Tuesday, August 17, 2010

REAL Financial Freedom

I'm guardian for a young man who had a stroke;  he lives with his dad "Mr. B" (his mother passed away several years ago). I get the young man's social security disability and pay his bills, including a stipend to Mr. B for taking care of him.

Dad called the office today and happened to mention that he was getting a reverse mortgage.  Donna knows my thoughts on them and alerted me;  I got him in immediately and reviewed the loan.  Basic financial picture:  monthly income 1830, monthly expenses less than 800 (not counting groceries). But Mr. B can't last the month without invading savings. No Budget (his wife handled the household finances before she died) No mortgage - house is paid for. Mr. B is over 80.

The loan was going to net $100,000 - after almost $7000 in fees and expenses. Plus there was going to be a monthly service charge added (but not prominently disclosed in the application documents).

Mr. B just wanted to have the money available. NO plan on what to spend it on, just some vague ideas. "But that Winkler fella (Henry Winkler, a/k/a Happy Days the Fonz) and Robert Wagner (It Takes a Thief, Hart to Hart, etc) say on TV how good it is".  They're paid to say that!

I told Mr. B that there are a dozen different ways to accomplish what he needed, and will help him meet them. The way he didn't need was this loan, or Financial Freedom servicing it.   With his signed consent we called it off.

Guess that won't get me back on FF's Christmas Card list, huh?

Seriously, in my opinion reverse mortgages are dangerous;  if you, your parents, or any elder person you care for is thinking of one, get an independent review from a professional before you do it. A Fee-Only financial planner (one who doesn't sell you something), a lawyer who's practice emphasizes ElderLaw (find one at www.naela.org) etc.   In some cases it's an appropriate tool, but -- in my opinion -- it's oversold, wastes the estate and creates a lot of hardship on families.

1 comment:

  1. AMEN! Or as they used to say when we were younger - Right On, Right On, Right On!