Benefits of a Reverse Mortgage
Is a reverse mortgage the best way to go for my 84-year-old father?
My father is 84 years old and has an outstanding note of $107,000 that he is paying $4,400 every 6 months for 2 years, then the note is due in full. He has no real way to repay this note, but he does have a townhouse that is paid off and worth about $160,000. I thought that a reverse mortgage would be something he should do, since I am not interested in inheriting from his estate, but would rather see him not worry about this note at his age. What are your thoughts?
A reverse mortgage is designed for people over the age of 62 who have equity in their homes and limited income. Therefore, a reverse mortgage could benefit your father.
However, if he is paying interest on the second note of $107k, it may make much more sense to get a loan on his paid off property worth $160k (which is only a 67% loan to value), and use the proceeds to pay off the first note. Then, if he still needs cash out, he can do a reverse mortgage on the townhouse. This will reduce the amount of his capital going to the lender on the $107 property.
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