Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Is a Reverse Mortgage a viable planning tool?
Old 09-04-2020, 09:10 AM   #21
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Posts: 1,547
Is a Reverse Mortgage a viable planning tool?

Quote:
Originally Posted by JillPill View Post
Reverse mortgages are not for everyone- especially people looking to preserve equity in their homes for heirs. If you are a person- like OP - without children then the decision gets easier. (My DH and I are childless and love our many nieces and nephews very much but feel no obligation to any of them)

The home value at the start is all that really matters. If it reduces or stagnates it won't matter.

It's a great way for *some* people not *everyone* to use the substantial equity in their home while they are alive.

This scenario is what I was pondering. I can certainly understand the value and mental comfort of having a paid off home. However, the long term math works better for us by keeping a mortgage, plus Iím the type who would feel like home equity of $750K and more ďjust sitting there untappedĒ would feel like a waste if I had a viable tool available to magically use $250,000 of it to make our monthly mortgage P&I payments stop. I take it from the comments that when one looks under the hood of RMs, they find that thereís more to the story than a magic free lunch, so Iím not going to build it into our plan. But who knows? 13 years is a lot of time for the rules and new RM offerings to change, too.

Others have mentioned HELOCs rather than RMs but itís hard for me to understand the advantage of HELOC debt and its required payments vs. keeping the regular mortgage. What am I misunderstanding?

Fortunately, this idea is all an hypothesis and not a necessity to make our plan work. Thanks for helping me kick it around, everyone. OldShooter is, of course, right that trying to plan 13 years out with any detail is futile. One blown knee or some arthritis, for example, and weíre not going to like these stairs much.
Markola is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-04-2020, 09:49 AM   #22
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 1,686
I am so tired of seeing Tom Selleck on TV for the past 6 months trying to sell the idea of reverse mortgages. He comes on a number of stations a few times every hour. Any company that invests that kind of time and money to pay for that many commercials has to make the difference up somewhere. For that reason alone I would not trust they were in your best interest regardless of what ol' Tom says. A bag of magic beans for your cow may not be a good idea.



Cheers!
Badger is offline   Reply With Quote
Old 09-04-2020, 10:05 AM   #23
Moderator
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 7,061
Quote:
Originally Posted by Markola View Post
Others have mentioned HELOCs rather than RMs but it’s hard for me to understand the advantage of HELOC debt and its required payments vs. keeping the regular mortgage. What am I misunderstanding?
EDIT: Never mind. You wanted a comparison of keeping the mortgage vs a HELOC. Yes, keep the regular mortgage unless you have a slam-dunk investment that can make a big rate of return. I'll leave the HELOC vs RM rant, below, because, well, it's already written.

In theory, reverse mortgages are great, but practically, they're horrible.

They are more complicated than HELOC's. And whenever "they" make a product that's complicated, they load it up with crap that's no in your best interest. So if you put a reverse mortgage and a HELOC side-by-side, they do the same thing, but the expenses, fees and rates are totally one-sided against the RM. What's hard to do is get the real numbers for a reverse mortgage (they don't want you to have them). But if you ever did get all of the costs, all of the "gotchas", all of the rates, and put them side-by-side with a HELOC, you'd see, I'm pretty sure of it, that the HELOC wins, hands-down.
sengsational is online now   Reply With Quote
Old 09-04-2020, 10:17 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Feb 2012
Posts: 1,351
Quote:
Originally Posted by Badger View Post
I am so tired of seeing Tom Selleck on TV for the past 6 months trying to sell the idea of reverse mortgages. He comes on a number of stations a few times every hour. Any company that invests that kind of time and money to pay for that many commercials has to make the difference up somewhere. For that reason alone I would not trust they were in your best interest regardless of what ol' Tom says. A bag of magic beans for your cow may not be a good idea.



Cheers!
+1,000. Never could stand the guy especially after he was caught stealing water from the local water utility. Those ads try to make him seem so trustworthy. They have the effect of me concluding that RM's are scams. May not be, but that's my opinion. Maybe he can sell payday loans too.
H2ODude is online now   Reply With Quote
Is a Reverse Mortgage a viable planning tool?
Old 09-04-2020, 01:52 PM   #25
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Posts: 1,547
Is a Reverse Mortgage a viable planning tool?

