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Old 06-27-2014, 09:31 AM
 
Location: Ocala, FL
407 posts, read 475,321 times
Reputation: 1299

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You get paid the amount monthly until the last qualified owner (over 62) dies. There is no end to the payments.

Google is your friend. Plug in your information about the house. Put in 0 for the desired line of credit. The house illustrated in the sample calculator gets you about $828 a month, starting at age 63 (1/1/1951 date), until you die. The longer you wait to get it, the more you get monthly, but that has nothing to do with the equity. If you're older when you get it, they figure you'll die sooner.

Reverse Mortgage Calculator

Or you can cash out the equity amount, about $150,000, and go over to the personal finance board and get those "experts" there to help you invest it. You might be able to get more monthly income on it. I don't know.

I have two rental houses that we paid about $90,000 for, including repairs and upgrades, and we net about $900 a month out of them after expenses. They do come with hassles, however. One of my tenants had a row with the HOA and moved out, so I had two months with no rental income and it cost me $1800 to do repairs before I could rent it again. Getting a monthly check with no hassles is a much better idea.

Good web site for reverse mortgage information. It's the actual HUD web site and has accurate information.

HUD FHA Reverse Mortgage for Seniors (HECM)

You're making this more difficult than it has to be. Reverse mortgages aren't for everyone, but for somebody living on nothing but SS and cat food and having a paid-for house, it can be the difference between having to sell and move or being able to stay in the home until dead or nursing home fodder.

Last edited by FloridaHappy; 06-27-2014 at 09:53 AM.. Reason: Clarity for the financially challenged
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Old 06-27-2014, 10:55 AM
 
3,492 posts, read 4,962,103 times
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Quote:
Originally Posted by FloridaHappy View Post
DH and I purchased our home using a reverse mortgage, put down I think it was 45% as he was 64 when we bought it. It's in his name alone as I'm not 62 yet. We have to maintain the house along with paying taxes and insurance, but we don't have a house payment and can live here until he dies. They send a form each year that he has to sign attesting that he's still alive and living in the home, but nobody knocks on the door to check. I have enough life insurance on him to pay it off should he die.

My fear is that he may have to go into a nursing home and then I would have to sell the house, but I'm not physically in a situation where I could maintain the property anyway. It's 5 acres, way more than I can do on my own. It has gained enough in value that should I have to sell it, I'd get back the entire 45% we put down plus some, even though the balance on the mortgage has increased in the four years we've lived here. In a couple years when I turn 62, we will look into refinancing it and putting my name on it, too. We own some rental properties I could move into should the need arise, so I wouldn't be living under a bridge regardless.

Yes, take the equity out and go have fun. Even if you had kids, who cares? Let them earn their money the same way you did. Nobody is entitled to an inheritance. You do have to be at least 62 to take out the mortgage, BTW.
Keep in mind the older generation ate the economy, figuratively speaking. They dismantled unions and outsourced jobs in crony capitalism where the market is far from free because we have so many intellectual protection laws, copyright laws, and oligopolies that the children have very little negotiating power. With all do respect, if the children of today work as hard as the baby boomers, many of them will be homeless. The burden we have given them to carry is vastly heavier because we did not give them the resources that baby boomers received from the greatest generation. They are facing much smaller inheritances and dramatically reduced working conditions. Effectively, as a cohort, the baby boomers devoured the wealth that was passed down from their parents and mortgaged the future to lower prices while consuming more than they could possibly afford and now face "shortages" in retirement that they demand their children make up for through a social security system that was a fraud from day one. The children have no way to earn enough to pay into social security to keep the fraud afloat, and are unlikely to even get back what meager amounts they can put in because the system will die or be overhauled before they retire. Meanwhile, the average age of death has gone from around 62-64 to around 82-84. The resulting increase in life span has been treated as if it should all be an increase in retirement, rather than an increase in working years. This generation that is currently and has recently entered the work force is the first generation in the history of our country to have a lower projected standard of living than their parents. That isn't because they are lazy or stupid, it's because the resources were already consumed.

