There are an awful lot of exclamation marks in the title above, but I can’t help it – It’s just exactly how I feel. Warning: Rant Ahead…
No matter how trustworthy the actors William Devane or Fred Thompson (and others) may seem, the idea of a reverse mortgage in my opinion is a truly horrible one. The companies that offer these are, I believe, preying upon elderly homeowners who for one reason or another find themselves so in need of cash that they will trade away the only significant asset that they may have left – the equity they have in the home that they live in. These companies’ commercials tell how “you can get the cash that you need out of your home and remain in it for as long as you live” and technically, this may be true. However, as is always the case, if it sounds too good to be true, it probably is…
While the letter of the agreement does actually read the way it sounds, the reality is all too often very different. While a borrower can get cash today and legally remain in the home for the rest of their life, reality is all too often going to be painfully different. As we age, what was at one time a home that suited our needs well becomes less and less suited to the position we find ourselves in. Stairs that once were no problem become unmanageable, as do larger lots and the related necessary lawn care that some people actually enjoyed in their prime. (I for one have always found that lawn care, as a form of recreation, is highly overrated but that is a post for another day.)
As a couple ages, it may be necessary that they move to a condominium, where the exterior maintenance is done for them, or maybe to a home on a smaller tract of land that will require less mowing and other lawn care. Possibly a single level home or one closer to medical facilities will be what is needed. Regardless of exactly what a senior needs, if they have executed a reverse mortgage, they quickly find themselves with no remaining equity and therefore they have the nightmare of not being able to sell. With no equity, there is no source for the required downpayment on the home that they may really need to move to. The very harsh reality is that once someone executes and draws from a reverse mortgage, they become more like glorified tenants than homeowners, and at that point they can’t sell, which of course means that they can’t move, no matter the reason that they may need to.
As a prisoner of their own home, who will mow the large yard when they can’t? Who will maintain the property when they can’t? How will they afford to pay for this work to be done? If they do move to a rental property, how long will they be able to pay rent on that place because they are no longer homeowners? The nightmares that we are putting into place aren’t yet clear but as our population ages and these homeowners become less able and trapped in these situations, the very real pain will become much more evident.
Just say “No” to the reverse mortgage! In my opinion, it’s a horribly bad idea unless the person taking this loan KNOWS that they can remain in this particular home and living situation until the day that they die.