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Old 06-24-2014, 02:37 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,585 posts, read 39,962,822 times
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A HELOC can work too.

Home equity loan that acts as a 'line-of-credit'
Take out more than you need and use the extra to pay the minimum amount back on the Heloc.

I have also used stock 'margin' accounts in the same fashion.
Quick funds to do what you must today, repay as you care to. Rates are pretty low.

Traditional Reverse Mortgages are pretty spendy (costs / fees / restrictions). There are ez'r ways to get play-dough.
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Old 06-24-2014, 02:48 AM
 
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why would you pay interest at any level on money you were not going to utilize? if you did use it for a higher return then the risk is you may not have it available to make the payments or will lose some of it if things are down and you need to make payments . while i can see investment uses i am not sure of this strategy in retirement.

the idea with a reverse mortgage is zero payments , no liability to make them. just the opposite is what a heloc gives you.
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Old 06-24-2014, 03:44 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,585 posts, read 39,962,822 times
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Quote:
Originally Posted by mathjak107 View Post
why would you pay interest at any level on money you were not going to utilize? if you did use it for a higher return then the risk is you may not have it available to make the payments or will lose some of it if things are down and you need to make payments . while i can see investment uses i am not sure of this strategy in retirement.

the idea with a reverse mortgage is zero payments , no liability to make them. just the opposite is what a heloc gives you.
I pay no interest on money I am not using (HELOC or Margin). It is just a handy checkbook when needed (For $20/ yr fees). Last I checked the Reverse (interest and fees) was 4x the interest rate of my Heloc and Margin accts. If it is all funded by the 'remainder estate'... why not get as much money / benefit as possible. Neither the Heloc or Margin generates DEBT greater than the estate (greater than value of assets).

So... expenses / costs will be settled upfront (with a reverse), or they will be settled on the tail end via recovering the debt from assets held by the estate.

Seems similar to your view on ROTHs. Why pay today, what you can pay later using deflated dollars.

With a reverse, you will pay dearly today and may end up a pauper before the final bell rings.
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Old 06-24-2014, 04:00 AM
 
71,593 posts, read 71,751,865 times
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i am no fan of reverse mortgages but throwing on a mortgage again to the house and having to make payments on any money you use just seems self defeating.

i can see if you do some aggressive investing and can get a better return but as a source of income i am not in favor of haviung something you need to keep paying with the money you took for spending.

the whole idea is to improve cash flow not create another bill and have to use the money you took to pay the loan.

it is no different then taking a heloc to pay your every day living expenses, bad move i think.
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Old 06-24-2014, 04:56 AM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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Quote:
Originally Posted by NewToCA View Post
My mother-in-law obtained a reverse mortgage after her husband died. It has been seven years now and that has allowed her to stay in her home, no mortgage payment anymore plus some modest supplemental income.

No regrets, on her behalf nor ours.
Do you know how that works, specifically for her? She owns the deed, right? And fees?
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Old 06-24-2014, 06:54 AM
 
Location: Southwestern, USA
15,387 posts, read 12,138,366 times
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All your posts are helping me.
Thank you so much.
I was stopped giving reps...gave too many today.

I swear I'm going to take the time to view the DVD AAG sent me...the
one with Senator Thompson from TV, I'm a trusting sort and I love
that guy...how could that face lie? Haha!!! *wink*

But I will talk to a real professional, maybe a couple!!!
So far I am not aware of any scam or true horror stories....
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Old 06-24-2014, 07:59 AM
 
Location: Central Massachusetts
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i will weigh in on this. First I am not a huge fan of a reverse but I can see it's uses. On what someone mentioned HELOC that is not even close to the same. A HELOC or Line of Credit is then going to have interest applied. Yes the reverse does as a build in but the reverse is a vehicle to get income from your main asset while still continuing to live in it. For people in the following circumstances it goes very nicely. First if you have no pension income and only have SS and maybe some savings it is a great way to suplement your income. Keep in mind that at the end when you pass away that asset will need to be remortgaged by heirs or left to the reverse mortgage company. If there are no heirs then perfect. If there are then before getting one you should consult family.

When I first saw these my initial reaction was one of aversion. I thought it a way to prey on older people but after retrospect I then saw good uses of that. The above is one and I am sure there are a couple of others.

One worry is if you have a reverse and for some reason you need to go to assisted or continuing care your home will not be available as an asset. It could put you in a bind but I will admit I do not know how that would work in that last case.
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Old 06-24-2014, 08:56 AM
 
Location: Tennessee
23,581 posts, read 17,574,904 times
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Quote:
Originally Posted by johnd393 View Post
I'm no financial expert I would think another way to get use the equity in your home is to sell it and rent.
If you sell it, you no longer own it, thus how can you rent it?
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Old 06-24-2014, 09:18 AM
 
Location: Central Massachusetts
4,800 posts, read 4,848,939 times
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Quote:
Originally Posted by Emigrations View Post
If you sell it, you no longer own it, thus how can you rent it?

I think he meant sell the house and rent a place to live.
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Old 06-24-2014, 10:24 AM
 
Location: Glenbogle
730 posts, read 1,027,552 times
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A question on the HELOC alternative: It's my understanding that a HELOC can be (often is??) a callable loan at the discretion of the lender -- in other words, the lender has the option to call in the outstanding balance even if the borrower has kept current on the payments. Wouldn't that be especially risky for a senior who may not have sufficient backup assets to pay the lender if that should happen?

Also I would guess that qualifying for a HELOC might be more difficult for a senior who has only their SS income plus perhaps a small (meaning less than $100K at the start of their RMD years) IRA as income. For example let's say that someone's gross income (SS+IRA) is $35K/year. Out of that income is taken Medicare-related costs and property taxes (as documented expenses) which reduces their usable income by $10K, to $25K/yr. Even with a paid-off house, I'm not sure that person is going to qualify for much of a HELOC because their debt-to-income ratio is not going to look that great in a lender's eyes. Especially nowadays when everyone says credit standards are a lot tighter than they were pre-2008.
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