Reverse Mortgage with Son

By Edith Lank

March 17, 2013 5 min read

Reverse Mortgage with Son

Dear Edith: My house is free and clear, and I'd like a little extra money. I thought my son, who is comfortably off, could lend me money on a reverse mortgage. In the end the house would be his and could be sold to recoup his investment. In the institutionalized version, the bank gets the house (plus a lot of extra fees and such) and my son and other children end up with nothing. I must say no one likes my idea, but I don't understand why not. — S. C.

Answer: No one likes the idea because financial arrangements within a family can lead to problems, especially if you have other children. Arranging a reverse mortgage with a regular lending institution is more prudent. Yes, you'll spend more on closing costs, but you don't actually lay out that money now. It'll be added to the debt, along with the money you receive every month and interest.

The bank doesn't get the house when you die or move out. Yes, often the house is sold at that point, but anything left over after the mortgage payoff belongs to the heirs.

Hope this helps.

Who Owns the House?

Hello. My husband and I have a home that sits on three acres. His parents put their home on our property over 20 years ago. His dad has died, his mom is ill. We're wondering how to sell our property when we don't own her home but it sits on the property. — askedith.com

Answer: The general rule is that if you own the land you own anything built on it. It's always possible, though, that some other legal arrangement was set up when his folks' house was built. If it's a mobile home, it may make a difference whether it's on a foundation or not.

It's time to have a lawyer find out where you stand. You need professional assistance at this point.

Danger of Over-Improving

Dear Mrs. Lank: I watch lots of home improvement shows and at the end they always tell how much the improvement raised the value of the houses. It usually is $10,000 to $50,000 or more. But Realtors always look at recent home sales and base the value price on square footage. There can be a great disparity between the two. What is the real truth?

I have a small ranch that I purchased almost new a few years ago. Since then, I have spent a considerable amount of money remodeling the inside and outside. I plan on living here as long as I can, so I basically made the house the way I wanted it.

There is a comparable house a few doors down that has done nothing much to it. It is actually assessed a little higher then my house. If both were listed for sale at the same time, couldn't I expect to receive a much higher offer since I have granite counters, hickory floors, a whole house generator, large patio, etc. — M. B.

Answer: Your house would certainly sell first, and for somewhat more money than the other one, but I doubt the price would be "much higher." The basic principle of appraising is that in general, people will spend only a certain amount to live in a certain neighborhood. That's what you'll come up against if you ever try to get back what you've spent. I'm glad to hear you plan on living there as long as you can, because that's the best reason for making improvements: your own enjoyment.

I doubt if those television shows put all that updating effort into properties that are, as yours was, nearly new. And in general, almost no renovation can be expected to increase value by the amount spent. The best investment is probably updating kitchens and baths, but even then, if a house becomes the most expensive on the street, sellers can't expect to get their money out. Buyers with that much to spend probably want to live somewhere else. People are just like that.

More Family Co-Owners

Dear Edith: My aunt passed away a year ago and she had only nieces and nephews as heirs. The four of us are co-owners of one acre of vacant land. Is it legal for one of us to sell our 25 percent to an outside interest or do we have to offer it to the other heirs first? All the heirs are not on friendly terms. A little more information would help. — R.

Answer: Any one of the owners has the right to sell his or her share to anyone. You've just to find a buyer who wants to be co-owner with the others. Any owner also has the right to force a public sale of the whole acre. That solution seldom yields full value, though.

Edith Lank will respond personally to any question sent to www.askedith.com.

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