Best way of Using Home Equity for Retirement?

[Homeby5]

Hey guys,
I'm one of these guys who has a home that is worth more than our retirement funds. I had a stroke early in life so I retired on disability in my 40's. My wife is an RN but now at age 56...she wants to retire.
According to most calculators we can retire with our portfolio and be OK but we won't have a lot to travel or make large purchases with (like a motor home or second home). Now....our home is valued at at a pretty high amount and is paid off. Plus...we have an attached apartment on our property that produces at least $1500/month. Because of this, I really don't want to sell our home.
Soooooo.......my question is what is the best way to utilize our homes equity to spend in retirement just in case we burn through our portfolio faster than we though OR we simply want to live a little more extravagant than our budget will allow. I have thought about a reverse mortgage because of no payments until we both leave the home. Why is that a bad move?
Thanks guys!

 

[Bir48die]

How much equity do you have?

 

[GrayHare]

Get a low interest mortgage, invest the money you get from the mortgage somewhat conservatively, repay the mortgage with inflated dollars (rendering it close to free), and use the extra money from the investments to pay expenses.

 

[Homeby5]

How much equity do you have?

About $800,000 plus the apartment can rent for about $1600/month.

 

[Homeby5]

Get a low interest mortgage, invest the money you get from the mortgage somewhat conservatively, repay the mortgage with inflated dollars (rendering it close to free), and use the extra money from the investments to pay expenses.

Define "mortgage"? AFAIK I only have two options...a HELOC or a Reverse? The reverse is attractive to me because I don't have to make payments.
As far as investing the banks equity....not sure where to invest to make safe money? What type of investment are you thinking of? I don't feel it would be wise for me to invest in anything that could take a downturn with my home equity money.
Thanks

 

[pb4uski]

GrayHare is talking about a cash out mortgage. If your home is worth $800k and the bank requires 20% down then you would get $640k in cash and sign a $640k note collateralized by your house.

 

[GrayHare]

GrayHare is talking about a cash out mortgage. If your home is worth $800k and the bank requires 20% down then you would get $640k in cash and sign a $640k note collateralized by your house.

Yes, that's the concept. Since the lender is putting up the money, the lender has the risk. Might not be doable, i.e. no one will make such a loan, unless you have regular, earned income. If, however, you have limited investing experience, this might not be a good approach.

 

[Homeby5]

Yes, that's the concept. Since the lender is putting up the money, the lender has the risk. Might not be doable, i.e. no one will make such a loan, unless you have regular, earned income. If, however, you have limited investing experience, this might not be a good approach.

Nah...won't do that because I am asking about retirement (maybe read my OP again) and my only income is SSDI and rental income.

 

[GrayHare]

Well, according to your original post, your wife does have earned income, something important only at the time of the loan. As for "asking about retirement" this strategy works regardless of employment status or age, provided you find a lender, of course.

 

[Sunset]

About $800,000 plus the apartment can rent for about $1600/month.

OP - earlier you said it did rent, so are you currently renting it all the time or just an idea ?

 

[Sunset]

OP - An issue with reverse mortgages is they have high fees, so are expensive.

From reading between the lines, I would say the idea of buying an RV or a second home would be TERRIBLE....

A very simple fact of life is, a low cost home , leaves a bunch of money available to invest, and reduces the monthly bills by a lot. So you could trade your $800K home for a smaller $300K home and save on the monthly bills plus free up about $450K.

 

[pb4uski]

.....Soooooo.......my question is what is the best way to utilize our homes equity to spend in retirement just in case we burn through our portfolio faster than we though OR we simply want to live a little more extravagant than our budget will allow. ...

Nah...won't do that because I am asking about retirement (maybe read my OP again) and my only income is SSDI and rental income.

I guess that you either want it or you don't.

 

[Homeby5]

Well, according to your original post, your wife does have earned income, something important only at the time of the loan. As for "asking about retirement" this strategy works regardless of employment status or age, provided you find a lender, of course.

I see..are you to saying get a HELOC right before she retires and use the money to invest and spend on things I want. And then invest the equity money with the goal of hopefully making enough money off of the investment to pay most of the mortgage payment. Right?

 

[Homeby5]

OP - earlier you said it did rent, so are you currently renting it all the time or just an idea ?

It's renting now and will continue to rent for the time I own the home (hopefully the rest of my life). It's good income.

 

[Homeby5]

OP - An issue with reverse mortgages is they have high fees, so are expensive.

From reading between the lines, I would say the idea of buying an RV or a second home would be TERRIBLE....

