Income for older person / reverse mortgage?

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
Throwaway here asking this question for a friend of a friend.

She has alot of equity, but little income, and has been burning through savings.  She is trying to get a reverse mortgage.

She's 71.  Ownes two condos.

Condo 1, rental, paid off
Value 350k.  Rent 2000/month.  $390 association, prop taxes 2100/year.  Cost basis ~125k.

Condo 2, residence
Value 500k.  Owes 200k.  Taxes 4100/year, $360 association.  Total monthly expense ~1600/month.

She has ~700/month income from social security but has been going through savings and has ~30k left.

She is trying to get a reverse mortgage on Condo 2 but is running into a lot of issues.  Apparently in 2011 it was deemed not FHA-eligible.  However since then it has improved, and is likely eligible again, but the condo association is actively trying to prevent it from becoming FHA eligible, because they don't want FHA buyers moving in.  

She has 2 kids, one of whom was willing to help her out by paying off her $200k mortgage on Condo 2 - but that would only drop her payment by about 900/month, which she claims is not enough. 

If she can't get the FHA status fixed and eligible for reverse mortgage, she is considering selling condo #2, buying another condo in an equivalent association that is FHA eligible and getting a reverse mortgage on that.

Any FWF wisdom/advice?
 

Member Summary
Staff Summary
  • Also categorized in:
Thanks for visiting FatWallet.com. Join for free to remove this ad.

Clears 1.5k from condo 1, income .7k, expenses 1.6k. How is she burning through savings again?

Selling and buying seems like a horrible idea.

phatrabbitzz said:   Clears 1.5k from condo 1, income .7k, expenses 1.6k. How is she burning through savings again?
  +1 More information needed as to what is eating up the current income.

1) Sounds like your 'friend's' mom has a 'spending' problem
2) Selling #2 would basically mean any profit will vanish.

As everyone says above, you need to list her spending habits.

71 ain't exactly old. She can't get a job? At least part time. Where she at? Minimum wage in some places is $12-$15/hour. She could bring in an extra g every month by working just 20 hours a week.

phatrabbitzz said:   Clears 1.5k from condo 1, income .7k, expenses 1.6k. How is she burning through savings again?

Selling and buying seems like a horrible idea.

  Food, gas, car insurance, cable, cell phone, ect.  I mean she probably does have a bit of a spending problem, but she's got like 600 a month leftover.  I'm guessing vacancy /repairs ect for the condo also add to the cash burn when they come up.

I agree that selling and buying again seems like a horrible idea, but she is desperate to find a way to use her equity to continue living the lifestyle she is accustomed to and that is the only way she is seeing now that will allow it.  Was wondering if FWF had any less horrible ideas.  

My best idea was let the son pay off 200k of mortgage, so monthly expenses drop 900.    Then if you really need more money sell the other condo and live off of that cash (put into cd ladder) 

Not my mom, friend's mom. 

I'm assuming since condo 2 is worth significantly more she could get more rent then condo 1 current is bringing in. If it is significant she could move into condo 1 and rent condo 2.

Not sure if going to help since an additional 900 doesn't seem to per your note. Sounds like needs to learn to cut back also.

IF at all possible, keep the son out of it. He may complicate the reverse mortgage process. Reverse mortgage requires owner occupied up to date of death or sale of the covered property certified by owner annually. IF owner not occupying for one calendar years for any reason like nursing home, mortgage payoff is required.  There is an annual certification that taxes and insurance are paid on time.
Reverse Mortgage UP FRONT COSTS ARE EXPENSIVE..A FEW THOUSAND DOLLARS which in many cases are folded into the loan. The property must be maintained to certain standards. IF the condo association desires, they can simply not do certain maintenance. Then the FHA will require the owner to do it and attempt to collect from the association if they are obligated by contract to do it. Failure of the home owner to do it may cause the required sale of the condo. IMO too much risk of condo association not meeting the standard.

Most lenders will push for variable rate reverse mortgage.  While rates have been stable, they did increase this past year and are likely to do so again.

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten   See item 9.  She would be wise to minimize the draw or set a monthly fixed draw rate. For myself, I chose equity line of credit and draw as needed.  You make me wonder if she has the discipline to make that feasible
In most reverse mortgages, the unused portion can draw untaxed interest until drawn out.

Another problem is most reverse mortgages are done over the telephone where it is easy to not get all the facts.  I was lucky in that the company I chose had a local rep who knew my Mother.  That is not always the best way to choose a reverse mortgage company, but that was my determining factor ... that and the local office for the paperwork.

reverse mortgages will eat up a lot of the equity while giving her a little bit of money. If she's seventy one and has no cash savings, she should probably consider selling both properties and buying or renting someplace much cheaper.

She needs a cheaper place to live. Sell condo #2 now. Move into to condo #1 for 2 years to save on taxes then move to a cheaper place.

I agree she should sell one of the places. She has not much liquidity left ($30K) after her other income. If repairs need to be done to the rental property, that could use much of that. At 71, one property is really enough. Use the money earned from the sale to generate some investment income. Also, enjoy life. Take a small vacation, but obviously don't blow it all on extravagant spending.

Sell 1 or both. Reverse mortgages are a rip-off.

Move in with son or other relative (hard part)
Sell condo 2. Net $300k. 4% withdrawal per year = $12k/year = $1k/month. Eliminate $1.6k/monthly exp.

New situation:
Total Inc = $1k (from condo2) + $1.7k (from condo 1) + $0.7k (ssi) = $3.4k/month
Also less $1.6k/month expense. Or pay rent to son/family member (keep money in family).



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017