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HELOC or Reverse Mortgage?
Old 10-31-2016, 05:51 PM   #1
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HELOC or Reverse Mortgage?

My wife and I are retired, mid-sixties. We're thinking of buying a home around $350k as a downsizer. We are wondering if in the future we should get a reverse mortgage or a home equity line of credit? I'd like to take advantage of an all equity situation. Thanks.
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Old 10-31-2016, 05:59 PM   #2
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Sounds like you could buy the home for cash if you need to. Nevertheless, a HELOC might be a good idea. Take one out for, say, 2/3 of the cost of the home. If you don't need the money, you will probably be able to get a low interest rate. Pay it down immediately, but keep it open. If necessary, use it periodically for home maintenance or renovation projects, but keep the balance low or at zero. That way, you will always be able to use it as an emergency fund and you won't need to keep a huge cash buffer.

Disclaimer: I do this.
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Old 10-31-2016, 06:06 PM   #3
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can you get a heloc without a j*b?
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Old 10-31-2016, 06:21 PM   #4
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can you get a heloc without a j*b?
Yes. PenFed was happy to give me one some years ago, and I had been retired for a number of years already. I guess it's up to the lender.
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Old 10-31-2016, 06:30 PM   #5
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can you get a heloc without a j*b?
Only if you can show them you don't need the money!
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Old 10-31-2016, 06:35 PM   #6
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I bank with PNC, they have me a heloc. They took in consideration the amount of equity in my house along with my monthly deposits into my checking accts
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Old 10-31-2016, 07:29 PM   #7
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My DW and I just bought our "downsizer" for cash in August. At the same time I retired at age 59. DW is 51 and intends to w*rk at least another two years.

Our current plan includes obtaining a HELOC right before DW retires (I want to be certain we have w*rk-related income so I can shop freely for the HELOC). For us, the idea is that the HELOC will act only as an "emergency fund" to draw from if the market is in a downward trend; we don't want to be forced to sell equities in a down market. Outside of that occurrence, we don't intend to access the HELOC.

At the end of the HELOC's 10 year term (around my age 70 and DW age 62), we'd likely consider a reverse mortgage if necessary, for the same purpose. Belts and suspenders are a vital part of our fashionable FIRE plan.
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Old 10-31-2016, 08:02 PM   #8
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can you get a heloc without a j*b?
Yes. We were limited to the income we could prove. It's based on your debt to income ratio. It's good to establish the line of credit while your income is higher.

There may be more creative ways of increasing your line of credit. I thought there was a recent post about that?
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Old 10-31-2016, 08:21 PM   #9
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There was a thread here recently regarding HELOCs without a job.

Bottom line was that the major quasi-Federal underwriters changed their guidelines several years ago to allow some fraction of retirement assets to be used in the qualification process.

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Old 11-01-2016, 07:14 AM   #10
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Part of my thinking was that a HELOC was less complicated and had much lower fees to obtain.
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Old 11-01-2016, 07:36 AM   #11
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Reverse Mortgages are very restrictive once in place.

DMIL had a reverse mortgage, which was a blessing when she lived in the home (no house payments). BUT, when she could no longer live there due to health (moved in w/kids) she was unable to sell for more than the outstanding loan due to housing crash of '08. Potential buyer offer on short sale was rejected. (Due to high appraisal by reverse mortgage bank). She then lost the house to foreclosure. What is sad is that a daughter, who lived nearby, wanted to move into the home as a renter. You cannot rent out RM homes.

(BTW, house sold at foreclosure 4 years later for much, much less than the short sale buyer offered. Your tax dollars at work.)
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Old 11-01-2016, 03:09 PM   #12
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From what i have read reverse mortgages have high fees, etc and if both people are out of the house for 3 months (say both are rehabbing for broken bones,etc), they can force the sale of the house.
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Old 11-02-2016, 11:20 AM   #13
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I posted such a comment on another blog about this same thing. They made the point that a HELOC could be frozen in a market downturn. That actually did happen to us when the housing last crashed. Thankfully, we didn't actually need access to it. Of course, if you have the house paid off, then maybe it is doubtful it would get frozen.
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Old 11-02-2016, 12:05 PM   #14
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I bank with PNC, they have me a heloc. They took in consideration the amount of equity in my house along with my monthly deposits into my checking accts
I bank with PNC as well. We have a heloc with them and the draw down period has expired (10 yrs) and the interest rate is now 5.xx%. Thinking it's time to get a new heloc with a lower rate.

We are retired. Just wondering how easy of a process it was to get your heloc thru them? Did you need to produce a ton of paperwork and could you work thru your local branch to apply?

Thanks
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Old 11-04-2016, 04:06 AM   #15
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a side from the fees and reverse compounding interest making reverse mortgages likely a poor choice there are other issues seniors are finding out about unexpectedly .

usually those that take reverse mortgages are strapped for cash but in every reverse mortgage agreement is the fact that you are responsible for keeping that home maintained to the standards the lenders dictate .

the homes are inspected periodically and you can be told to replace that roof , your furnace , etc . anything the lender wants done you ha have agreed to do whether you have the money or not to do it .
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