A very simple fact of life is, a low cost home , leaves a bunch of money available to invest, and reduces the monthly bills by a lot. So you could trade your $800K home for a smaller $300K home and save on the monthly bills plus free up about $450K.

Yeah...I though about downsizing...and MAYBE it would be a smarter move but I hate to give up the home. It's in The Keys and I love it here.

Now here is another scenario that I believe follows your suggestion....I could simply rent out the main home (the home I live in now) and move to the smaller apartment (about 1000sf). This would give me another $1500/month income because the main home could rent for about $3000/month and the rental income I receive now goes for about half that.

But, I want to stay on topic because I have already figured that my retirement income needs can be met. I am asking about the smartest way to use my equity in my home for me to make large purchases (whether it's a motor home, 2nd home, end of life care, etc...). Talk me out of getting a reverse mortgage where I won't have to make any payments on the equity I use vs other scenarios where I would be stuck with a payment on the equity, which I really don't want because I will be on a fixed income. AKAIK...the fees are not much higher than HELOC loans and if they are...they are negotiable.
Thanks.

 

[JDARNELL]

What are you really trying to accomplish?

 

[Gumby]

If I recall correctly from the OPs's earlier thread, this is the home with the illegal rental unit on which he has not been declaring rental income for some number of years. Selling the home in order to downsize may bring these issues to light.

 

[Teacher Terry]

Research reverse mortgages. One of you must be 62. They are a bad idea. People are suggesting you remortgage your home with a new mortgage and pull out some of your equity.

 

[ExFlyBoy5]

If I recall correctly from the OPs's earlier thread, this is the home with the illegal rental unit on which he has not been declaring rental income for some number of years. Selling the home in order to downsize may bring these issues to light.

Oh snap! Yeah, that could cause issues for the OP.

 

[Bir48die]

I would sell the whole dang thing and buy something to give you $500k in investable assets. Hope that your wife can contribute in salary for awhile longer. I assume she'll have some SS?

 

[GrayHare]

I see..are you to saying get a HELOC right before she retires and use the money to invest and spend on things I want. And then invest the equity money with the goal of hopefully making enough money off of the investment to pay most of the mortgage payment. Right?

Not exactly. I'd get a standard mortgage because that maximizes the money you'll have to invest, plus the interest rate will be lower than a HELOC. Mortgage payments are irrelevant, you simply make them from the money you received from the mortgage. None of this will work though unless you have enough investment experience to produce a return larger than the interest rate of your mortgage.

 

[Homeby5]

If I recall correctly from the OPs's earlier thread, this is the home with the illegal rental unit on which he has not been declaring rental income for some number of years. Selling the home in order to downsize may bring these issues to light.

For an Administrator, you sure speak with a lot of ignorance

 

[Gumby]

For an Administrator, you sure speak with a lot of ignorance

This is what you said in your introductory thread. I'd say my post is accurate based on your own words.

.... .we have an apartment in Key Largo that we will use for income. My parents live there now but will probably generate about 1800/month currently....

I'm pulling about $2100 a month from SSDI. And yes the parents are kicking in 1300/month now.

.....the only taxable income until our age of 62 will be my SSDI. We won't claim rental income because we don't want to register with Monroe County.....

...
Basically, I have a brand new 1000 sf apartment attached to my home with a kitchen that wasn't on the plans because Monroe County only allows one sink per residence. yes....I can register to rent it, pay income tax but I don't want a surprise inspection and have to rip out a $30,000 Kitchen. So I simply rent it and while I don't claim the income...I also don't claim the depreciation and expense for anything that cost me. Kinda a wash....

 

[Homeby5]

If I recall correctly from the OPs's earlier thread, this is the home with the illegal rental unit on which he has not been declaring rental income for some number of years. Selling the home in order to downsize may bring these issues to light.

Again....since my last post was removed and I am sure this one will get me banned)....for an Administrator of a financial site, you sure exhibit a lot of childish ignorance and malice forethought. WTH are you smoking to reply in such an idiotic manner?

Not that I owe you any explanation, but I am in no way "illegally" renting an apartment. FYI...my elderly parents live in my apartment. Now when my wife retires, I may rent it out and if I decide to obey or not every aspect of the State, local and Federal Rental guidelines, Ill be sure to check with you first since you obviously have nothing better to do than get into everyone else's business.

 

[Homeby5]

This is what you said in your introductory thread. I'd say my post is accurate based on your own words.

See my above post....and as you see....none of those quotes of mine said I am doing anything illegal.
But again...WTH does any of this have to do with the topic at hand? What kind of Administrator trolls threads? You either have a lot of jealousy or you are trying to impress someone from behind a keyboard. I dunno....completely childish and has nothing to do with the topic at hand.