Reverse mortgages...

[restoman]

Anyone familiar with them?
They're only offered in Canada through the Home Equity Bank - CHIP.
My parents, 79 and 80 years old are experiencing some health and mobility issues the last few years. They're not poor, as far as I can determine.
They are, however, incredibly stubborn when it comes to making any change in what they've been doing for the past 55 years that they've been in their home.
They're both at the point where changes need to be made, whether they like them or not, so the roadblocks are going up. "It costs money..." is at the top of the list.
Did I mention my Dad is incredibly cheap? He's always been frugal, now it seems he takes great delight in not spending any more than he absolutely has to.
I get it. Spending from your nest egg makes the pile smaller and there's always the "what if...?".
But... the "what if...?" is here.
We three kids are trying to gather together some options for them to look at. They won't find things out for themselves, 'cause that would be admitting they're not 35 anymore, so we're asking the questions and putting together scenarios for them to be able to stay in their house for as long as possible.

So... anyone have any experiences with reverse mortgages, or sale and lease back style plans?
I've read about them but I'm looking for personal experiences. Pros and Cons.

 

[68R/T]

I don't have any personal experience, but from research I've done the ONLY time that it's advisable is if you have no decendants. Because the payback that you receive is only a portion of the true equity of your home. It's really just another form of legalized robbery.

 

[dodgechargerfan]

My brother's Mother-in-law had one. When she passed, my brother and his wife wanted the house. They had to jump through a number of hoops and carry two mortgages until their old house sold.
They essentially had to buy back her childhood home.
So, as Olde Pharte points out, be damned sure they don't care who lives n the house when they are gone (or whomever in the family wants it can be in a position to buy it back)


If they don't need a big lump sum right away, a better, but maybe more complicated, method might be to take out a line of credit that is secured by the home's value (or a portion of it).
Then invest that money into something that generates a good income - enough to cover what's needed for the changes or as close to it as possible.
The line of credit only needs the interest paid off on an ongoing basis. So, if the investment income can cover that too. Fantastic. Otherwise, look at it as a living expense (likely just shifting some other expense), but you're paying to grow your net worth.
The upside is that the interest is now tax deductible.
When the time comes, the line of credit could be paid off by selling off the investment. Then the home is free and clear again.

It basically turns the equity in the home into an income stream along with some tax benefits.
But it's more of a trickling income than a big lump sum (unless you find some boffo investment and make a killing)

All of the moving parts is where you're going to need an expert.
How much of the equity can be leveraged?
How to invest that for maximum return?
How to balance the tax implications of an income stream against the tax-deducible interest?
Who is the beneficiary of the investment account that can then sell it to pay off the line of credit to free up the house?

 

[71ChargerRT]

A friend of my mom got one, they gave her a small percentage of what her home was worth. I don't have all the details, but she said she regrets it. She wishes she would have sold the house outright, even though the market was down, and just bought a smaller home or condo.

 

[restoman]

Thanks for the comments. I know nothing about them, only what I've read in the sales pitch...
The line of credit sounds like a much more stable way to go, should they require it.