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Old 09-08-2019, 12:05 PM
 
Location: The Triad (NC)
29,212 posts, read 63,488,477 times
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Quote:
Originally Posted by thrillobyte View Post
Retired couple, no kids, no heirs. Have a million dollars cash. Want to buy a 1.5 million house...
They better have a whole lot more than just that first million working for them.
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Old 09-08-2019, 12:14 PM
 
73,611 posts, read 73,452,884 times
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Quote:
Originally Posted by thrillobyte View Post
No, Jack, that would require my mother to live in the house and she's currently a candidate for hospice and would need to be in a nursing home setting with round the clock care, which she couldn't afford even with a reverse mortgage.


But back to the reverse mortgage for a purchase. Can we use a reverse mortgage going out the gate to purchase a home we otherwise couldn't afford?
yes they require 30-40% down ... but like i said , these loans are costly and will eat up any equity in short order ... far faster then i would ever want to see with these loans. so for us it is a no go
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Old 09-08-2019, 01:18 PM
 
109 posts, read 102,030 times
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Quote:
Originally Posted by thrillobyte View Post
Anyone ever heard of this technique? Does it exist?


Retired couple, no kids, no heirs. Have a million dollars cash. Want to buy a 1.5 million house in a highly desirable area like Carmel but don't want to take out a loan that would require monthly payments. Would like to get an immediate reverse mortgage for half-million using the million cash as collateral. No payments. When I die the house goes to my wife. When she passes the bank takes the house. Doable?



Hello-

HECM's (FHA Insured Home Equity Conversion Mortgage) have a home value cap of $726,525. At the purchase price you're talking about, it would most likely not give you enough proceeds.

In today's marketplace there are several reverse mortgage lenders that offer proprietary non-recourse reverse mortgages, designed for high value properties. Rates and fees have come WAY down in the last few years because of increased competition.

Wouldn't work exactly like you're proposing, the home is the collateral.

Rough, rough, rough numbers- using average rates and terms available today.

Lets assume a 75 year old borrower doing a Reverse Mortgage for Purchase of a 1.5 million home.

With a traditional HECM you'd be lucky to get 400K in loan proceeds towards the purchase price. you would need to come up with the other 1.1MM in cash. In terms of fees, the FHA mortgage insurance alone would exceed $14,500, plus 3rd party fees like title and appraisal. Probably 20-25K in total fees. You would be staring off with 1.1MM of equity in the property in that example.

Proprietary Jumbo Reverse Mortgage:
You could get up to 750K in loan proceeds, you would only need to come up with the other 750K in cash to purchase the home. depending on the lender and rate- fees would be anywhere from zero to whatever a regular purchase mortgage would cost you. You would be staring off with 750K of equity in the property.

No mortgage payments with either program, you still pay property taxes and insurance.

If there is equity at the end, the home passes to your estate. if there is no equity the estate can do a deed in lieu. or let the bank foreclose.

If you shop around you'll probably find Fixed HECM Rates today are in the mid to high 4's, and fixed rate proprietaries start in the high 5's.


Good Luck!

Last edited by anicon; 09-08-2019 at 01:23 PM.. Reason: accuracy
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Old 09-08-2019, 03:44 PM
 
Location: Southern New Hampshire
7,372 posts, read 12,955,298 times
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Quote:
Originally Posted by thrillobyte View Post
We're old. We don't want to be giving our money to the bank. And why would we want to give away a 1.5 million dollar house to charity after making all those payments? Doesn't make a bit of sense. We're charitable, but not THAT charitable! We're getting off topic anyway.
Because, as you wrote in the first post, YOU HAVE NO HEIRS. So why would it make a difference to you -- who will be dead -- to give the house to charity? Who ELSE would you give it to after you and your spouse die? I can't think of a better thing to do.
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Old 09-08-2019, 04:10 PM
 
9,249 posts, read 5,332,568 times
Reputation: 10530
Quote:
Originally Posted by thrillobyte View Post
No, Jack, that would require my mother to live in the house and she's currently a candidate for hospice and would need to be in a nursing home setting with round the clock care, which she couldn't afford even with a reverse mortgage.


But back to the reverse mortgage for a purchase. Can we use a reverse mortgage going out the gate to purchase a home we otherwise couldn't afford?
Yes, you can. Though you don't need to cough up 2/3 of the purchase price. Half or less will do it, depending on age.
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Old 09-08-2019, 05:48 PM
 
Location: Colorado
186 posts, read 42,025 times
Reputation: 827
You will need to pay ever increasing property taxes, home owners insurance, and home maintenance with your left over cash. Every year you and your spouse who may be by themselves year in and year out. You can not miss one payment. Does not sound fun to me to have that much money tied up in one asset.

There is a LOT of red tape and rules in a reverse mortgage. Good luck with your decision.
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Old 09-08-2019, 07:42 PM
 
11,473 posts, read 11,489,725 times
Reputation: 3609
Quote:
Originally Posted by karen_in_nh_2012 View Post
Because, as you wrote in the first post, YOU HAVE NO HEIRS. So why would it make a difference to you -- who will be dead -- to give the house to charity? Who ELSE would you give it to after you and your spouse die? I can't think of a better thing to do.

