Reverse Mortgages

[srm775]

No, they really don't. For an individual's primary residence, the first $250,000.00 of gains is exempt from taxes, and that goes double for a married couple. If the couple has more than half a million in capital gains on the home sale, I'm not terribly worried about the tax hit they feel.
TL

Oh yeah, I forgot that it was changed that you didn't need to use the money or a part of the money towards the purchase of a new home.

 

[RoaringBrewer]

You selling Columbian Marching Powder?

Ha-ha... I wish it was that easy.

No, I'm slaving away as an external auditor for one of the "Big 4" firms at this point. It's a stressful job and definitely not 40 per week, but its good money and interesting at times. At this point, I'm not "rich" by any means, but for a 26 year-old I'm making pretty nice scratch for central PA in general, let alone someone my age.

If you can stick with this job, there are certain pay plateaus that are pretty certain. E.g. Manager (which I make next year) makes around $100k to start with 10%+ increases thereafter, Partner starts in the $300-500k range depending upon location and you could achieve partnership by your mid-30s. Like I said, *if* I decided to stick it out here, the pay potential by your 60s is pretty darned high. In fact, I'm pretty sure they enforce a mandatory 55 retirement for partners, so you know you must be doing OK by that time, no?

 

[RoaringBrewer]

In summary, I don't know much about RM's, but I do know it doesn't sit right with me in a lot of cases. Banks are making a killing off them and taking the house in the end too. That's just how it seems to me...

I'd much rather cash out my capital gains (which as pointed out are not taxed until a certain amount), buy something smaller (or rent), and have the new house owned free and clear when I'm gone or have a fatter bank account. I know, I know you can't take it with you, but I'd like to give my children a little bit of something when I depart, it will more prepare them for the future so they don't need a RM either, etc.

So, I think its OK in some drastic cases, but i also think there are options. Can we agree to disagree somewhat?

EDIT: Now I need to get back to work and actually earn my money, or my earnings potential is now in the crapper when I get fired. Hahaha...

 

[cheezydemon]

How long does the interest rate stay at 3.36% though? I thought you said in the original post that the interest rate increases; unless I misread.

It is based on the 1 year t-bill, which in turn, is based on the economy. If we are on top of the world (and I am skeptical that we ever will be again) then the rate will be higher. But of course, property values would be increasing faster in that case as well, so there is a decent balance.

And thanks for the questions Roaring Brewer! I don't appreciate whoever was bragging about making a "killing" off of them (I know it was a relative, not anyone here). I do well, but just because so many people are doing this now. If you sold cars at a low but fair price, but you were selling 200 a month, you might say that you were making a killing off of selling cars without ripping anyone off.

It is not how I word it.

 

[BlindLemonLars]

There may be $150,000 owed on their $250,000 house instead of $40,000 when they pass away, but their kids have houses and lives, and were just thrilled that mom and dad would be happier.

Please....don't ANYBODY tell my parents about this!!

 

[cheezydemon]

Please....don't ANYBODY tell my parents about this!!

Greedy Bastard!!

 

[RoaringBrewer]

Wow other than the money that sounds like some boring unfulfilling stuff.

I guess it depends upon your viewpoint... I like my job 9 days out of 10. As sad as some would consider it, it's interesting for me to dig into financial details and workings of Companies. It's especially interesting when you get to work on significant projects like mergers and acquisition work between giant companies, etc.

If that's not your thing that's fine, but I don't think we need to bash each other for our jobs just because its not the other's cup of tea...

The money for me is a bonus. Honestly, I work on average 50 hours per week (some 40, some 60) and make great money for someone of my age. My job may not seem 'exciting' to you, but I have plenty of disposable income to modify sportscars and offroad vehicles, buy and shoot guns, fish, vacation at leisure, and of course brew. To me, and I think you'd have to agree with at least some of them (brewing at least, no?!), these are fun and exciting things, so... the money is a nice bonus that keeps things even more interesting and fun than my job already is.

Bash on if you must, but I like where I currently am and will love where I am in 10+ years, so that's all that really matters to me!

Now, wasn't this thread about RMs?

 

[BlindLemonLars]

Greedy Bastard!!

It's funny...my parents were born towards the end of the great depression, and their parents taught them both to respect money. Although they aren't exactly rich, through a lifetime of hard work, frugal living and saving/investing, they've done very nicely for themselves.