How wonderful it must be to be old and uninformed. Miss Hepburn has a legitimate situation in having no heirs, though I would encourage her to consider creating a will that gives her possessions to a charity of her choosing. People with children should consider the difference between the world as they found it, and the world as they left it.
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Old 06-27-2014, 11:38 AM
 
Location: Ocala, FL
407 posts, read 475,321 times
Reputation: 1299
Quote:
Originally Posted by lurtsman View Post
How wonderful it must be to be old and uninformed. Miss Hepburn has a legitimate situation in having no heirs, though I would encourage her to consider creating a will that gives her possessions to a charity of her choosing. People with children should consider the difference between the world as they found it, and the world as they left it.
I may be old, but I'm not uninformed. I didn't have kids and my estate goes to animal charities, not that it's any of your business. I don't have a college degree and neither I nor my DH ever made over $40K a year. I bought my first house at 18 and have owned a home (and at this point three) since then, paying property taxes that include school fees to educate your kids and your kids' kids. Currently school taxes are over half my property tax bill and it's a good-sized chunk of change I could well use for something else.

And don't give me that BS about other people paying for MY education. I think in over 40 years of owning homes I've long since paid for my education through property taxes.

Kids today are brainwashed into that "you have to have a college degree to get a job." There are plenty of blue collar jobs out there that don't need a degree. Electricians make darn good money. Plumbers make darn good money. And the world will always need ditch diggers. Today's kids don't want to sweat. They want to sit on their butts, play video games, and get a check handed to them every week.
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Old 06-27-2014, 12:26 PM
 
29,793 posts, read 34,889,516 times
Reputation: 11715
The last sentence in the above posts sounds like a good pension, SS, annuity and or draw down based retirement.The rest of her post is right on target in a thread on positive reverse mortgage stories. Congrats to them on their success.
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Old 07-01-2014, 01:30 PM
 
Location: Prescott AZ
6,130 posts, read 9,093,524 times
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Florida Happy: How does that work, purchasing a house with a RM? I have not known anyone who ever did it. So you put down a $ amount on the house and then the reverse mortgage gets involved and you don't end up paying any monthly payments? Could you explain a little further? I am dense.
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Old 07-01-2014, 04:54 PM
 
Location: Glenbogle
730 posts, read 1,028,568 times
Reputation: 1046
I found it interesting that (a) the funds received from a RM are supposedly not taxable, and (b) if you pay off a RM, you can then deduct the interest that you have to pay to the lender when you do that.

So let's say someone takes out a RM for $90K and elects to have it either in a lump sum or in relatively large annual payments. None of that $90K is taxable income. Then if they pay it off five years later, let's say, and have to pay $XX in interest at that time, they can deduct that $XX in interest from their tax return just as if it was interest paid to a lender on a conventional mortgage.

I'm always surprised when the gov't lets us deduct ANYTHING, lol.

Don't get me started on my soapbox about how we should be allowed to deduct a capital loss on the sale of our primary residence, though. IMHO that is one of the most unfair parts of the tax code. We can deduct capital losses (and carry them over from year to year if need be) on investments; why not -- especially in this rotten housing market where so many are underwater -- also on the biggest investment most people will ever make: their home?

*puts duct tape over keyboard now*
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Old 07-01-2014, 06:30 PM
 
Location: Ocala, FL
407 posts, read 475,321 times
Reputation: 1299
Quote:
Originally Posted by PhxBarb View Post
Florida Happy: How does that work, purchasing a house with a RM? I have not known anyone who ever did it. So you put down a $ amount on the house and then the reverse mortgage gets involved and you don't end up paying any monthly payments? Could you explain a little further? I am dense.
That's how it works. We purchased the home we live in for $245K. At the time of closing, we brought about $114K (around 45%) to the table. It would have been less had DH been older. The balance of the purchase price was funded through FHA as a reverse mortgage. I am not on the mortgage or the house as I am not yet 62. We pay only the taxes, insurance, and upkeep. There is no escrow account. FHA believes we are mature enough to pay our own bills on time.

Each year DH gets an inquiry from the mortgage company he has to sign attesting that he's still alive. Other than that, we never hear from anybody.
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Old 07-01-2014, 06:34 PM
 
Location: Ocala, FL
407 posts, read 475,321 times
Reputation: 1299
Quote:
Originally Posted by StressedOutNYer View Post
I found it interesting that (a) the funds received from a RM are supposedly not taxable, and (b) if you pay off a RM, you can then deduct the interest that you have to pay to the lender when you do that.

