DEAR BRUCE: What reverse mortgage company will keep paying you on your reverse mortgage when it is already upside down. I’m sure a value was agreed upon and the payments will come until this amount is reached. Credit cards don’t work when their maxed out. — G.G., via e-mail
DEAR G.G.: You raise an interesting point. Reverse mortgages work like this, assuming there are no other mortgages on a piece of property when making the application and these can be dealt with as well. The mortgage company agrees to pay you in lump sum or installments of fixed amount of money. This fixed amount ordinarily gives them a very substantial cushion with regard to the overall value of the property, perhaps 50 or 60 percent of the then value. They are committed until you pass away or leave the premises allowing you to stay there as long as the insurance and taxes are paid. The fact that their investment is upside down is of no interest to you. The person with the mortgage (since they are “stuck” with it) ordinarily, they have allowed enough cushion there so they are not in jeopardy.
The major jeopardy is, if the person who is granted the mortgage lives an ordinate amount of time, since the amount loaned is in part predicated on the life expectancy when the mortgage is issued. Your analogy about credit cards while seemingly makes sense, does not apply. Once the mortgage is issued, as long as the mortgagee meets their obligations, the mortgage company is on it.
DEAR BRUCE: I am 59 years old and recently divorced from my second husband. I plan to retire in five years. Will I be able to collect Social Security benefits equal to either one of my ex-husbands? Both of them made considerably more money than I did, and will be receiving a much larger monthly income from Social Security. My first husband will receive the largest income. I could not find this information on the Social Security website. — Molly from Florida
DEAR MOLLY: You didn’t indicate how long you were married to these guys, but if you were married to either one of them for 10 years or more, you are eligible to collect under their account. First, you must make a claim for your own, based upon the payments you made. The amount you collect will be raised proportionately. I understand the propensity for most folks to go to a website to find this information, but in this situation it will be well worth your time to stop by a Social Security office with all the specifics like Social Security numbers, etc. The office can research your individual circumstance completely and accurately. It is certainly worth the investment of your time.
DEAR BRUCE: My husband is looking to retire and he knows someone who is suggesting annuities. It is scary that you cannot touch the money once you sign up for the annuity. What is your take on them? — Toni, via e-mail
DEAR TONI: You mentioned “someone” is suggesting annuities. I would be very surprised if that someone is not an insurance salesman. There are so many annuities available today. It is difficult to say that one is against or for. However, more and more salespeople are pushing variable annuities of one kind or another, and most have one unfortunate characteristic — the money must be left there for a substantial period of time, which is usually seven or more years, unless it’s left or if it’s withdrawn early. The penalties can be substantial. The older the annuity is the more troublesome that could become. The money may very well be needed or wanted, there is obviously a distinction. In most circumstances, I would want a great deal of investigation by a neutral party (not the salesperson before an annuity is considered). There are situations where the income can be justified, but move very softly.
Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: firstname.lastname@example.org. Questions of general interest will be answered in future columns.