For the past decade I've been actively encouraging them to start enjoying their money, and to not worry about leaving anything behind. On the other hand, my brother frequently asks about their holdings and openly discusses who should inherit what!!

I think Dad is slowly coming around to my point of view...last year he bought a new red Corvette! His grandchildren can hardly believe it.

Sorry to be so far .

 

[MikeFlynn74]

I wasnt bashing- just really came out wrong.

My wife looooves accounting.

My job is boring too. I hate it. But Im good at it and it pays the bills, for now.



Why cant I make good money Drinking beer?

 

[springer]

They would take a huge capital gains hit on a move like this and loose a lot of money to taxes.



.

Married couples are exempt up to 500k on capital gains on their primary home. Some people may take a hit with capital gains.


House bought 1970 @ 75K in NY Sells today at 750k over the years any improvements to the home are taken out- Roof, new furnace, A/C ect are subtracted from the selling price and any brokers fee's . let assume 3% to the real estate agent

Selling price-fees - cost basis = capital gain/loss

75k + 35k improvements over 38 years = 110k cost basis

727k (Selling price after 3%) -110= 617k - 500k for married = 117k taxed as long term capital gain

Long term capital gain @15% max CG you would pay$ 17,550 .

709k in the owners pocket.

15% is the max and 5% in the least and most retired senior citizens dont fall into the 25% and higher tax brackets


Now how could anyone say this person would be better of taking a 100 k reverse rather than taking THEIR money and buying something they can afford to live in without a mortgage and have say 400k to retire with?

With compounding interest that 100k will be an astronomical amount in 10 -15 years if they live that long . Just think if they put 400k in an immediate annuity they could live the rest of they’re lives with steady income and leave the money to whomever they want and not give it the government OR the bank.

 

[Philip1993]

They would take a huge capital gains hit on a move like this and loose a lot of money to taxes.

Still not a good deal. I used the AARP reverse mortgage calc and ran it for a 150k paid for house (using my parents ages). They would get paid $82,500 BEFORE closing expenses (listed at 4% origination + closing costs ~= $7000) which would leave me with $75.5K.

Now, that house on the market would fetch $139,5 AFTER sales commissions and $118,575 after cap gains. That's a $36,000 improvement over a RM. And it assumes they didn't move down in house (or have exemptions), in which case there would be no CG due

So, If I sell the house, pay the CG, and take my $118k and "invest" it at 5%. What now? I rent an apartment (or house) at $750/mo and the funds will keep my rent paid for the next 22 years.

Or, I take my $75,5K now and stay in the house. In 5-7 years the money is gone, I'm in debt to my eyeballs and have no options remaining.

Last thought: Let's assume you only expect to live 5 more years. If you sell the house, pocket $75k, and "invest" the rest at 5% you can rent an apartment (or house) at $750/mo and the funds will keep the rent paid for the next 5.5 years. No mortgages, no shady contracts, no legal issues controlled by by outsiders. As a bonus, if you die early your kids/grandkids/favorite charity gets the money. Worst case, you live longer than 5 years and you're in the same shape as if you took out a RM.

 

[springer]

Still not a good deal. I used the AARP reverse mortgage calc and ran it for a 150k paid for house (using my parents ages). They would get paid $82,500 BEFORE closing expenses (listed at 4% origination + closing costs ~= $7000) which would leave me with $75.5K.

Now, that house on the market would fetch $139,5 AFTER sales commissions and $118,575 after cap gains. That's a $36,000 improvement over a RM. And it assumes they didn't move down in house (or have exemptions), in which case there would be no CG due

So, If I sell the house, pay the CG, and take my $118k and "invest" it at 5%. What now? I rent an apartment (or house) at $750/mo and the funds will keep my rent paid for the next 22 years.

Or, I take my $75,5K now and stay in the house. In 5-7 years the money is gone, I'm in debt to my eyeballs and have no options remaining.

Last thought: Let's assume you only expect to live 5 more years. If you sell the house, pocket $75k, and "invest" the rest at 5% you can rent an apartment (or house) at $750/mo and the funds will keep the rent paid for the next 5.5 years. No mortgages, no shady contracts, no legal issues controlled by by outsiders. As a bonus, if you die early your kids/grandkids/favorite charity gets the money. Worst case, you live longer than 5 years and you're in the same shape as if you took out a RM.

if you paid 150k for the house and sold it for 139k there is no CG Even if the #'s were reversed in your case there is no capital gain... your primary home is exept up to 250k for an individual and 500k for married.

