Reverse Mortgage

[NorthNola]

Hi all, Another question as my sis and I try to navigate next steps in our living arrangement and 1-3 year plan to move to something maintenance free. Want to know if any of you have any experience with reverse mortgages. Long story short. 64 and 70, neither of us has children, no additional siblings so no close "next generation" to leave anything to.

2m in investments, savings
primary home paid off value 175k,
second home condo value 425k w/200k left on mortgage (2k month).

Because of the housing market selling my primary residence isn't going to free up enough to cover a new condo. I don't want to rent because potential increases don't seem as controllable or minimal as HOA or condo fees. My FA and another friend in the FA business both suggested a reverse mortgage as a potential to free up cash. I am not ready to give up the vacation home and selling and buying smaller there isn't realistic because of the housing market as well (and the 3.3% interest rate). I am perfectly fine "leaving my home to a bank". Any insight or experience is welcome. Thanks!

 

[ivinsfan]

Two FA recommended a reverse mortgage, wait is it April 1?

 

[pb4uski]

I don't see how a reverse mortgage will help you.

You could do a cash out refinance of your second home to 80% LTV and raise ~$140k. That and $175 from sale of primary home would be $315k towards a new primary home or condo.

Otherwise just do a conventional mortgage on the new primary home.

Another option if you need temporary bridge financing between buying new housing and selling current primary home is a pledged asset LOC. I currently have one with Schwab. Rate is 8.7% but the underlying assets are yielding over 5.3% so my net cost is 3.4%.

 

[ivinsfan]

In a previous thread you started you mention the need to get rid of your primary home due to all the maintenance it requires. Are you sure you are understanding what a reverse mortgage is?

 

[NorthNola]

In a previous thread you started you mention the need to get rid of your primary home due to all the maintenance it requires. Are you sure you are understanding what a reverse mortgage is?

Pretty sure I don't, that's why the ask. But I should be clear that I'm thinking of buying a new condo then doing a reverse mortgage on that. after no primary mortgage for 15 years I didn't want to add $2700-3000 expenses per month.

Thinking of how to free up monthly spending while I'm alive rather than building up equity to leave it to no one. Or not. I like to keep things simple.

 

[ivinsfan]

Pretty sure I don't, that's why the ask. But I should be clear that I'm thinking of buying a new condo then doing a reverse mortgage on that. after no primary mortgage for 15 years I didn't want to add $2700-3000 expenses per month.

Thinking of how to free up monthly spending while I'm alive rather than building up equity to leave it to no one. Or not. I like to keep things simple.

Don't mean to offend you but I don't understand what you wrote here. Do a little on line research about reverse mortgages.

 

[Ian S]

If you want something maintenance free as well as having more cash at your fingertips, why not sell your primary residence, put the proceeds towards paying off the condo and then either fully pay off the condo with savings or continue the $2k per month payment for a year or so - or some combo of the two - to best suit your timeline? My impression is that reverse mortgages work out best for the outfits peddling them but YMMV.

 

[pb4uski]

Pretty sure I don't, that's why the ask. But I should be clear that I'm thinking of buying a new condo then doing a reverse mortgage on that. after no primary mortgage for 15 years I didn't want to add $2700-3000 expenses per month.

Thinking of how to free up monthly spending while I'm alive rather than building up equity to leave it to no one. Or not. I like to keep things simple.

IMO reverse mortgages are a ripoff. If you have a paid off property IMO you are better off getting a mortgage, investing the proceeds and using that pile of cash to make the mortgage payments than doing a reverse mortgage and paying all the fees.

You say you have $2m and I presume that you have SS or a pension of some sort... how much cash flow do you need? The $2m should easily provide $80k a year using the 4% rule... plus SS.

There is no such thing as a free lunch.

 

[ShokWaveRider]

Run Away, Run away ..... from reverse morthages.

https://duckduckgo.com/?hps=1&q=mon...www.youtube.com/watch?v=7FPELc1wEvk&ia=videos

 

[old medic]

Run Away, Run away ..... from reverse morthages.

Run Forrest Run!

 

[jazz4cash]

Still not clear but I presume OP wants a loan with no loan payment which I think only happens via reverse mortgage. So lets assume 500k purchase price less 175k from sale of primary. That leaves 325k to be financed via reverse mortgage. I think the most you could get via reverse mortgage is about 300k on 500k appraised value so maybe take some from your nestegg. The problem Ive noted with reverse mortgages is the fees that make it a very expensive option if you have other choices.

 

[pb4uski]

You have to have home equity in order to do a reverse mortgage, so I don't see how a $500k purchase price with $175k from sale of current home gets the OP anywhere.

A reverse mortgage would be a way for someone that has a $500k paid-off house to monetize it and generate monthly cash flow that creates a loan secured by the home... and when the owner dies the mortgage company sells the house and the proceeds from the sale of the house pay off the reverse mortgage loan.