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Would you do it?
Old 04-09-2016, 08:51 AM   #1
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Would you do it?

An intriguing article by Scott Burns on the use of reverse mortgages to buy new homes with 50 percent down and then using a reverse mortgage to pay the mortgage on your 50% ownership to pay the remaining mortgage payments.

https://assetbuilder.com/knowledge-c...rtgage-payment

Not good if you want to leave property to your kids, or if you want to reserve the possibility of a later reverse mortgage to pay long-term care costs, but perhaps something to consider?
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Old 04-09-2016, 09:25 AM   #2
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Wait a minute! It sounds good on the surface, until you run the numbers. You start out with 50% equity and 50 % mortgage. With the reverse mortgage, you decrease your 50 % equity with each mortgage payment. Since the mortgage payment is principal and interest, you only get a small portion of your equity back.
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Old 04-09-2016, 10:32 AM   #3
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To me, a reverse mortgage is only a last ditch possibility, in case someone runs out of money during the last few years of life and needs money for LTC. And who's to say that reverse mortgages will even be offered to the elderly in the future? I don't think a reverse mortgage is a plan, it's a gamble.

I'm not counting on a reverse mortgage. Instead, I'll leave my house to my heirs. Although they will have the hassle of selling it, they will end up with more that way.
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Old 04-09-2016, 11:04 AM   #4
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Originally Posted by W2R View Post
To me, a reverse mortgage is only a last ditch possibility, in case someone runs out of money during the last few years of life and needs money for LTC. And who's to say that reverse mortgages will even be offered to the elderly in the future? I don't think a reverse mortgage is a plan, it's a gamble.

I'm not counting on a reverse mortgage. Instead, I'll leave my house to my heirs. Although they will have the hassle of selling it, they will end up with more that way.
+1, my thoughts exactly - only as a last resort, but on the radar.
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Old 04-09-2016, 11:13 AM   #5
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I never would, but others might not have a choice.
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Old 04-09-2016, 09:49 PM   #6
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Originally Posted by W2R View Post
To me, a reverse mortgage is only a last ditch possibility, in case someone runs out of money during the last few years of life and needs money for LTC. And who's to say that reverse mortgages will even be offered to the elderly in the future? I don't think a reverse mortgage is a plan, it's a gamble.

I'm not counting on a reverse mortgage. Instead, I'll leave my house to my heirs. Although they will have the hassle of selling it, they will end up with more that way.

Don't have a link handy, but Wade Pfau and some others have done some simulations/research that shows that if you get a reverse mortgage and use it specifically to fund years where portfolio results are negative, that it improves your chances of portfolio survival dramatically, especially if you want to use a SWR much greater than the normal 4%. Very interesting research.


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Old 04-09-2016, 11:14 PM   #7
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There are some things to consider like you might want to move again someday. I am 67 already so when I buy my next house I could do that but then I am giving up freedom to ever move again. If I took a reverse mortgage I am accruing interest expense every month so will owe a chunk of money when I sell. So say I buy a home at 70 then decide at 80 I would rather live in a condo or with someone else like if I were to get married at 80 I would have to pay back the entire debt so less equity to roll into the next home.
Also every year they will require an inspection and for you to repair anything they think needs repaired or they can force a sale. So if you are 85 with bad knees and a bad heart and they say you need to paint the outside of the home you might not have the money to pay someone or the ability to do it so lose your home.
My grandma was living alone in a small house in a small town at 96 a floor was rotting out and other things weren't good but she didn't need to fix them she could live with the problems.
As for it paying for long term care if you move out of the home they make you sell the home once the last person on the reverse mortgage leaves the home. So if you kids have moved in they need to move out even if you need them while in long term care.
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