 

[Docapi]

You all just don't get it.

The fact is, sometimes people don't WANT to give up the house that they have lived in for decades. The house they raised their children in, that they shared with their spouse, that they busted their butt for years to turn into a HOME, not just a house.

The same house that, due to rising home costs, now is assesed at such a high value that just making the tax payments every year (not to mention any remaining mortgage payments) are getting darn near impossible to keep up with on a fixed income.

Yes, it might be a better FINANCIAL move to sell and relocate, but to some people giving up their HOME is exactly the "option" they want to avoid at all costs.

An option that makes it so they no longer have house payments, keep the home, and puts a little cash back into the account is definitely a viable option.

Maybe it is an age, or where you are at in your life thing. 15 or 20 years ago, pure dollars and cents calculations would have swayed me, too. Now that I have a home and not just a house I see things differently.

 

[springer]

You all just don't get it.

The fact is, sometimes people don't WANT to give up the house that they have lived in for decades. The house they raised their children in, that they shared with their spouse, that they busted their butt for years to turn into a HOME, not just a house.

The same house that, due to rising home costs, now is assesed at such a high value that just making the tax payments every year (not to mention any remaining mortgage payments) are getting darn near impossible to keep up with on a fixed income.

Yes, it might be a better FINANCIAL move to sell and relocate, but to some people giving up their HOME is exactly the "option" they want to avoid at all costs.

An option that makes it so they no longer have house payments, keep the home, and puts a little cash back into the account is definitely a viable option.

Maybe it is an age, or where you are at in your life thing. 15 or 20 years ago, pure dollars and cents calculations would have swayed me, too. Now that I have a home and not just a house I see things differently.

I get what your saying your saying I have lived in my home 18 years my kids grew up there.

But what happens if they live a lot longer than anticipated? like you said home values grow over time but I dont think it will be like the 80 and late 90's anytime in the near future. But you can damn well be sure that tax's will go up every year what happens in 15 years when the equity is gone and the tax of say around here 18k is due by march 30th 2023?


I'm 49 years old my home is my biggest investment and if need be I would sell it in a heartbeat and downsize if my bills were more than my income.When it comes down to finance's emotion must be taken out of the picture


edit spelling

 

[RoaringBrewer]

House bought 1970 @ 75K in NY Sells today at 750k over the years any improvements to the home are taken out- Roof, new furnace, A/C ect are subtracted from the selling price and any brokers fee's . let assume 3% to the real estate agent

Selling price-fees - cost basis = capital gain/loss

75k + 35k improvements over 38 years = 110k cost basis

727k (Selling price after 3%) -110= 617k - 500k for married = 117k taxed as long term capital gain

Long term capital gain @15% max CG you would pay$ 17,550 .

709k in the owners pocket.

15% is the max and 5% in the least and most retired senior citizens dont fall into the 25% and higher tax brackets

Now how could anyone say this person would be better of taking a 100 k reverse rather than taking THEIR money and buying something they can afford to live in without a mortgage and have say 400k to retire with?

With compounding interest that 100k will be an astronomical amount in 10 -15 years if they live that long . Just think if they put 400k in an immediate annuity they could live the rest of they’re lives with steady income and leave the money to whomever they want and not give it the government OR the bank.

At least I don't feel so alone in this argument anymore...

 

[springer]

See- you miss the point-

By doing a reverse mortgage, you are- in essence- doing just that.

You are selling the home- to the bank.

1.Are they giving you the full value of the home?

The bank gives you the money now, but the great thing is that you get to keep living in the house until you die or sell it it.
2.Or untill you have no money left to pay the property tax,upkeep, insurance

It is the best of both worlds- you get to sell the house and get the money from it, but you still get to live there until you are finished with it. You don't have to move out of the house that you have spent 20, 30 or more years in and is full of memories.
see #1,2

All it costs you to live there is the 3.whatever% interest- but you don't even have to pay that until you vacate the house.

what happens if your upside down on the mortgage when you vacate?

I just can’t get around this. The "Homeowner” is still responsible for the tax's upkeep insurance on the home. So after the money is gone what happens?


I don’t know the banks were all over sub prime loans now this. I'm not saying they are alike just seems a little predatory to me.

 

[EdWort]

They would get paid $82,500 BEFORE closing expenses (listed at 4% origination + closing costs ~= $7000) which would leave me with $75.5K..

4% origination? WTF? That's outrageous. BOHICA.

