What is a Reverse Mortgage and why should I hate it? скачать в хорошем качестве

What is a Reverse Mortgage and why should I hate it?

What is a reverse mortgage and why should I hate it? Now, in the last video, I explained a little bit about exactly what a reverse mortgage is. And you may have been thinking to yourself, well, that's stupid. Why would I want to give my equity up to the bank over time and pay more in interest over time? That's silly. But there are actually a few situations in which it does make a little bit of sense. So let's look at those three scenarios. Number one, you have somebody who has lots of equity in their house and not a lot of uh retirement funds, pensions, etc., and they don't have enough income to meet their monthly needs. Category number two are people who want to take their retirement to the next level and they want to access that money in their house to do so and they don't have heirs who are depending on them financially. Now subset three is somebody who may have some good retirement funds but they want to set up a buffer asset to draw from in case the market is down in their early years of retirement. So there are three kind of the main scenarios in which it might make sense. So, you know, is this reasonable? No. Reasons to hate a reverse mortgage. Number one, I'm paying to access my own money. I earn that money rightfully over time. That's my money. And there are insane fees and the interest only goes up over time. That's my money. I want access to it. Pause. So, anytime you want access to money, you're going to have to pay for it. You want to sell stocks or bonds, got to pay taxes. you want to take out a loan, you're going to have to pay fees. You have some cash in a shoe box or under the mattress, you're losing that money to opportunity cost or inflation. Also, if you are retired and you don't have a lot of income coming in, it's going to be real hard for you to qualify for a traditional mortgage or a heliloc to access that equity. And any additional monthly payments are just going to stretch that monthly budget. So, also PS, those fees that we talked about, those get rolled into the loan. Those aren't something that you pay for upfront. That's reason number one to hate a reverse mortgage. Reasons to hate a reverse mortgage. Number two, the bank is going to take my house. If I can't pay my bills, then the bank is going to put me out on the street. Pause. So, part of the reason for those insane fees that we mentioned in the last video is to make this what we call a nonreourse loan, which means that the bank cannot kick you out of your house as long as you're alive and they cannot pass down debt to your kids even if you owe more than what the house is worth and the bank is losing money every day. So, part of the reason for those insane fees is to make this so you can't kick grandma out of the house at all. So, yeah, you do need to pay property taxes. You need to pay your homeowners insurance and you need to maintain the house. But that's the same with any other mortgage. Or even if you own the house outright, if you don't pay your property taxes, you're going to get foreclosed on. So, no real difference in this loan. But that's reason number two to hate a reverse mortgage. Reasons to hate a reverse mortgage. Number three, you're stealing my kids inheritance. When I die, there's not going to be any equity to pass down to my kids. So if you live for 30 years after you get a home equity conversion mortgage, you might be end up end up in a position where you don't have a whole lot of equity in your house. Now remember, the bank has no recourse against you except for the house. So you cannot pass any debt down to your kids. While so while this feels like it might be true emotionally, statistically it's very unlikely. What is more likely to happen is that you'll pass down the cost for end of life care to your kids. So actually a home equity conversion mortgage can provide a much needed financial cushion for that period of life. So and often the kids who are usually my age by now uh they don't want an older house with deferred maintenance and having to sell it and split up inheritance, all that kind of stuff. They would much rather not have to pay those end of life costs. um that can be provided with a home equity conversion mortgage. So that's reason number three to hate a reverse mortgage. Reasons to hate a reverse mortgage.