An elderly friend of mine told me she wants to get one of these things, I've heard they can screw up the lives of the children left behind once the person dies....

Thoughts ? .

TIA,

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-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better

I would look at the terms very closely. Here's a few perspectives:
https://www.investopedia.com/mortgage/reverse-mortgage/5-signs-reverse-mortgage-good-idea/
https://www.investopedia.com/mortgage/reverse-mortgage/5-signs-reverse-mortgage-bad-idea/

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Tony H
W111 280SE 3.5 Coupe
Manual transmission

Past cars:
Porsche 914 2.0
'64 Jaguar XKE Roadster
'57 Oval Window VW
'71 Toyota Hilux Pickup Truck-Dad bought new
'73 Toyota Celica GT

Go to www.clarkhoward.com and view his thoughts on these things. He is pretty negative and has a good head on his shoulders.

Same as a home equity loan, with the exception of higher interest rate and it dribbling in instead of one lump sum. Just refinance with a cash out for equity, best rate and someone has to pay it back before anyone receives clear title.

THANK YOU ! .

She rarely listens to the advice she asks for, that's how she got into the current jam .

I hope she'll read the articles I copied and sent her, otherwise I'm sure she'll be out in the street ere long .

She wants to get a lump sum, always the worst choice .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better

They are generally a way to drain the final assets from the elderly. As others said, there are many better alternatives if in a crunch.

Uderstood .

She has nowhere else to go and needs to sit on her hands and just be frugal and things will work out in due time .

I hope she listens to you alls because she don't listen to me .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better

Your instincts are right Nate! They’re a real mess from what I’ve seen. A guy I worked with dealt with the aftermath of one when his parents died and it was pure nightmare.

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2001 SLK 320 six speed manual
2014 Porsche Cayenne six speed manual

Annoy a Liberal, Read the Constitution

There is a long list of financial products that are automatically met with derision and criticism, usually unwarranted. Reverse mortage is a great example. A reverse mortgage is a form of home equity loan, and it's a safe and useful product, but only for some. To use it safely, a few criteria need to be met:

1) You need an ongoing source of income (social security, pension, annuity) sufficient to cover maintenance, debt service, insurance, and taxes, indefinitely.
2) You need to have a reasonable expectation of being able to age in place.
3) You have a reserve fund for home health care. (LTC insurance would be ideal, but this is America, where nobody plans ahead.)
4) You don't have an expectation of leaving your home to heirs.
5) You own the home free & clear and have no other significant debts.

If this is the case, then it's not unreasonable to tap into home equity for spending money. It doesn't necessarily screw up your estate, unless your heirs have an irrational expectation of keeping the home or the house value is grossly out of line with the appraisal. In most cases, the home is sold, the bank is repaid, and the estate only gets whatever loose change is left over.

The truth is that you need a certain amount of wealth to make this work. The reason these loans have a bad reputation is that the borrower often has nothing left but home equity, and quickly gets into trouble. And for these borrowers, it turns into a nightmare. Also be careful of private label loans. The HUD version of the reverse mortgage, called a HECM, is safest.

Tom Selleck would disagree!

__________________
"I applaud your elaborate system of denial"

As I think I stated before, she's hard up against things but has sufficient $ to make do is she just stops spending and giving her adult daughter $ on a regular basis .

We'll see how it all turns out .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better

One of the things I noticed about the reverse mortgage websites I looked at is that they don't list the interest rate(s). Instead, they ask the user a bunch of questions. That makes me suspicious that the interest rates are bad.

I still don't know what the interest rates are. But, my ex-girlfriend's mother has/had one of these, it's time to pay back the mortgage, and she has to sell the house and move into an apartment.

As a general rule, an elderly person should maintain enough wealth to pay for five years in a nursing home. The good news is that if you're going in a nursing home, you're probably circling the drain and you're not going to be there that long. The average stay in about two years. But, my grandmother was in a nursing home for five years, and it almost wiped out all of her wealth.

End of life planning is ridiculously difficult. You don't know how long you're going to live, much less how long you'll be in terminal care. The average nursing home residency is 2 years, true. but there's really no upper limit. The cost: if you haven't budgeted at least $300/day for nursing care, you aren't going to make a dent in it....and in areas like NY, the actual average cost is $450/day. That's at least $219K that you will need to have available, over and above your retirement funding. Don't forget to factor in inflation, which is at least twice CPI for healthcare expenses. Self-funding final care is definitely a challenge.

There are specific financial products that work for this, but they're all expensive and fraught with problems. Traditional long term care insurance is ideally purchased when you're around 50. Earlier, and you're wasting money. Later, and it becomes prohibitively expensive. Twenty years ago, policies were unlimited, and as a result the companies that issued them ended up in serious trouble. More recent policies offer a fixed benefit for a fixed period of time...say $300/day for five years, so it's more likely the insurance company will be around to actually pay out. But very few people have the cash and foresight to buy his & her policies at 50. And if you end up not using the benefit, the money you paid is never returned.

Another alternative is either a permanent life insurance policy or deferred annuity, either of which can include an accelerated death benefit rider. Essentially, your policy pays part of the death benefit to the nursing home while you are still alive. These have the advantage that they always have redeemable cash value in case you need the funds for something else, although you would obviously lose benefits if you took advantage of this. Any residual value goes to your beneficiaries. The problem again is that late in life, it's hard to handle the price for a sufficiently large policy.

Many people rely on Medicaid, which pays for LTC as a free benefit. The problem is that you need to be destitute in order to receive benefits. Medicaid will look back at your financial records five years, and claw back funds if they think you're tying to game them. So you may find that free help costs all your money. It gets more complicated if we're talking about a married couple, as you really don't want to leave your spouse penniless. Of course, if you had LTC insurance, it would cover you for the first five years. So your POA's can safely hide your money before they abandon you to the system.

So there's a list of pariah products that you may end up needing before it's over...LTC insurance, annuities, life insurance and Medicaid. Or you or your POA could just arrange a reverse mortgage and pay your end of life costs with home equity. It's a long life, so don't be so quick to dismiss these "awful" products.

Legally to us as a couple in Canada. We can give away all our assets. As long as they depart years before a nursing home or their is no trail. Then the nursing home just takes our pension cheques and the government pays the rest.

I have an ethical issue with that unfortunately.

The people that never controlled their finances properly for the bulk of their lives. I cannot see them all of a sudden in old age changing. You want to live at your means or more. There can be a price.

I can almost see a reverse mortgage or similar. For those that have nobody to leave anything to.

Technically we have been on pensions for twelve years. I would estimate in those twelve years our own cost of living in Canada has probably almost doubled. Today with cutting back we could survive on them. Fortunately we have never had to even use them or depend on them.

I almost would like to see a light recession to slow down inflation in Canada. House prices jumped this January by 11 percent in Toronto. The average cost of all housing sales in the same month across the whole of Canada was 503,000. Of course rents are also rapidly increasing as well.

We as a couple had a young family at one time. It was not always the easiest. Today looks almost insane to get anywhere in comparison for young families starting out.

Financial stress is and has been the number one reason for marriage breakups. Single parent children do not seem to do as well. We are pouring the stress on young families like never before in Canada. Most are also stating that retirement is not going to be an option they think.

Barry posted a comment then I guess deleted it ? .

__________________
-Nate
1982 240D 408,XXX miles
Ignorance is the mother of suspicion and fear is the father

I did then what I knew how to do ~ now that I know better I do better