So let's say someone takes out a RM for $90K and elects to have it either in a lump sum or in relatively large annual payments. None of that $90K is taxable income. Then if they pay it off five years later, let's say, and have to pay $XX in interest at that time, they can deduct that $XX in interest from their tax return just as if it was interest paid to a lender on a conventional mortgage.
No loan proceeds are ever taxable, whether it's from a mortgage, line of equity, or money you borrow to buy a car. And, yes, when/if the mortgage is paid off, whether it's from sale of the home or just flat out paid off (you win the lottery and pay it off, say), the interest that has accrued from the time of the mortgage's inception is deductible.

BTW, a reverse mortgage always has mortgage insurance on it and, guess what? That's deductible for us each year! They send us a 1099 or whatever that form is and we just file it along with our taxes.
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Old 07-01-2014, 06:52 PM
 
Location: Near a river
16,042 posts, read 18,991,724 times
Reputation: 15649
Quote:
Originally Posted by FloridaHappy View Post
As far as an inheritance, it occurred to me that to manage one's estate better, one could take out the equity and invest it in a trust fund or other investment that would pass without probate or taxation to the heirs. Then the estate wouldn't have to deal with selling the property and if one had to go to a nursing home, the money would already be there for their care. The estate would just pass on paying off the house and hand it to the bank if there was little or no equity left at the time of death.

So help me get this straight. Here is a scenario based on me and dh:

We sell our current property in a few years (we have no mortgage) and then buy down, purchasing a small house for cash with half the profit of our current house.

We take a good part of the profit and invest it in a retirement fund.

Then on this dinky little house (er, sweet cottage), we take out a RM on it and can have it one of two ways:

1. Take a lump sum (and how much $ could that be for?) and put it into a trust for heirs, or to use for nursing home.

OR

2. Take monthly income and do the same, only #1 would make more sense perhaps if we wanted to turn the RM into an investment or trust.

Since we'd both be on the RM, does that mean that the survivor (him or me) can continue the RM till my or his death?

In any case the little "final" house becomes a "throw-away" (to the RM lender) on the second death.

Did I interpret right?
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Old 07-01-2014, 07:50 PM
 
Location: Ocala, FL
407 posts, read 475,321 times
Reputation: 1299
Quote:
Originally Posted by newenglandgirl View Post
So help me get this straight. Here is a scenario based on me and dh:

We sell our current property in a few years (we have no mortgage) and then buy down, purchasing a small house for cash with half the profit of our current house.

We take a good part of the profit and invest it in a retirement fund.

Then on this dinky little house (er, sweet cottage), we take out a RM on it and can have it one of two ways:

1. Take a lump sum (and how much $ could that be for?) and put it into a trust for heirs, or to use for nursing home.

OR

2. Take monthly income and do the same, only #1 would make more sense perhaps if we wanted to turn the RM into an investment or trust.

Since we'd both be on the RM, does that mean that the survivor (him or me) can continue the RM till my or his death?

In any case the little "final" house becomes a "throw-away" (to the RM lender) on the second death.

Did I interpret right?
Well, you're doing it the hard way. Instead of paying cash for the second house and then reverse-mortgaging it, just take a portion of the proceeds from your original house sale and use that to buy the "dinky little house," then take the rest of the money and invest it in a trust or retirement or whatever. DH was 64 when we bought our house with the reverse mortgage and he had to put down about 45%. It's a lesser percentage down if you're older when you do it.

So, say you're 64 like he was, instead of taking half the profit from selling the original home and buying the house outright, you take 45% of the purchase price of the home (make it easy, $100K house, $45K down) and keep the rest of the money from the sale of the original home in your pocket/trust fund/retirement/whatever. You never make a payment on the "dinky little house" and, heck, it might appreciate in value to the point that your heirs can sell it and make a profit over the mortgage...depends on how long you live.

If both people are on the mortgage, the reverse mortgage remains in effect until both people die. If you've chosen to pay cash for DLH (dinky little house), then get a reverse mortgage and take out monthly payments, the payments will be based on the equity in the house and age of the oldest borrower, but the payments continue until all parties to the mortgage die.

Clear as mud?
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