Quote:
Originally Posted by Plinker
The Realities of a Reverse Mortgage the Salesman Won’t Disclose
Mary has a home worth 6 apples and is very, very hungry.
Farmer Jim gives Mary 3 apples (half the value of her home). If Mary eats all of her apples and passes away, farmer Jim gets her home because Mary now owes farmer Jim far more than the house is worth.
When Mary passes away her home is now worth 8 apples but due to fees and interest she now owes farmer Jim 10 apples. Mary had hoped to leave her home to her only heir, a sweet little lamb. Unfortunately, if you recall, Mary was very, very hungry and she owed more apples than the home was worth.
Farmer Jim sells the home for 8 apples and then hits the townsfolk up for the remaining 2 apples.
Oh, I almost forgot. Before sealing the deal, farmer Bruce (oops, I mean Jim) invites Mary over for a free, fried-chicken dinner.
Introducing the cast:
The trusting yet vulnerable Villager is played by Mary
Your substantial home equity is played by the apple
Your heirs are played by the sweet little lamb (really gonna miss you!)
The burdened taxpayers are played by the townsfolk.
The sketchy RM salesman and lender is played by farmer Jim
Oh and the fried-chicken dinner was anything but free. Mary paid for it.
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I will agree that RM are not for everyone.......but there is a fit for some. A few years back I had a client who could not pay for her meds so she simply quit taking them. She has zero assets. She refused to move. Her home was paid for so what would you do for her. RM was the right fit, she only did 1/4th of the value because she only wanted enough money to keep up with her cost of living.....taking her meds.
Now the bad fit. Years ago someone (not your farmer) did a RM in The Villages for a couple who had plenty of income but no LTC so someone helped them into a RM took the funds and put in an annuity and use the gains off the annuity to pay for the LTC. Here’s the problem Mr passed away and the kids wanted her to move back home but she was know upside down on her home. This became a hot mess for the family....so bad RM because it was done for the wrong reason.
For every bad story there is a good one. Today RM’s are very regulated and you have to go through a lot of steps.
To say they are good or bad doesn’t quite fit because everyone has a different story.
You are also wrong on the 50/50% of a RM
Like an other asked you clearly have a personal story so why don’t you share that because it may help someone thinking about a RM and will it fit them.
Last always consult your family, your financial advisor and your accountant before you sign a dotted line
And NO I have never sold a RM, I have nothing to do with them but I have clients that have, so I do understand them.