Reverse Mortgage: Subject To

[Nigel Johnson]

A lady called me with a nice house in a nice neighborhood that she wants to sell for what she owes which is $108k, and it is worth $150k. It needs no repairs, since her son is one of my best contractors who told her to call me.

She is in her early 80's, and she and her husband took out a reverse mortgage around 1993. She received monthly payments for years, but they eventually stopped a few years ago.

Her husband died 6 years ago, and the house is too large for her to maintain by herself (keep clean, cut the grass, utility bills, etc.). She wants to rent a small house with a small yard.

I mentioned that I might be able to help her with the house she no longer wants, and could likely help her find a house to rent.

Admittedly, I don't know much about Reverse Mortgages, but it seems like I would be buying a beautiful house subject to a mortgage with no monthly payments, but a balloon when she dies.

Couldn't I just buy a term life insurance policy on her, and use the proceeds to pay off the mortgage when she dies? Surely, the life insurance premiums would be a good tradeoff if I am receiving a "free" $150,000 house.

What am I missing?