Author Topic: Buy a Home With a Reverse Mortgage  (Read 4095 times)

Petunia 100

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Buy a Home With a Reverse Mortgage
« on: September 05, 2014, 03:08:09 PM »
One strategy I consider when I am plotting how to make my limited resources stretch far enough is the idea that I may buy my next (and final) home using a reverse mortgage.  I would need to put about half down, and then I am done buying the home.  No more mortgage payments, and I keep the other half of the purchase price invested.  If I am too young for the RM, I will buy traditionally and wait for the opportunity to take the RM.  Thoughts?

marty998

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Re: Buy a Home With a Reverse Mortgage
« Reply #1 on: September 05, 2014, 05:28:42 PM »
Your kids will hate you for that lol. All that equity going to the bank.

Typical SKI behaviour- spending the kids inheritance

Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #2 on: September 05, 2014, 05:38:13 PM »
Your kids will hate you for that lol. All that equity going to the bank.

Typical SKI behaviour- spending the kids inheritance

I have to cover my own needs first, don't I?  :)

Catbert

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Re: Buy a Home With a Reverse Mortgage
« Reply #3 on: September 06, 2014, 10:54:18 AM »
Be cautious about getting reverse mortgage at a young age (60's are young for a reverse mortgage).  You'll still need to have enough to pay property taxes, insurance and general up keep.  As time passes and inflation takes a toll on your income that could be a problem.  If you can't pay taxes, insurance and maintenance the mortgage company can ultimately take your house.

Conventional wisdom is the your 70s is a sweet spot for a reverse mortgage.  Less time for inflation to put you in a bind but enough time to make up for the high fees to get into a reverse mortgage. 

P.S. Screw the kids - it's not "their inheritance" until you die with something left.

Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #4 on: September 06, 2014, 12:36:35 PM »
Thank you for your thoughts, Mary.   

I am thinking of using the RM as a way to help me afford to retire, so I won't want to wait until my 70s, even if the payout is better.

I am 47 now, and am hoping to retire ASAP.   I lost a substantial (to me, 6 figures) amount of home equity a few years back, and it has seriously hampered my ability to buy my final home mortgage-free, something I have long hoped to do.   So if I still want to do it, my choices are to raid my retirement accounts (which are only just over 200k), look for a no-frills small condo, or buy a home using a reverse mortgage.

At this point, I am leaning towards the reverse mortgage idea.   Especially if I have to work until age 62, which I most likely will. 

My plans also include relocating to a less expensive area, so that my limited funds stretch further.

viper155

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Re: Buy a Home With a Reverse Mortgage
« Reply #5 on: September 06, 2014, 01:32:22 PM »
I hope you are researching the living shit out of this because a reverse mortgage benefits only one entity.....and it's not you. Don't do it.

Ybserp

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Re: Buy a Home With a Reverse Mortgage
« Reply #6 on: September 06, 2014, 01:50:24 PM »
If you use a reverse mortgage to live more extravagantly now than you could otherwise, what are you going to use to pay for long term care when you need it?

Are you content with total dependence on medicare and medicaid if (or maybe when) you need assistance meeting your own daily needs? Do you expect those same kids to move you into one of their homes after you've sold the bank yours? Or do you think the kids who can't sell your house to use to fund the initial costs of your nursing home will come up with the payments themselves to put you in a nice place where the older-you can feel safe and comfortable?

Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #7 on: September 06, 2014, 02:09:50 PM »
I hope you are researching the living shit out of this because a reverse mortgage benefits only one entity.....and it's not you. Don't do it.

Isn't living in a home a benefit?

Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #8 on: September 06, 2014, 02:17:53 PM »
If you use a reverse mortgage to live more extravagantly now than you could otherwise, what are you going to use to pay for long term care when you need it?

Are you content with total dependence on medicare and medicaid if (or maybe when) you need assistance meeting your own daily needs? Do you expect those same kids to move you into one of their homes after you've sold the bank yours? Or do you think the kids who can't sell your house to use to fund the initial costs of your nursing home will come up with the payments themselves to put you in a nice place where the older-you can feel safe and comfortable?

I would use my nest egg to pay for my care, until it was depleted.   Much the same way I would use my home if it did not have a reverse mortgage.
 
No, I do not expect my kids to support me.   That is why I am trying to make the best use of my resources that I can.

Ybserp

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Re: Buy a Home With a Reverse Mortgage
« Reply #9 on: September 06, 2014, 02:59:55 PM »
I would use my nest egg to pay for my care, until it was depleted.   Much the same way I would use my home if it did not have a reverse mortgage.
 
No, I do not expect my kids to support me.   That is why I am trying to make the best use of my resources that I can.

Good! In that case, why is it that paying fees to a reverse mortgage lender is better than selling the home outright and using the proceeds from the sale to buy an annuity sufficient to pay rent and equivalent living expenses? (With an annuity you'd have the payment benefit for the full remainder of your life instead of just the portion during which you were able to stay in that reverse mortgaged house and there would be no property taxes and home maintenance issues.) Or what about skipping all mortgage broker/annuity broker fees entirely and living off a 4% withdrawal from that nest egg invested in stocks and bonds?

