Sell and downsize or get a reverse mortgage?

Jim,

You have given the right advice... really a financial planner for the individual is a MUST... There are HUD approved reverse mortgages.. for whatever that is worth.. that are regulated by the FED's so that is one area to look into.  Some reverse mortgages never make the owners move out.. even after they have taken all their money... so depending on how old you are and how much money you have to hire someone to help you... all makes a difference in the decision... Estate planning for heirs.. all play into the equation so there is not one answer for the question... it all depends.

Ilike that Jim - this question is coming up more and more frequently.  I'd love to re-blog it! :-)

Jim,

I agree it is tough to figure out downsizing and then when you add a condo into the mix there is the association fee that can go up and up.  However, the maintenance may be less.  So, there is alot to weight when you think about a condo.  As far as lending, guidelines are much more restictive, so getting a loan on a condo is more difficult and rates can even be higher depending on your ltv.  Also, if there is litigation, most banks won't lend.  We are in tough times.

Hi Jim - The key is that the answer is different for each person and each situation.  I have put people into reverse mortgages, including the new purchase reverse mortgage, and they feel it is the best thing that they could have done.  The fees do seem bigger than a forward mortgage, but mainly that is because for most loans, the fees are spread out over years, but for a reverse, the fees have to be all bunched up at the front, including PMI, because of the very nature of the loan.  If you expect to have the mortgage for more than 5 years, it is a good deal.  If you think it will be less, then it might not be.  Having no mortgage payments and having an equity line for emergencies can make an older person feel very secure.  It isn't for everyone, but for some it is a lifesaver.

Jim, We have friends who decided to do a reverse mortgage a few years ago. Before the drop in prices they could have sold for a nice profit. The went with the RM. They underestimated their cashflow needs and now the home value has dropped so there's no equity and no sale possible at this time. Challenging to say thie least.

The difficulty is that there is not one answer that works for everyone.  That's why your suggestion of using a financial planner is excellent.  I tend to be very cautious of recommending a reverse mortgage to anyone.

Jim, so I must need to pay attnetion to reverse mortgages this week, It is the third time it has come up. Thanks for the post.

Jim,

It's always an individual decision as to what makes sense. There should be some articles on this topic, reviewing the pros and the cons. This is not only about lifestyle, but it's also about financial resources and investments.

Brian

You gave excellent advice Jim as well as stating your are not a financial advisor or mortgage broker.  While on the surface it appears to be a solution, one must delve into their own personal situation carefully.  We also agree when you said, "The last thing you want to do is get a reverse mortgage, not be able to take care of your property, and have it deteriorate while you're still living there."  That in itself would be a major problem.   

Jim, I have often thought that I don't want a house when I'm older.  The work is never ending and I have to call someone in for everything.  I think finding the right condominum would be a wonderful choice for me.

Dear Jim,

You gave the perfect advice. Only the person in question knows what is the right choice for them. Personally I would move into a condo and avoid all the maintenance headaches in my 'golden years' Of course it would be hard to give up my home on a private acre of land and pool, but if I never scooped another leaf or never spent 1/2 day mowing and edging I would be a happy woman!

;)