 

[TexLaw]

4% origination? WTF? That's outrageous. BOHICA.

My thoughts, exactly. That really is a killing.


TL

 

[Philip1993]

4% origination? WTF? That's outrageous. BOHICA.

4% + closing costs. That's not my numbers, but what the AARP website said to expect as normal with an RM. And it wasn't an anti-RM page, so I doubt they are artificially inflated.

EDIT: The 2+2 numbers I quoted earlier were from the summary info page. Having dug deeper and found the AARP page that explains how to compare costs, it may be much worse than that. Go look at this page. It's the page AARP links to explain RM costs.

Here's an excerpt:

Table 4: Two HECMs After Two Years

                  LUMPSUM    MONTHLY
                  ---------  -----------------
Cash to Borrower  $70,298    $562/mo. ($13,488)
Total Costs 	  $21,464    $9,751
                  ---------  -----------------
Balance 	  $91,762    $23,239

By my math, $21,464 over two years is 15.27% APY. 15% on 50% LTV secured loan is highway robbery...

 

[cheezydemon]

4% + closing costs. That's not my numbers, but what the AARP website said to expect as normal with an RM. And it wasn't an anti-RM page, so I doubt they are artificially inflated.

EDIT: The 2+2 numbers I quoted earlier were from the summary info page. Having dug deeper and found the AARP page that explains how to compare costs, it may be much worse than that. Go look at this page. It's the page AARP links to explain RM costs.

Here's an excerpt:

Table 4: Two HECMs After Two Years

                  LUMPSUM    MONTHLY
                  ---------  -----------------
Cash to Borrower  $70,298    $562/mo. ($13,488)
Total Costs 	  $21,464    $9,751
                  ---------  -----------------
Balance 	  $91,762    $23,239

By my math, $21,464 over two years is 15.27% APY. 15% on 50% LTV secured loan is highway robbery...

After 2 years?? OK lets look at your mortgage after 2 years. Even low closing costs look obscene if you only have the loan 2 years!

Lets say I loan you $100.00, and tommorrow you pay me back $102.00.

That's fair for me risking $100 right? But after just one day that is almost 700% interest.

The shorter the term looked at, the worse it will look.

So to use YOUR term, Why 2 years? WTF?

And again. THE RATE IS ASTRONOMICALLY LOW. MAKE THE INTEREST ONLY PAYMENT AND ALL THE SMART MONEY ******* HERE GOES OUT THE WINDOW.

Edit: C H A T T E R is banned??? There must be something I am not getting here.

 

[wihophead]

Another thing that is funny is the 70K to 700K in New York example. That is simply not the norm for the country. I think the norm would be to pay 10-20K in 1970 something and todays value being between 100-200K. Granted there are some area were property value has sky rocked out of control and for those people they can make a killing if they can sell the home for what they think it is worth but overall I doubt that is the case.

Also selling your home to rent something for $750 a month??? I know what you get here for $750 a month and I wouldn't want my parents living there not to mention that is $9000 a year. I live in a nice neighborhood and my property tax is $4100 a year for a saving of $4900 a year.

 

[cheezydemon]

4 points to buy something down to over 2% below going rates? most people would kill to do that.

The origination is maxed at 2% by the way.

FHA charges 2% to insure the loan (so that debt is never transferred to the heirs, and also so that even if property values shot down, nothing would ever be owed above or beyond the house) which is a deal considering what the insurance does, and considering the rate.

And I can't undaerstand all the "smart money" talk about the last 7 years of someone's life.

They should move out of their home, or live soc sec check to soc sec check so that they will have more in assetts when they die?

The real fact is that they have only as much money and joy as they spend or have in their lifetime. They can't take it with them. And they will never know if the sale of their home enriches the lives of their family, or if it causes squabbles, or if it gets sold cheap because the taxes are due, the market is down, or their family is out of town and unable to manage the property.

Then some investor gets rich and why did those people suffer to pay the house off?

 

[JVD_X]

Another thing that is funny is the 70K to 700K in New York example. That is simply not the norm for the country. I think the norm would be to pay 10-20K in 1970 something and todays value being between 100-200K. Granted there are some area were property value has sky rocked out of control and for those people they can make a killing if they can sell the home for what they think it is worth but overall I doubt that is the case.

My old neighbor bought their house in 1978 for 70K and just recently sold it for 650K (1300 square feet!). However, we live close to DC where home values are stable relative to the rest of the country, so you are probably correct in what you say is the norm.

