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Many arguments came up with my mom-inlaw, & recently she confronted us (w/ my husband) about issues. In the end, we told her about moving out (which is our plan & we were doing it for a few months now). She talked about reverse mortgage in case we move out. I’m not familiar with this type of mortgage. My concern is my husband (of course, any bad result of this will affect us). His name was included in the mortgage us of now, & if mom-inlaw will do the reverse mortgage, will my husband’s name be taken out, or it will still be there!? We both want my husband’s name to be taken out of the mortgage, but bcoz of the economy right now, they can’t do refinancing. Can my husband’s take out his name when his mom do the reverse mortgage. What do you think can we do? Thanks in advance.
My other concern is that bcoz of the economy, the house don’t have equity. How can she do the reverse mortgage if there’s no equity? This is so confusing & I don’t want my husband to get involved in this situation bcoz later on, it will affect both of us. Please help.

3 Thoughts on Mon-inlaw talked about reverse mortgage…….?
  1. Reply
    chatsplas
    February 9, 2014 at 3:42 pm

    MIL can’t do reverse mortgage without your hubby signing off on it. He should not do so. MIL may not be able to get reverse mortgage with hubby’s name on deed and mortgage. Generally a reverse mortgage is where seniors have paid off their house and get a reverse mortgage of payments to them every month for living expenses, which are paid off after their death when house is sold. Doesn’t sound like MIL may even qualify for one.

    If you can’t do a refi to get off the mortgage, try contacting Lender to see about a Loan modification. Do NOT tell them that you are considering moving out of the house at some point in future. This lowers the interest rate and lowers the mortgage. Can MIL make the mortgage payments and pay real estate taxes?

  2. Reply
    Dan B
    February 9, 2014 at 3:42 pm

    The advertisements for reverse mortgages are made to sound like it’s the best thing since sliced bread. But there are many pitfalls.

    What happens is that you have equity in the home. The reverse mortgage lender gives the owner a percentage of that equity in monthly installments. It is a loan against your equity that you don’t have to pay back, YET. You are allowed to live in the home until your death. The owner has to be 62. Young people are not qualified so if the lender wants to do the reverse mortgage, they’ll have to rewrite the mortgage (if that’s possible).

    The reverse mortgage lender is gambling that the owner will die real soon – the sooner the better. The lender gets their money back plus a profit from the sale of the home after death. The estate gets nothing (or very little).

    Pitfalls: The homeowner could be made to put on a new roof at their expense, painting inside and out at their expense and any other repairs or maintenance that could be required. That reduces the net amount of the reverse mortgage. So, even if you have $ 100,000 in equity, you might realize less than $ 40,000 over the time of the reverse mortgage after all maintenance, repairs and loan fees are deducted. You still have to pay homeowner’s insurance. As you draw money from the equity, you’ll accumulate an interest debt on that money. That debt is recovered when the home is sold.

    There is a risk that the lender is taking. So, even if you have the $ 100,000 equity, you won’t get the full value of the equity. They will deduct a certain percentage from the equity to cover their risk just in case you live to be 100 years old, the anticipated interest and other fees.

  3. Reply
    v b
    February 9, 2014 at 4:09 pm

    Your husband needs to do some fast research on the web and sit his mother down.

    She isn’t going to like the results from that research because the bottom line is, if she can’t afford her house on her income (work, savings, pension and/or social security benefits), she needs to SELL and move into a tiny apartment.

    A reverse mortgage works on the premise that you have lots of equity in your home and don’t mind paying incredibly high fees to let someone else gamble that you will die soon. Or worse, move to a nursing home or be otherwise evicted for failure to maintain the property, insurance and taxes. Since nobody knows how long you can hang on, the payouts are fairly low, but the accrued interest and financing fees are extremely high.

    Worse the companies that lend the money have a huge safety net for themselves as congress guaranteed *their* loans. (This is going to raise my taxes.) There is NO safety net for the borrower.

    Do the math. She either sells, pays off her current mortgage and moves to a small apartment that she can afford indefinitely or she hangs on, gets the reverse mortgage, uses up ALL of her equity, can’t afford taxes or repairs and is forced to move…and what happens if she wants to move in with you?

    Edit:
    No equity = NO LOAN. Even you figured that out!

    If the two of you move out, her viable options are:

    a) get roommates. She won’t of course.
    b) use up any remaining savings. Spending more than she makes is the problem already.
    c) don’t pay the loan, get foreclosed on and then, depending on the loan, your husband may or may not have cancelled debt income. See IRS publication 4681 and realize that while original loans are often non-recourse (the bank can’t sue), 2nd loans are often recours (the bank can sue).

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