Well, I like to keep things simple and understandable, so these recent comments above about hidden this or that or scammy infomercials are enough to put me off. I donít have cable so I havenít seen Tom Selekís sales job.
Markola is offline   Reply With Quote
Old 09-04-2020, 03:02 PM   #26
Thinks s/he gets paid by the post
 
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 2,529
A co w*rker of mine 20 years ago had 2 beachfront condos in/near Destin FL that he rented out all the time. He had a property management group, but him and his wife had no kids. He helped me initially when I started real estate investing, and his plan was to retire, liv in one of them, continue to collect rents on one of them, then put a RM on his other condo and his house up here, snowbird or rent it out. Sounded like a plan, don't know if he ever enacted it, as I went on to other job assignments in the company.
__________________
Give me Liberty or give me Death. Patrick Henry
Winemaker is offline   Reply With Quote
Old 09-04-2020, 03:52 PM   #27
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 2,297
I guess I'm lucky (from another thread) but I see no merit in mixing worlds between the roof over my head and investments. Think back to our ancestors and how this situation was positioned. Ownership vs company towns etc.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
foxfirev5 is online now   Reply With Quote
Old 09-07-2020, 07:57 AM   #28
Full time employment: Posting here.
 
Join Date: Aug 2015
Posts: 762
Before I would RM, I would refi and extract as much as I could such that the extracted cash would pay the new mortgage for my lifetime and then some. My FIL got a 30 year mortgage on his final condo in Ft Lauderdale at 80, with 5% down and paid PMI. It was only a $150k condo, so a small mortgage and he spent it on whatever he wanted. He died at 89 in 2012 and it was still underwater then so we let the bank take it. He gambled that it might be worth something to his kids later, but instead they split the couple hundred K that was still left from the invested proceeds of the house he sold when he decided to go maintenance free single level. I calculated the estate was still quite a bit ahead vs had he bought it for cash and we sold it at the going market.

I have always been relatively lucky in home appreciation, but would never gamble on a value that far in advance for a RM.
Perryinva is offline   Reply With Quote
Old 09-07-2020, 09:05 AM   #29
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Posts: 1,547
Quote:
Originally Posted by Perryinva View Post
Before I would RM, I would refi and extract as much as I could such that the extracted cash would pay the new mortgage for my lifetime and then some. My FIL got a 30 year mortgage on his final condo in Ft Lauderdale at 80, with 5% down and paid PMI. It was only a $150k condo, so a small mortgage and he spent it on whatever he wanted. He died at 89 in 2012 and it was still underwater then so we let the bank take it. He gambled that it might be worth something to his kids later, but instead they split the couple hundred K that was still left from the invested proceeds of the house he sold when he decided to go maintenance free single level. I calculated the estate was still quite a bit ahead vs had he bought it for cash and we sold it at the going market.

I have always been relatively lucky in home appreciation, but would never gamble on a value that far in advance for a RM.

Interesting strategy, which I hadnít considered, because I assumed banks would not sell a 30 year mortgage to an 80 year old. Really, what your FIL did, may he rest in peace, sounds like a more flexible and transparent reverse mortgage variant in that, in both scenarios, the bank ends up with the house. However, in your FILís model, the ownerís hands arenít tied regarding what he/she can do with it during life, as with a RM. For example, with a RM one canít rent the place out, and many other strings. It also sounds easier on the executors to simply give the condo to the bank rather than deal with selling it themselves. Makes sense to me. Any other upsides or downsides to your FILís decision?
Markola is offline   Reply With Quote
Old 09-12-2020, 10:19 AM   #30
Full time employment: Posting here.
 
Join Date: Sep 2007
Posts: 875
Quote:
Originally Posted by Markola View Post
I assumed banks would not sell a 30 year mortgage to an 80 year old.
Why not? They make 30 year mortgages to 70 year olds all the time. And they know that most of them will not make it to 100.
rayvt is offline   Reply With Quote
Old 09-12-2020, 10:34 AM   #31
Recycles dryer sheets
 
Join Date: Nov 2012
Posts: 134
Quote:
Originally Posted by rayvt View Post
Why not? They make 30 year mortgages to 70 year olds all the time. And they know that most of them will not make it to 100.
Age discrimination in lending is illegal in the US under the Fair Lending Act. https://www.occ.treas.gov/topics/con...r-lending.html

Other countries have different rules; I've seen news stories about people in their 40s having a hard time getting mortgages in the UK since the mortgage was longer than their expected remaining time in the workforce.
geeky_grrl is offline   Reply With Quote
Old 09-12-2020, 02:37 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Jul 2007
Posts: 1,213
It think I would buy a small house somewhere or rent a small apartment. A Reverse Mortgage does not seem worth it. If you moved to the Midwest you could buy a house and take out more than 250k Maybe as much as 450k
FANOFJESUS is offline   Reply With Quote
Old 09-12-2020, 06:42 PM   #33
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Location: NE Tarrant County
Posts: 4,475
I disagree that reverse mortgages are always a bad idea. It depends on the situation. As I recall Wade Pfau was suggested using reverse mortgages as part of a retirement plan. He indicated that using a reverse mortgage earlier in retirement actually works out better financially than doing at the last moment.