 

[springer]

Another thing that is funny is the 70K to 700K in New York example. That is simply not the norm for the country. I think the norm would be to pay 10-20K in 1970 something and todays value being between 100-200K. Granted there are some area were property value has sky rocked out of control and for those people they can make a killing if they can sell the home for what they think it is worth but overall I doubt that is the case.

Also selling your home to rent something for $750 a month??? I know what you get here for $750 a month and I wouldn't want my parents living there not to mention that is $9000 a year. I live in a nice neighborhood and my property tax is $4100 a year for a saving of $4900 a year.

I was pointing out even at an extreme example most people will pay little if no Capital gains on the sale of a home. I bought my home for 100k being realistic its worth about 400k.

How do you get 4900 savings? There are no other cost to you involving your home just your tax's?

 

[springer]

4 points to buy something down to over 2% below going rates? most people would kill to do that.
would all depend on how long you expect to be there.20 years yes I would , 5-7 not a chance

The origination is maxed at 2% by the way.

FHA charges 2% to insure the loan (so that debt is never transferred to the heirs, and also so that even if property values shot down, nothing would ever be owed above or beyond the house) which is a deal considering what the insurance does, and considering the rate.
so what your saying is the FHA insures the loan so that if your house lost 50k and i no longer is worth the 150k you borrowed and you move out FHA is going to cough up the 50k to cover the bank loan


And I can't undaerstand all the "smart money" talk about the last 7 years of someone's life.

and you know this how?

They should move out of their home, or live soc sec check to soc sec check so that they will have more in assetts when they die?
In my scenario the person would have more money than they knew what to do with. I know things are not the same here as other places. But I see this type of thing done all the time, selling and downsizing.

The real fact is that they have only as much money and joy as they spend or have in their lifetime. They can't take it with them. And they will never know if the sale of their home enriches the lives of their family, or if it causes squabbles, or if it gets sold cheap because the taxes are due, the market is down, or their family is out of town and unable to manage the property.
Who ever does know what happens after their death

Then some investor gets rich and why did those people suffer to pay the house off?

Well we agree to disagree on this. These RM's may be right for some but I tend to think not for the majority.

And who is this investor that gets rich?

 

[Philip1993]

After 2 years?? OK lets look at your mortgage after 2 years. Even low closing costs look obscene if you only have the loan 2 years!

Yes, let's do that. I borrowed $185,000 @ 6.25% My P&I payment is $1139.08 or $27,337 after 2 years. Add in $3000 closing costs, and I paid $30,337.92 (16.4%) to borrow $185,000. Compare that to the reverse mortgage in the example; $21,464 (30.5%) to borrow $70k on a $150k home.

So, if you would define 16.4% is obscene, how would you define 30.5%?

The shorter the term looked at, the worse it will look.
So to use YOUR term, Why 2 years?

It was an AARP guideline. BUT, as you so eloquently pointed out, we're only talking about the last 7 years of their life. What did you suggest I use, 15 years?

And again. THE RATE IS ASTRONOMICALLY LOW.

Nope. 3.36% is a variable interest only rate that adjusts monthly. Two years from now, that rate could be 10%. 4 years from now 18%. Like any adjustable rate loan, it's a huge risk. And this one is paid out at 50c on the dollar against equity and with astronomical fees attached.

4 points to buy something down to over 2% below going rates? most people would kill to do that.

Not with a 7 year window they wouldn't. Oh, and most people are $40k in debt on credit cards...

The origination is maxed at 2% by the way.
FHA charges 2% to insure the loan

Who gets paid isn't relevant to the value of the financial product. 4% origination/insurance + closing costs is a terrible deal for the borrower.

FHA charges 2% to insure the loan (so that debt is never transferred to the heirs

The heirs didn't sign for the debt... Debt is never transferred to the heirs no matter what.

and also so that even if property values shot down, nothing would ever be owed above or beyond the house)

So 2% of the origination costs are paid by the borrower to ensure YOU against making a bad loan. Because if the house is 200K under water and the borrower dies, guess who gets to eat that deficit?

And I can't undaerstand all the "smart money" talk about the last 7 years of someone's life.

Very simple. Because they might live well beyond 7 years.

They should move out of their home, or live soc sec check to soc sec check so that they will have more in assetts when they die?

No, because they can sell their home and make investments that will carry them for decades.

The real fact is that they have only as much money and joy as they spend or have in their lifetime. They can't take it with them.