Wellll.....mayyybe...


Quote:
Originally Posted by anicon View Post
Hello-

HECM's (FHA Insured Home Equity Conversion Mortgage) have a home value cap of $726,525. At the purchase price you're talking about, it would most likely not give you enough proceeds.

In today's marketplace there are several reverse mortgage lenders that offer proprietary non-recourse reverse mortgages, designed for high value properties. Rates and fees have come WAY down in the last few years because of increased competition.

Wouldn't work exactly like you're proposing, the home is the collateral.

Rough, rough, rough numbers- using average rates and terms available today.

Lets assume a 75 year old borrower doing a Reverse Mortgage for Purchase of a 1.5 million home.

With a traditional HECM you'd be lucky to get 400K in loan proceeds towards the purchase price. you would need to come up with the other 1.1MM in cash. In terms of fees, the FHA mortgage insurance alone would exceed $14,500, plus 3rd party fees like title and appraisal. Probably 20-25K in total fees. You would be staring off with 1.1MM of equity in the property in that example.

Proprietary Jumbo Reverse Mortgage:
You could get up to 750K in loan proceeds, you would only need to come up with the other 750K in cash to purchase the home. depending on the lender and rate- fees would be anywhere from zero to whatever a regular purchase mortgage would cost you. You would be staring off with 750K of equity in the property.

No mortgage payments with either program, you still pay property taxes and insurance.

If there is equity at the end, the home passes to your estate. if there is no equity the estate can do a deed in lieu. or let the bank foreclose.

If you shop around you'll probably find Fixed HECM Rates today are in the mid to high 4's, and fixed rate proprietaries start in the high 5's.

Good Luck!
Very helpful info, anicon. Thank you.

The PJRM sounds like the one for me. A 750/750 split sounds like a dream come true. Reverse mortgages used to be the loans from hell with all the fees but since the RE market has heated up mortgage lenders have been softening their fees since people have shied away from using them and are trying to lure borrowers back in with things such as no-fee loans. MarketWatch has an excellent article on Jumbos:
https://www.marketwatch.com/story/wh...ges-2019-02-13
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Old 09-08-2019, 08:39 PM
 
Location: San Diego
1,102 posts, read 749,495 times
Reputation: 1361
I have looked into an FHA HECM Reverse Mortgage. I am toying with the idea of paying cash for a $700k home and getting RM equity line. The equity line will grow at 4% or whatever the interest rate is at the time and with any luck the home value will also grow. For The equity line to.grow it is not dependent on the value of the house and cannot be cancelled or closed like my equity line was in 2008.
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Old 09-09-2019, 12:18 AM
 
Location: Ocala, FL
411 posts, read 484,154 times
Reputation: 1323
We bought our house in 2010 using a reverse mortgage. We put down about $115,000 on a $245,000 home purchase. In 9 years the balance on the mortgage is now about $234,000 and the house is now worth about $390,000, so if we sell it tomorrow without a realtor we're still going to come out with all the money we first put in plus a profit.

Over the 9 years our only expenses have been property taxes, insurance, and normal upkeep you'd have to put out for any home purchase. The great thing is when the A/C died, we had the money to fix it!

We get to live in a much nicer home than $115,000 would have bought even in 2010 during the real estate collapse.

When my DH passes in the not-distant future (end-stage renal disease with dementia), even though I wasn't 62 when we bought the house, meaning I wasn't put on the mortgage at that time, changes have been made by HUD that will allow me to continue to live here under the same terms until I die. I plan to sell out, though, and move to a smaller place that's easier to take care of. I'm disabled and unable to deal with 5 acres any more.
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Old 09-13-2019, 07:18 PM
 
109 posts, read 102,030 times
Reputation: 155
Quote:
Originally Posted by FloridaHappy View Post
We bought our house in 2010 using a reverse mortgage....

...even though I wasn't 62 when we bought the house, meaning I wasn't put on the mortgage at that time, changes have been made by HUD that will allow me to continue to live here under the same terms until I die. I plan to sell out, though, and move to a smaller place that's easier to take care of. I'm disabled and unable to deal with 5 acres any more.

Hello-

You should call your loan sericer to confirm this. You can also call FHA directly: 1-800-CALL-FHA.

As far as I know, the deferral period (Non-Borrowing Spouse protection) is only available to case numbers assigned on or after 8/4/14. Which is when Mortgagee Letter 2014-7 went into effect. https://www.hud.gov/sites/documents/14-07ML.PDF

If you took your loan out 10 years ago and haven't refinanced, I believe your loan will come due if your spouse pre-deceases you. To be protected, you need to refinance to be added as a borrower or a NBS again.

There are churning rules against HECM to HECM refinances. These rules are waived if you're adding a spouse that isn't on the old loan. But the #'s still need to work.


-anicon

Last edited by anicon; 09-13-2019 at 07:30 PM..
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