Reverse mortgages
In laws considering a reverse mortgage. Anyone here have a condensed version
of what they are all about?
Basically, the mortgage company forwards you money either lump sum or income
stream depending on agreement. In return, you guarantee them portion of
proceeds from your home when you sell or die....which portion has an
interest rate such that what they do get eventually is generally more than
what they pay out to you. That interest rate is much like interest rate for
regular mortgages - it can be fixed or variable. Clearly, different
lenders have different interest rates and structures...just as for regular
mortgages. Anything left after they take out their 'share' is yours or your
estate's. Dunno the tax treatment of all this.
To take the example a little further, say you withdraw the $322566.11
at the age of 82 and blow it all in Las Vegas and then die. Your heirs
will now have to sell the house and pay the mortgage company
$354,823.00 from the proceeds. If the house, however, doesn't sell for
that much, the bank eats the difference. On the otherhand, if you die
at the age of 82 before you withdraw the money, your heirs will only
owe $32256.61.