What Is A Reverse Mortgage?

I hear this more often than necessary, “What IS a reverse mortgage?” Most people that use the reverse mortgage and enjoy the benefits of it, are no longer here on Earth to brag about it to the rest of us.

The reverse mortgage is utilized by people in their twilight years. When they are done using the reverse mortgage it’s because they have gone off to the retirement home in the sky. So we mortals don’t hear about the results. Whether it worked out well for the user or not.

Although we do hear about the disgruntled heirs of the deceased that opted for the reverse mortgage. I’ve heard the heirs grievances over and over again. One person, in particular, still grumbles about his parents obtaining a reverse mortgage as if it happened yesterday! They moved on to the silver lining in the sky years ago. “It was MY inheritance!” He says.

To start this, our children are not entitled to an inheritance. They may very well receive an inheritance, but entitled, no. But you wouldn’t know they weren’t entitled if you talked with some of them!

A reverse mortgage is not in favor of the heir(s) IE: Our children. It is for the person that owns the home. It’s all about the homeowner getting some, maybe all, of the money he/she put into the home, back out.

The way I understand the reverse mortgage is a person that is 62+ years old AND outright owns their home, or has a very low mortgage due, can obtain a loan against the equity that they have in their home. This equity loan is then distributed to the homeowner. They can receive it in monthly payments a lot like a retirement account. The homeowner has options as to how much they want to receive each month and other loan options.

Now, if the homeowner dies before they have repaid the reverse mortgage loan, then the reverse mortgage lender can still recoup their funds when the home is sold. That’s why the homeowner must have a low balance owing, so there is plenty of money to pay off the original mortgage and the reverse mortgage.

If the homeowner still had a high balance owing on their mortgage, that would mean they have a low equity amount in the home. When the homeowner passes away and the home is sold, the original loan must be fulfilled before the reverse mortgage. The reverse mortgage lender might not be able to recoup their loaned funds. Thus, the home must have enough equity to cover the original mortgage balance and the reverse mortgage balance.

The grievance that heirs have about the reverse mortgage is they are expected to fulfill the reverse mortgage loan when the homeowner dies by selling the home and paying off the original mortgage loan and the reverse mortgage loan. Heirs don’t like that.

From my experience heirs do not like to pay off any bills belonging to their parents even if it is paid off with equity the parents left in the home. Heirs want all the equity.

I have experienced first hand the anger and despise of an adult sibling attempting to obtain all that he could from our mother’s estate, but was accidently thwarted by me.

Our aged mother owned a home which she bought for mere pennies on the dollar back in the 1950’s. She was well over 65 years old and still working full time to pay bills. When we all met on vacation I was talking with my mother and suggested, “Mom, why don’t you sell the house, or do one of those reverse mortgages, use the money to travel for a few years? You would be able to retire and not worry about bills anymore. You’d be able to enjoy your Golden years instead of working and worrying.” Mother said she’d think about it, but she was doubtful she would stop working since it gave her something to do and feel needed in this world. That was the end of the conversation.

I hoped she would take my advice. I wanted to see her enjoy all the equity she worked so many years to achieve. It felt like it would be a reward for her and all seniors that work so hard to save. They should enjoy their money finally!

Not long after that conversation, I received a scathing letter from my older brother accusing me of “ruining” him. He had overheard my conversation with our mother. We weren’t hiding our conversation at all. He should have sat down and joined us, but instead he just listened and became enraged. His letter also stated that because I had “told our mother to sell the house” I didn’t tell her to, I suggested it, and she didn’t sell it anyways! According to him, I now owed him $1,000,000! No, joke, seriously. I owed him $1,000,000 for suggesting our mother sell the home and enjoy her money.

Why? Why did he feel this way? Because he had intentions of our mother signing the home over to him alone so he would inherit everything. Then, he would sell it for $1,000,000 and now I had ruined it for him.

After his letter he still tried to take the home from our mother. When she passed away he insisted she had signed documents releasing the equity and home to him alone. These documents were never found. We gave him over a month to produce proof of this claim, but he produced nothing. Not even a note from our mother stating so.

What does this have to do with a reverse mortgage? It gives you insight into how the heirs mind works. They are counting up their parents money before the parent has even become ill. They are shoveling the dirt into the hole before the parent has turned 60 years old! Siblings, friends, acquaintances, multiple people, have aired their grievances to me when they learned they were not going to receive all the money they’ve decided they will inherit from their parents.

When one of these people finds out about a reverse mortgage their parent has taken out, the heir more often than not, becomes enraged. There is nothing they can do about it and they know it.

The parent that enjoyed the reverse mortgage is gone. All we have left to provide some sort of feedback about reverse mortgages are the heirs. How do you think these heirs are going to rate reverse mortgages, regardless of the fact their parent probably enjoyed their twilight years and had less stress? I have never heard a positive review by an heir, yet.

It’s very sad to see so many people looking at their parents with dollar signs in their eyes. I might leave something to my kids, I hope not. I hope I have a grand old time, one last Yahoo that takes everything I earned with me! We only live once, so LIVE IT, ENJOY IT! Reverse Mortgage it! 🙂

My favorite bumper sticker!

Disclaimer – I do not work for any mortgage company. I am not drumming up business for anyone or any lender. I am just a person that loved my parent and always put her happiness before anything I could ever want. Her happiness was what I wanted. I am not tolerant of people that do not respect others, their parents especially! I am outspoken on the subject of respect and those that do not utilize it. LOVE YOUR FAMILY. RESPECT YOUR PARENTS!! They OWE you nothing!

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