Loaning a friend money

[LivingAlmostLarge]

Because she can't afford to buy or even rent anything else. I think the best idea is to help settle the estate when her mom passes. It's really hard to tell someone look the ideal thing is to cash out your mom's ira and pay off the reverse mortgage that is in her mom's name.Her mom has the house in her name. And my friend has been paying all her bills one by one. It's been very organized. She save 15% retirement, 5% extra and then is very responsible about paying her bills including her lawyer, etc.

[disneysteve]

I'm still confused on this whole situation. Isn't the whole point of a reverse mortgage that you get money upfront but don't have to repay it until either the house is sold or the borrower dies? Why can't she just wait until her mom dies and repay it then? Plus it's not even her house at this point.

[Fishindude77]

I'm still confused on this whole situation. Isn't the whole point of a reverse mortgage that you get money upfront but don't have to repay it until either the house is sold or the borrower dies? Why can't she just wait until her mom dies and repay it then? Plus it's not even her house at this point.

I think you sign over the deed on your paid off house and the reverse mortgage company pays you a monthly stipend until you die or leave the house, whichever comes first.
The monthly amount is based on a formula considering what your house is worth and your remaining expected life duration.
I believe you can get the deed back by paying back what you have received, plus some interest and fees.

[disneysteve]

I think you sign over the deed on your paid off house and the reverse mortgage company pays you a monthly stipend until you die or leave the house, whichever comes first.
The monthly amount is based on a formula considering what your house is worth and your remaining expected life duration.
I believe you can get the deed back by paying back what you have received, plus some interest and fees.

So the reverse mortgage isn't currently costing the daughter anything and the mother is getting a monthly check. If that's the case, why the need to pay it off while she's still alive?

[LivingAlmostLarge]

No the mom isn't getting a monthly check. It is just not being paid and interest is piling up on the reverse mortgage. She is getting NO MONEY from the reverse mortgage. She borrowed in 2010 $14k and with interest and fees it's added up to about $65k now. It's that she didn't want to finish off paying $14k. It was incredibly stupid. She should have just paid instead without getting a penny back it's like an unpaid CC that keeps accruing more and more interest and fees

That's why her daugther wants to stop and get out from under it.

[kork13]

No the mom isn't getting a monthly check. It is just not being paid and interest is piling up on the reverse mortgage. She is getting NO MONEY from the reverse mortgage. She borrowed in 2010 $14k and with interest and fees it's added up to about $65k now. It's that she didn't want to finish off paying $14k. It was incredibly stupid. She should have just paid instead without getting a penny back it's like an unpaid CC that keeps accruing more and more interest and fees

That's why her daugther wants to stop and get out from under it.

Sounds more like it's structured as a cash-out refi/HEL. And/or she simply got screwed by a crook of a lender (in reverse mortgages, that's not exactly uncommon). If payments are expected, then the fact that they aren't getting made is only making the situation worse. She's going to lose the house one way or another -- in death, foreclosure, or sale. There's literally no other option here to "get out from under it" if your friend/her mom can't/won't make the payments. I'll stick with my answer of "sell the house." If she can't afford to live in the area, she may need to find a new area. My heart goes out to her, but she's gotta face reality and take care of herself.

[LivingAlmostLarge]

She can't move per divorce decree. If there is no mortgage on the house she can afford it. She just needs to wait until the house is reverse morttgage clear

[disneysteve]

She can't move per divorce decree. If there is no mortgage on the house she can afford it. She just needs to wait until the house is reverse morttgage clear

The divorce decree says she has to remain in that house? That seems oddly specific.

[mumof2]

The divorce decree says she has to remain in that house? That seems oddly specific.

I was just thinking the same thing and when the mom dies does that mean that the reverse morg people have control of her house or does the daughter? very confusing to me...

[cypher1]

Myself, no way. I've done it before and luckily not gotten burned, but money has strained relationships during that process. If you're comfortable with the potential risk of not getting $35K back for whatever reason, sure. Go for it. But it sounds like this situation is more complicated. With more moving parts to factor in, not including further burden and pressure between friendships.

To most of us, 35K is a lot to loan out to anyone. It's unfortunate your friend is in that position. Call me cold blooded, but it's really not your problem or business to be involved, even if you believe it's a short term loan. So while you have good intentions to help, you have a lot more to risk for both personal and monetary reasons.

[creditcardfree]

She can't move per divorce decree. If there is no mortgage on the house she can afford it. She just needs to wait until the house is reverse morttgage clear

She has to live in that house per the divorce decree? Or she has to live in the same school district/town? I think it needs to go back to lawyers if it was house specific. There is no way they should instruct her to live in a specific house, particularly one she has no ownership over!!

I would avoid getting involved monetarily, unless you can figure a way to have collateral from friend to back up the funds you are loaning. Otherwise it's very, very risky.

[corn18]

I would say no to your question.

I will say that I have several friends that if they knocked on my door and asked for $50k, I would start writing the check straight away and not ask any questions. I have other friends that would get a lot of questions or just a hell no.

[disneysteve]

We've loaned money to a relative once. We lent $5,000 to my cousin (who is like a brother to me) when he was in the process of moving to Florida. He has plenty of money but was short on the available cash he needed at that moment. We had absolutely no hesitation in doing it and he paid us back in a reasonable time as soon as he got settled and arranged everything. HOWEVER, even in that situation, I had a bit of ill will because during the time that he owed us that money, he bought a new car. I couldn't help but think, "How come he could buy a new car but hasn't repaid us yet?" I didn't make a big deal of it and he paid us not long after that and everything is just fine between us but that's the kind of thing that happens when you lend money to people. You start to analyze everything you see them spending money on. "Sure, they can afford to go out for a fancy dinner but haven't paid me back" or "How come they have the money for that trip but haven't paid me back?"

[AJSimon]

The way I look at it is, if I can afford to loan someone a given amount of money with an indefinite timetable for repayment, then I can afford to give them the money outright. And given no third alternative, that's what I should do. If they insist on paying me back, that's on them - I certainly won't decline the money. But I don't want to be anyone's creditor - it just makes things weird.

[LivingAlmostLarge]

Got it. Nope school district. She can't afford to rent anywhere else in the school district. It just happens to be something she can afford. Once the reverse mortgage is clear she'll be okay.

I gotta add that bad financial decisions does not make a bad person. Nor does it necessarily make them irresponsible. Sometimes a poor choice (in this case marrying the wrong person) lead to some bad financial decisions. Ones that I've seen her digging out and doing well. I did loan her $5k before and I did loan her another $5k and she paid back both. She's a really good person. I am not justifying just explaining it's not cut and dry that poor = bad person.