We are in our late 60s but in good health and are drowning in debt. Our only asset is our home and what's in it. Car is leased. Our home is worth about $185,000.00 and we owe $72,000.00 on it plus have a home equity loan of $26,000.00. Our credit score is 700 and none of our many credit card and personal loan payments have ever been late. I have 1 personal loan of $85,000.00 from a friend at 6% interest that we now owe $29,000.00 for which the monthly pmt is $1,000.00. We need to pay this off and get $10,000.00 for home repairs. We also have an additional $80,000.00 in unsecured debt. It seems the best choice is a reverse mortgage. Anyone out there with advice on how to better handle this please comment.I also have a $100,000.00 life insurance policy.
Maybe it’s time for a bankruptcy and a fresh start! I know it’s a last ditch effort, but why live the rest of your life in such debt? You can keep your home in most cases . It doesn’t cost a thing to look into it. If you or your husband are veterans, they have free financial help available to you.
Thank you Lindsey. Yes, I am a veteran. I guess our 3 choices are Tirle 7 bankruptcy since we have no assets but the house and a life insurance policy, a reverse mortgage, or a Home Equity loan. Not sure which would be best.
Birdman: You may have problems with a reverse mortgage. My understanding is that a home needs to be paid in full which my math is showing to be $98K (72+26) between current balance and equity loan. While your equity (assuming full market value, not including fees or interest) amounts to $87K, you may or may not qualify for another equity loan it would only shuffle debt, not really pay it since you are talking about $80k in unsecured debt. Bankruptcy may or may not be an option but be aware that personal loan will have to be accounted for and only an attorney in your State can advise how that can be handled. I have no clue how your insurance policy (cash value?) may or may not affect your claim. ((Also, do you not have vehicles and/or equity in them?))
I just went through this, with a lot more equity in my house and quite a bit lower debt. The reverse mortgage is a pretty complicated vehicle, but the main thing is, looking at your numbers, you probably won't get any cash out at closing if you do qualify. Basically, your existing debt, mortgage and equity line, would be paid off as part of the process. The amount of reverse mortgage available depends on a formula using your appraised home value (you'll pay for the appraisal), your age (age of lowest-age spouse), amount of home debt, amount of repairs to property required. You need to contact a reverse mortgage lender to get your numbers, and then do a lot of research. Closing costs also figure into it, and they are pretty high, but will be wrapped into the mortgage. If you do qualify, you'll end up with no requirement to make a monthly house payment. You can then add that and the amount you are currently paying on your equity line, to an avalanche plan to pay off your other debts. Be aware that you'll also have to save for your insurance and real estate taxes, since those won't be escrowed under the reverse mortgage. In my case, I was able to significantly pay down my other debts with the cash out from the RM, then save enough for a couple years of escrow, and add a lot to my avalanche plan such that I'll be debt-free (except for the RM) in about a year. But do your research and due diligence. And, you can negotiate on interest rates for the RM.