costs associated with a reverse mortgage may include:

a higher interest rate than for a traditional mortgage
a home appraisal fee
a setup fee
a prepayment penalty if they pay off their reverse mortgage before it is due
legal fees for closing costs or independent legal advice

It is important to weight the pros and cons when considering a reverse mortgage. Here are some of the things you may wish to consider (not an exhaustive list):


homeowner(s) don't have to make any regular loan payments
they may turn some of the value of their home into cash, without having to sell it
they don’t pay tax on the money that's borrowed
this money doesn’t affect the Old-Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits
homeowner(s) still own their home
homeowner(s) may have options as to when and how they receive the money


interest rates are higher than most other types of mortgages
the equity they hold in their home may go down as the interest accumulated on the loan
the estate has to repay the loan and interest within a set period of time when they die
the time needed to settle an estate may be longer than the time allowed to repay a reverse mortgage
there may be less money in their estate to leave to their children or other beneficiaries
costs associated with a reverse mortgage may be higher than a regular mortgage or other credit products

Incorporating a reverse mortgage into client's retirement plan is a complex tax and estate planning strategy and we are not in a position to provide specific advice on it. We would recommend your client consult with an accountant and a lawyer to fully understand how a reverse mortgage can affect their home equity and their overall financial position over time before making any decisions.

Me - BW
DDay - May 4, 2013

And nothing's quite as sure as change. (The Mamas and the Papas)

posts: 85   ·   registered: Apr. 11th, 2023
id 8797295

 WhatsRight (original poster member #35417) posted at 2:09 PM on Thursday, June 29th, 2023

Well, damn!

I guess one of us just needs to croak so the other can have their life insurance !

I’m kidding… I’m kidding.

"Noone can make you feel inferior without your concent." Eleanor Roosevelt

I will not be vanquished. Rose Kennedy

posts: 8089   ·   registered: Apr. 23rd, 2012   ·   location: Southeast USA
id 8797370

likeapinball ( member #50073) posted at 12:50 AM on Thursday, July 13th, 2023

My MIL did this about a year ago. Basically she needs to sell her condo before she hits the 3 year mark or it's a wash. So, if she were to need long term care (which is a definite possibility) and she hasn't sold it by then, she'll be out of luck! That's a very basic/short version but that's how it's going to work for her. We're in Ontario, Canada so not sure if the same rules apply where you are?

BS,DD: Sep 26, 2015. Married 16 years at DD. WH had a LTA with MOW. Three kiddos 15, 13 and 11 at the time. In R

posts: 226   ·   registered: Oct. 26th, 2015   ·   location: Canada
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Topic is Sleeping.
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