https://retirementresearcher.com/usi...t-income-plan/

It has been awhile since I read the article so I don't know if he has written anything newer about it.
Katsmeow is offline   Reply With Quote
Old 09-13-2020, 06:07 AM   #34
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 1,686
Quote:
Originally Posted by Markola View Post
Well, I like to keep things simple and understandable, so these recent comments above about hidden this or that or scammy infomercials are enough to put me off. I donít have cable so I havenít seen Tom Selekís sales job.
I haven't had cable for a couple of decades now. I have an antennae for the local stations and Tom is on there selling RM constantly throughout the day. Some of the commercials are older and some more recent as can be seen getting "long in the tooth". Maybe the commercials are more frequent here in Florida due to the high percentage of retired folks.



Cheers!
Badger is offline   Reply With Quote
Old 09-13-2020, 06:33 AM   #35
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Posts: 1,547
Quote:
Originally Posted by Katsmeow View Post
I disagree that reverse mortgages are always a bad idea. It depends on the situation. As I recall Wade Pfau was suggested using reverse mortgages as part of a retirement plan. He indicated that using a reverse mortgage earlier in retirement actually works out better financially than doing at the last moment.



https://retirementresearcher.com/usi...t-income-plan/



It has been awhile since I read the article so I don't know if he has written anything newer about it.


Quote:
Originally Posted by geeky_grrl View Post
Age discrimination in lending is illegal in the US under the Fair Lending Act. https://www.occ.treas.gov/topics/con...r-lending.html



Other countries have different rules; I've seen news stories about people in their 40s having a hard time getting mortgages in the UK since the mortgage was longer than their expected remaining time in the workforce.


Thanks for the articles.
Markola is offline   Reply With Quote
Old 09-15-2020, 05:36 PM   #36
Full time employment: Posting here.
 
Join Date: Jan 2016
Posts: 523
A friend of mine sold her home in another state and took out something called a ďreverse mortgage for purchaseď to buy a new home. I had never heard of this product but she is happy with it.

She had to put down a big down payment and thatís all. No payments for life. She banked the rest of the money she hit from the sake of her other house.


She is 70 and single no children.
meleana is offline   Reply With Quote
Old 09-15-2020, 09:46 PM   #37
Recycles dryer sheets
 
Join Date: Dec 2017
Posts: 110
I think if you are cash poor and have lots of equity in your house, a reverse mortgage can be a good way to go. A friend of mine took one out. She had tons of equity, low property taxes and not a lot of current income. The reverse mortgage changed her life.

There are high fees, etc., but in some cases, it is the right decision.
samcat is offline   Reply With Quote
Old 09-16-2020, 04:22 AM   #38
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 1,686
Quote:
Originally Posted by meleana View Post
A friend of mine sold her home in another state and took out something called a ďreverse mortgage for purchaseď to buy a new home. I had never heard of this product but she is happy with it.

She had to put down a big down payment and thatís all. No payments for life. She banked the rest of the money she hit from the sake of her other house.


She is 70 and single no children.

How does that work for her taxes when she banks some of the money instead of putting it into another house?
Badger is offline   Reply With Quote
Reverse Mortgage Purchase
Old 09-16-2020, 11:22 AM   #39
Confused about dryer sheets
 
Join Date: Mar 2017
Location: Santa Monica
Posts: 1
Reverse Mortgage Purchase

I just sold my house in CA and am planning to purchase a home in florida with a RM. 600K purchase, 80% RM, so I have a nice house ,no payments for 120K...sounds good to me. let the bank worry about appreciation and future equity.
Davidz247 is offline   Reply With Quote
Old 09-16-2020, 02:02 PM   #40
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,977
Quote:
Originally Posted by Davidz247 View Post
I just sold my house in CA and am planning to purchase a home in florida with a RM. 600K purchase, 80% RM, so I have a nice house ,no payments for 120K...sounds good to me. let the bank worry about appreciation and future equity.
I have always assumed the bank HAS already worried about the appreciation and equity. They've probably built that into their fees, etc. Not saying the bank could not eventually take a bath, but usually, they would factor in a near worst-case situation so that they will not loose very often. Again, not an expert, but I assume that in some fashion, you will be paying for the bank's potential down-side risk. YMMV
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Why Solar & Wind won't be viable anytime soon? Midpack Other topics 67 06-30-2011 01:07 PM
"Putting Your Mortgage in Reverse" Nords FIRE and Money 14 12-07-2008 12:17 PM

» Quick Links

 
All times are GMT -6. The time now is 09:17 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.