MrsPete

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Re: Buy a Home With a Reverse Mortgage
« Reply #10 on: September 06, 2014, 04:09:54 PM »
The old guy who lived across the street from us -- nice man -- lived the nightmare scenario:  I'm not sure how old he was, but I'd guess late 70s /early 80s, and he took out a reverse mortgage on his house.  He died two months later, and his kids had massive fusses with the bank for a very long time.  The bank won big time on that, and his kids lost. 

What if you do a reverse mortgage, and then you decide you want to move?  It could happen:  Your neighborhood could go "downhill" -- I see it happening to mine in the relatively near future.  You could decide you want to move to a retirement community or just to a maintenance-free condo.  You might marry again.  You might decide to move in with a sibling or friend.  But if the bank owns part of your home, you're not completely free to get rid of your current house. 

The fees on a reverse mortgage are big.  They're meant to help desperate retirees who didn't plan well -- but the big winners are the bankers.


Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #11 on: September 06, 2014, 06:26:37 PM »
I would use my nest egg to pay for my care, until it was depleted.   Much the same way I would use my home if it did not have a reverse mortgage.
 
No, I do not expect my kids to support me.   That is why I am trying to make the best use of my resources that I can.

Good! In that case, why is it that paying fees to a reverse mortgage lender is better than selling the home outright and using the proceeds from the sale to buy an annuity sufficient to pay rent and equivalent living expenses? (With an annuity you'd have the payment benefit for the full remainder of your life instead of just the portion during which you were able to stay in that reverse mortgaged house and there would be no property taxes and home maintenance issues.) Or what about skipping all mortgage broker/annuity broker fees entirely and living off a 4% withdrawal from that nest egg invested in stocks and bonds?

In the lower cost area I have in mind, I could buy a small but nice sfh for about 150k.   To buy it with a reverse mortgage, I would need to put about 75k down.   75k will not buy an immediate annuity paying enough to cover rent for the rest of my life.   Online quotes indicate it would pay about $350 per month with no cost of living adjustment.

Or, I could use the 75k to buy a 1 bedroom apartment style condo outright.   I'd rather have the small sfh with a garage and no HOA or HOA dues, and no shared walls.

Petunia 100

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Re: Buy a Home With a Reverse Mortgage
« Reply #12 on: September 06, 2014, 06:30:49 PM »
The old guy who lived across the street from us -- nice man -- lived the nightmare scenario:  I'm not sure how old he was, but I'd guess late 70s /early 80s, and he took out a reverse mortgage on his house.  He died two months later, and his kids had massive fusses with the bank for a very long time.  The bank won big time on that, and his kids lost. 

What if you do a reverse mortgage, and then you decide you want to move?  It could happen:  Your neighborhood could go "downhill" -- I see it happening to mine in the relatively near future.  You could decide you want to move to a retirement community or just to a maintenance-free condo.  You might marry again.  You might decide to move in with a sibling or friend.  But if the bank owns part of your home, you're not completely free to get rid of your current house. 

The fees on a reverse mortgage are big.  They're meant to help desperate retirees who didn't plan well -- but the big winners are the bankers.

You can sell a house after taking a reverse mortgage.  You must pay the mortgage in full before title is transferred,  just as you must with a traditional mortgage.

Yes, the fees are large.  That is a definite bummer.

deborah

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Re: Buy a Home With a Reverse Mortgage
« Reply #13 on: September 06, 2014, 06:54:52 PM »
The old guy who lived across the street from us -- nice man -- lived the nightmare scenario:  I'm not sure how old he was, but I'd guess late 70s /early 80s, and he took out a reverse mortgage on his house.  He died two months later, and his kids had massive fusses with the bank for a very long time.  The bank won big time on that, and his kids lost. 

What if you do a reverse mortgage, and then you decide you want to move?  It could happen:  Your neighborhood could go "downhill" -- I see it happening to mine in the relatively near future.  You could decide you want to move to a retirement community or just to a maintenance-free condo.  You might marry again.  You might decide to move in with a sibling or friend.  But if the bank owns part of your home, you're not completely free to get rid of your current house. 

The fees on a reverse mortgage are big.  They're meant to help desperate retirees who didn't plan well -- but the big winners are the bankers.

You can sell a house after taking a reverse mortgage.  You must pay the mortgage in full before title is transferred,  just as you must with a traditional mortgage.

Yes, the fees are large.  That is a definite bummer.
I can see a point (but there is no way I would ever do it) if you are sure you are going to live in that house for the rest of your life. However, you are not sure. You could be amongst the large numbers of people who need to go to some sort of assisted accomodation as they get older - or any of the myriad of other reasons to move house. After all, on average, houses are sold every 7 years, and you are only 47. That means you have about 33 years left. Have you lived anywhere for 33 years?