What is a reverse mortgage anyway? It sounds like something that would be a really good idea if all your heirs are liberals.
What is a reverse mortgage anyway? It sounds like something that would be a really good idea if all your heirs are liberals.
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Imagine your house is paid off and you’re 75 years old. You’d like to be able to travel or help your children or grandchildren, but the only real asset you have is your house. The bank gives you some portion of the value of the house (40%) and you pay only the interest on the loan every month, no principal. The bank gets all the interest you paid while you were alive and when you die and the house is sold, and they get all the proceeds of the loan back. I know someone who did this and she liked having the extra $70,000 in the bank in case the roof had to be replaced, or she wanted to go to Florida for winters. From a greedy heir’s perspective, you’re spending their inheritance, but you’re really just using your earned equity to improve your lifestyle while you’re alive with few other resources. I’m unaware of the interest rates on these things. I don’t think it qualifies as usury. In practice, it is a sly way to reduce inheritances, which might be desirable if your heirs were all liberals.