reverse mortgage

...would anybody really do this??? I am sure in some extreme circumstance maybe....but why else ? I see these ads on TV all the time and think ....shysters

It can work well for people in extreme circumstances, such as when current income is more important that leaving property to their heirs. Its no more a hustle than a variable annuity is, which truthfully is not much of an endorsement.

It depends on the company. For most people, their home is their largest investment. If they do not have much other money, but the home is paid off and they are in their retirement years, it is a viable and valuable option to finance their retirement. Lots of variables to be considered, interest rate, kick out clause, family history (longivity) and age of home owners, desire to leave anything to the heirs just for a few

To add a little to what Cris D said, there are a lot of variables to think about there. But the analysis is pretty simple, and there are just two parts. First, ascertain how much cash will you get if you sell the house and what kind of interest rate you will get if you invest it?

Now, look at the cashflow generated by the reverse mortgage, and add in rent you would have to pay to live elsewhere if you sell your house. Take that cashflow and discount it to present value using the interest rate you would get paid by investing the money from selling your house (this is the NPV function in Excel). Whichever number is bigger is the better choice.

That said, at today's insanely low interest rates, I would bet that either scenario is a bit dismal.

Suppose you're elderly and have lived in your home for many, many years. You don't want to move, but you need more income in order to stay there and still have enough disposable income to do other things. If you have no heirs - or don't want to leave them the home - a reverse mortgage might make sense. I would think it would be a good fit for only a very small percentage of people.

Certainly better than the other choice.....sell the place that is the home they love and find someplace cheaper where they'll be miserable. Or move in with you!:eyepop:

Look at it like this....it's not a house, it's a investment they made over the years. Not that much different from a savings account, an IRA or a 401K. Doing a reverse mortgage is nothing more that making a withdrawal from that investment account.

OK seems reasonable I guess,under the right circumstances....I just have little faith in TV advertisers concerning money investments. thx

As long as you keep in mind the fact that a bank is a predatory institution, and that the consumer is the prey, you should have the big picture of how this works. The bank is NEVER your friend and should be dealt with accordingly. People seem to have forgotten this in the last generation.

The reverse mortgage is a way for the banks to feed off of people who are caught in an unfortunate circumstance like having to sell their house to the bank for a reduced value. A bright tactic on their part, but one that may have backfired during the housing price collapse.

Pete

Only use LOCAL competent bank/mortgage people you trust and you can meet face to face...never deal with someone 1,000 miles away who you found on the internet.

Reminds me of sharks circling what is about to become their dinner.