The widow of my husband's college friend came to visit last week. The husband, a highly trained professional, had run their financial situation into a deep hole through extravagant travel and hobbies. The widow had her own resources (an inheritance) which the husband also squandered in recent years.
Finally, their debts overwhelmed them. The husband had maxed out his credit cards and cashed in his whole life policy.
The husband died suddenly last winter without a will and left his widow with an overwhelming mess.
Before he died, he insisted they take out a reverse mortgage. The wife wanted to declare bankruptcy but the husband countered with, Doctors don't declare bankruptcy. He was living a lie and didn't want to burst others' perceptions. Pride goeth before a fall, as my mother always said..
The widow told me she never wanted the reverse mortgage, fought against it, and now wants to pay it off because interest on the advances is accruing. The issue is, she has no money except social security. What is she going to live on? She can't pay off the reverse mortgage and sell the house because they tried to sell the house for years. No luck. The neighborhood has declined and the house has deteriorated.
A reverse mortgage is a last resort. Our friend's wife needs the money from the reverse mortgage. Sure, interest is high, but she has no other option. She is chained to the house which I really believe is worthless. When she dies or sells the house, the house reverts to the bank. Her children will not "inherit" the house; maybe they will get what funds haven't been used through advances and interest. Having the bank liquidate the house will actually be a blessing. The house will be a worthless nightmare for the bank.
This is a circumstance where the widow should take the money, as much as she can, and run.
I tried to gently approach this issue with my friend, but she has her mind made up.
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