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Old 09-14-2014, 12:12 PM
 
8,820 posts, read 5,119,154 times
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Quote:
Originally Posted by GeneR View Post
this is a confusing topic. How can one "buy" a home with a Reverse Mortgage? To have a RM you must own the home which must be (and continue to be) your primary residence. If you own a home and take a reverse mortgage out to buy another then you would have to pay off the reverse mortgage when you move to your newly purchased residence. It would be much less costly and presumably more profitable to sell your home, take the cash to buy another.

I'm just very unclear on what you mean by "buying" with a reverse mortgage. How can you "buy" something you already own? I assume I'm missing something here!
It has only been a year or two since buying a home with an RM has been possible. If you don't follow RM news, that is why you didn't know.
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Old 09-14-2014, 01:02 PM
 
Location: Buckeye
601 posts, read 714,740 times
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Quote:
Originally Posted by Petunia 100 View Post
It has only been a year or two since buying a home with an RM has been possible. If you don't follow RM news, that is why you didn't know.
Hmmmm, basically you and a lender are co-owning the property except you cover all household expenses such as insurance, taxes, maintenance. Guess it's a way to not have monthly payments and then let your heirs sort out the finances upon death if you live in it the rest of your life and the property is worth more than the value of the RM. Interesting!
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Old 09-14-2014, 01:32 PM
 
29,764 posts, read 34,848,700 times
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Quote:
Originally Posted by GeneR View Post
Hmmmm, basically you and a lender are co-owning the property except you cover all household expenses such as insurance, taxes, maintenance. Guess it's a way to not have monthly payments and then let your heirs sort out the finances upon death if you live in it the rest of your life and the property is worth more than the value of the RM. Interesting!
Yeah, it really is and a life line for some folks facing some uncertainty of success with their retirement finances. You have to have the money for your part of the down payment and that can be a big challenge for many. A lot of new products will emerge some good and some bad as folks begin to confront retirement. I am not as anti RM's as I use to be now that I am retired and experiencing and learning from others also retired.
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Old 09-14-2014, 02:16 PM
 
Location: Ocala, FL
407 posts, read 474,000 times
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Quote:
Originally Posted by Petunia 100 View Post
It has only been a year or two since buying a home with an RM has been possible. If you don't follow RM news, that is why you didn't know.
More than a year or two. We bought our house with a reverse mortgage in 2010. We put down $115K, received as inheritance from DH's mom, which could have bought us a 2 BR 1 bath 900 sf on a tiny lot with no mortgage. Instead we have 5 acres, 1850 sf 3 BR 2 bath home, a barn for my 2 horses (which boarding would have been costing us $600 a month at least), 12 x 24 greenhouse, two storage buildings, a workshop, and a pool in an equestrian neighborhood that is peaceful and quiet with no barking dogs, roaring cars, or loud trashy neighbors. It gave us the ability to purchase a much nicer home without having to make monthly payments.

We pay property taxes, insurance, and upkeep. We do not "co-own" the house with the mortgage company. It is in our names and we can sell it if we decide to do so. The reverse mortgage is treated just like any other mortgage at the time of sale. It's paid off at closing and the equity goes straight into our pockets. And we do have equity...in fact, since Ocala real estate has rebounded, particularly in our equestrian community, we have more equity than when we bought the house even after having the RM for four years.

We have nobody to leave the property to. DH's brats have cut him out of their lives (dumb move) secondary to their mother's brainwashing and I have no kids. We've left everything in the hands of our lawyer to be sold and the funds split between two animal charities. If we had offspring we wanted to leave anything to, they would have at least a year to decide what to do with the house, either refinance it and pay off the mortgage, sell it and take any equity, or if at the time we croak we owe more than the house is worth, the estate just hands the keys to the mortgage company and walks away.
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Old 09-15-2014, 08:11 AM
 
Location: Hiding from Antifa?
6,393 posts, read 4,170,610 times
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Can't you get a traditional RM when you have 50% equity and get money from the mortgage company each month? Wouldn't it make more sense to get a traditional mortgage, putting 50% down, then come back later and refinance with a RM, and have extra money, as long as you know it will be your last home and have no heirs or heirs that do not need your equity.
I guess it wouldn't work though, if you could not afford to make the payments right off the bat.
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Old 09-15-2014, 08:20 AM
 
Location: Hiding from Antifa?
6,393 posts, read 4,170,610 times
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My wife's parents have a reverse mortgage that pays them each month. They keep saying to us that we will still get the house when they die. I just smile and move on, knowing that it is quite possible there won't be anything left. But in their case, they need the money now, since they have little SS income to live on. It works for them and while their other daughter is well off, and we can struggle on into our retirement, it's for the better.

I can remember living in another state in New England for a time, and hearing some of the younger coworkers saying how they don't have to worry about their future because when Mommy and Daddy die they will be in good shape. I made up my mind that, no matter what my own circumstance becomes, I would never count on someone else's largess for my future.

I say more power to the older people that cash in on their equity.
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Old 09-15-2014, 08:39 AM
 
Location: Near a river
16,042 posts, read 18,964,817 times
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So basically with either a regular RM or a RM for purchase you are borrowing against your house. That would work well if you live in it till you die, and hopefully then the home would have gained value, not lost it. If it lost value (if the area went downhill or the market bust), then heirs would have to pay off quite a bit of money. Do I get that right?
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Old 09-15-2014, 08:40 AM
 
Location: Near a river
16,042 posts, read 18,964,817 times
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When I used the RM calculator (link from PhxBarb, above) with hyptothetical numbers, this is what I get:

term: 25 years
$0 immediate lump sum
$1,000/month income
4.5% interest rate
owed at end of 25 years: $555,000

If my home is worth $250,000 at the outset, but for whatever reason it only appreciates to say $350,000 in 25 years, my heirs would owe $200,000??
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Old 09-15-2014, 08:56 AM
 
Location: Near a river
16,042 posts, read 18,964,817 times
Reputation: 15649
One more question....

Could one purchase a retirement home that will be the primary residence with an RM before moving into it (i.e, that is while living in the current home while it's on the market)? Would the intention to live in the new house permanently qualify?
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Old 09-15-2014, 08:59 AM
 
29,764 posts, read 34,848,700 times
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Quote:
Originally Posted by newenglandgirl View Post
So basically with either a regular RM or a RM for purchase you are borrowing against your house. That would work well if you live in it till you die, and hopefully then the home would have gained value, not lost it. If it lost value (if the area went downhill or the market bust), then heirs would have to pay off quite a bit of money. Do I get that right?
Not really, the heirs have the option to pay off the mortgage or just let the mortgager have it. Often the mortgager wants it and doesn't help facilitate the heirs paying it off. That was another thread. Also their is interest accumulated on the unpaid mortgage balance.
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