This, I agree with. But, if you follow the "smart money c h a t t e r" instead of the marketing hype, they can have more money to spend in their waning years...

Then some investor gets rich and why did those people suffer to pay the house off?

Care to explain this statement?!? Who exactly is this "rich Investor"?

 

[wihophead]

How do you get 4900 savings? There are no other cost to you involving your home just your tax's?

Of coarse there will be some maintenance but I can guarantee it will not exceed
$49,000 in the next 10 years, we are assuming it is paid off correct?

 

[Philip1993]

Also selling your home to rent something for $750 a month??? I know what you get here for $750 a month and I wouldn't want my parents living there

To expect someone to sell a dumpy house and then move into an exclusive swim&tennis complex just isn't realistic. If $750/mo is a dumpy rental in your town, I would also suspect that $150k is a pretty dumpy house. If you live in a decent house, your sales price would be much better thus allowing you to afford a better apartment. For this example, I picked a modest but decent house and a modest but decent apartment in much of metro Atlanta.

All that said, the point was that you can sell and sustain a decent std of living for 20+ years off the income.

 

[homebrewer_99]

The way I understand it is this MAY be good for SOME people, but the majority of the people are just ignorant so it's a good way for a mortgage company/lender to pay you one price while the value of your house increases.

It's right up there with "I'll rob you now, but when I collect it'll be worth much more"...trust me, they're not doing it out of charity.

They plan on making a good profit after you move out/die.

All these new schemes are just another way to trick you out of what's yours.

It works a lot like the Gov't...when they tell you they're doing something FOR you -- don't believe it!!! They're doing it TO you!!

 

[wihophead]

I would also suspect that $150k is a pretty dumpy house.

$150K will get you a decent house, it is the neighborhood I would worry about. Not to mention I would NEVER want to live in the "city" again.

My mother paid $18K in 1972 and now here house is worth maybe $125K but she lives in a great area on 1/2 acre, it is just an old tiny house. My FIL's house is worth maybe $150K it is a 3 bdrm brick home but the neighborhood is OK but I will be curious to see what it is like in 10 years.

The last 2 houses that sold on my block went for 10% under the appraised value, one was on the market for a year and the other was 8-9 months.

The days of skyrocketing and inflated housing prices are over for awhile, it has to be since nobody will be able to afford a house. You can say your house is worth 400K but it is only worth what somebody is willing to or can afford to pay.

 

[Philip1993]

$150K will get you a decent house, it is the neighborhood I would worry about.

Perhaps dumpy wasn't the right word. Substitute "undesirable" instead.

 

[cheezydemon]

Great discussion. OK

The investor? Is the guy that pays cash for houses, especially when someone has died and their kids aren't keen on paying the taxes, mortgage, etc. or are unable to even keep the grass cut.

You may not be familiar with this kind of investor, but you can see him on HGTV. Flip this house? There are 2 or 3 others. The ones that they show the most are the serious fixer uppers, but they snap up the house that is OK even faster. It just isn't as good of TV.

And yes, we agree to disagree. Gladly even! But I think we probably do agree. "You" are talking about someone that has plenty of assetts. I am not.

And if you see the t-bill going to 17% anytime in our lives, I suggest you buy some. Our economy would have to be going gang busters (in which case the house is appreciating faster too) for the rate to exceed 7%.

We both have people's best interests in mind. Just consider this last example.

73 year old woman, 12 months behind on her mortgage. Credit in the crapper.
Owes 29K on a 100K house. She gets $756 from soc sec each month and can't afford her meds.

(and I am going good naturedly smart ass!! Please forgive me, I mean well)

So she should complain about the closing costs, or consider the likelyhood of the t-bill going through the roof, and not do the reverse mortgage? Rather than recieving 32K in a line of credit that grows 4% each year (regardless of property values) and never having to pay her $342/month payment again? She should lose her house right?

(this one is closing Friday, and I am her hero!)

 

[Philip1993]

Our economy would have to be going gang busters (in which case the house is appreciating faster too) for the rate to exceed 7%.

History does not agree with you: http://www.mortgage-x.com/general/historical_rates.asp

Rather than recieving 32K in a line of credit that grows 4% each year (regardless of property values) and never having to pay her $342/month payment again? She should lose her house right?

And how much did this 32k cost her in origination, closing costs, points, fees, insurance, etc. i.e. What's her debt - cash in hand? I'm betting at least 10K.

I'm sorry but that's not helping, that's preying on those in need...