Trying to pay off reverse morgage
Hi Terry
I look forward to hearing you every Wed. on WGN.
Ihave had a everse mortage for many years and have
used the money for furniture and trips. I still have about
$86,000 available, however, the flood ins. inceases each
year – this year – $280.00 for a total of just under $3,000.
I decided I wanted to pay it off. When I asked what the
amount would be – was told $192,000 plus. I neglected
to realize I had to pay them for the ins. they pay for. My
plan was to use the majority of my stocks – $75,000 and
get a bank or other loan for the majority of the rest. I was
told by a bank agent I would need the reverse mortgage’s
permission. I made it very clear my object was to pay off
the reverse mortgage – – with no response from her. Is
there any way I can get a loan and pay off the reverse
morrgage? I realize I still would need to have flood ins.
but I wouldn’t be paying $3,000 plus for their ins. and
close to that amount for flood ins. Am I dreaming?
Terry Says
So here’s the thing with the reverse mortgage — you sort of have your cake and eat it too. But that comes with a price. You get to stay in the house as long as you want, or aslong as you live. They cannot demand repayment of the loan until you move out or die.
BUT, you have to maintain and insure the property and pay all the property taxes. They get to inspect and make sure you are keeping the house in good repair.
AND, there are fees and interest on this reverse mortgage that eat into the equity you or your heirs will have leftover when you die or move out. Those are very expensive costs — so the idea is to only do a RM if you think you will stay there for the rest of your life and be able to pay the upkeep.
Once you’ve been into it for a few years (and your interest rate may be much higher than today’s rates), it doesn’t ever make sense to pay off the RM!
So keep your investments on the side to pay for ongoing house expenses, and enjoy living in your home –and don’t worry about the RM. That’s what I did for my Dad, and he lived to be 95 — thus “cheating” them out of a lot of money, because they surely didn’t think he would live that long,and they would have to wait that long to sell the house and collect their money back!
The best thing you can do to win at the RM “game” is to keep living there and enjoying it far longer than the lender expected when they calculated the loan! So stop worrying about that loan hanging over your head. You don’t have to pay interest and they can’t push you out! As long as you live there, you’re the winner!
Who cares what’s left over at the end — you get to enjoy it while you live!
