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Old 09-15-2014, 09:06 AM
 
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Quote:
Originally Posted by newenglandgirl View Post
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?
Can I Use a Reverse Mortgage To Purchase a Second Home?

Quote:
Borrowers who take out a reverse mortgage are able to use their proceeds however they choose. They can pay for in-home care or even purchase a second home if they would like.

Seniors who live in a colder climate may prefer to spend time in places like Florida, Arizona, or California during the winter to get out of the cold.

Here is a quick example of how it could work. A 72-year-old borrower who owns a $500,000 home takes out a reverse mortgage on their primary residence and has access to $322,723 after closing.

The borrower could use the money to purchase a second home in Florida for $200,000 and still have $122,723 left over in reverse mortgage proceeds from the primary residence.

One important thing to consider is that in order to satisfy your reverse mortgage requirements, your second home cannot turn into your primary residence. The Department of Housing and Urban Development requires that HECM borrowers who obtain a reverse mortgage occupy the home as their primary residence.
Hope this helps
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Old 09-15-2014, 09:12 AM
 
Location: Near a river
16,042 posts, read 19,040,770 times
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Quote:
Originally Posted by TuborgP View Post
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.
So the home with the RM would not be considered an asset for heirs, most likely. Just write it off and live there.
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Old 09-15-2014, 09:13 AM
 
Location: The Triad (NC)
28,628 posts, read 62,508,875 times
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^^
Quote:
A 72-year-old borrower who owns a $500,000 home takes out a reverse mortgage
on their primary residence and has access to $322,723 after closing.

The borrower could use the money to purchase a second home in Florida for $200,000
and still have $122,723 left over in reverse mortgage proceeds from the primary residence.
That senior would be far better off to sell that $500,000 home and use the proceeds to
buy a smaller, more modest home outright (maybe two) and invest the balance.

Even if their net equity is less and they're forced to buy a modest place...
and don't have any excess to add to their investment account...
they're still better off to OWN that home.

The more I learn about RM the more I'm inclined to stick with my original position:
Carrying debt should be about want to (eg cash management) ...not need to.
And especialy when you no longer have a job with earned income.
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Old 09-15-2014, 09:15 AM
 
Location: Near a river
16,042 posts, read 19,040,770 times
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Quote:
Originally Posted by TuborgP View Post
I was thinking more along the lines of getting a RM immediately on a new (final) house WHILE still living in current house that would be on the market (for sale). Doing this would (a) secure a home so we don't have to rent in the interim, and (b) start monthly income, before selling current home.

As an alternative, I wonder about a bridge loan (if they even give those anymore) so we can purchase before we sell.
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Old 09-15-2014, 09:20 AM
 
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Quote:
Originally Posted by newenglandgirl View Post
I was thinking more along the lines of getting a RM immediately on a new (final) house WHILE still living in current house that would be on the market (for sale). Doing this would (a) secure a home so we don't have to rent in the interim, and (b) start monthly income, before selling current home.

As an alternative, I wonder about a bridge loan (if they even give those anymore) so we can purchase before we sell.
You can get a reverse mortgage on your current home and use those proceeds to buy a second home for down the road. You can use the money for what ever you want. It is all about how to leverage and for what purpose the equity you have. It will be different for all of us as our situations are different. Working on seven years in retirement and having read and chatted with folks I have learned that seeing retirement through the prism of our experiences would cost me to sometimes miss the point. I can do that anyway
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Old 09-15-2014, 09:27 AM
 
Location: Near a river
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Just read that Wells Fargo and BOA have gotten out of the RM business altogether. Online advice is to find smaller lenders/banks.
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Old 09-15-2014, 09:28 AM
 
29,916 posts, read 34,981,661 times
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Quote:
Originally Posted by MrRational View Post
^^

That senior would be far better off to sell that $500,000 home and use the proceeds to
buy a smaller, more modest home outright (maybe two) and invest the balance.

Even if their net equity is less and they're forced to buy a modest place...
and don't have any excess to add to their investment account...
they're still better off to OWN that home.

The more I learn about RM the more I'm inclined to stick with my original position:
Carrying debt should be about want to (eg cash management) ...not need to.
And especialy when you no longer have a job with earned income.
I understand the overall point you are making but there are a lot of variables that differ from person to person. My pension is more certain than a job with earned income as while yes pensions could change jobs are more likely to. Sometimes debt is a wise part of choice in cash management. Remember a RM is debt a person doesn't have to pay back, their heirs do or no one does and the bank takes the house. That can be a great way to leverage the equity in your home. Taking a reverse mortgage at 62 is very different than 82 because of life expectancy and probability of needing it being different. Debt especially in a low interest rate world can be a very different experience than in normal times.
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Old 09-15-2014, 09:29 AM
 
29,916 posts, read 34,981,661 times
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Quote:
Originally Posted by newenglandgirl View Post
Just read that Wells Fargo and BOA have gotten out of the RM business altogether. Online advice is to find smaller lenders/banks.
Yeah, it isn't the win, win rip off game for them some people thing. There are a lot of dead beat over age 62 folks who don't take care of the property etc etc. Also homes aren't appreciating everywhere and there ability to say no can be restricted. Before I write anything else I will try to find a link to say it. I don't want to start any controversy in here.

http://www.nytimes.com/2011/06/18/yo...erse.html?_r=0

Quote:
For Wells Fargo, however, the inability to assess borrowers’ financial health was the biggest factor for exiting the business. Anyone over the age of 62 with enough home equity can take out a reverse mortgage, regardless of their other income. The amount of money received is determined by the borrower’s age, the amount of equity in the home and prevailing interest rates.

“We are not allowed, as an originator, to decline anyone,” added Mr. Codel of Wells Fargo. We “worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.”
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Old 09-15-2014, 09:56 AM
 
8,996 posts, read 5,189,970 times
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Quote:
Originally Posted by Cruzincat View Post
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.

You can't borrow every last nickel, the lender wants some equity to (hopefully) cover accrued interest and market fluctuations. If you put down 50% and take a traditional mortgage, there may not be much of anything to borrow later. Higher LTV are allowed as you get older, and your house may appreciate in the meantime, so there may be some room for additional borrowing.

I'm not worrying overly much about my heirs. I'm going to cover my own needs first. If I die before spending it all, they can have what is left. I have given them a good start, it is up to them to make their own way and take care of their own finances. Besides, they will (hopefully) be well into middle-age before I kick off. They should be set by then.

I watch my own mother, aged 82, still fretting about adding to her savings and doing without things she would like because they are "too expensive". For example, she has been wanting new dual-pane windows on the west side of her house for oh, about 20 years now, but will not pull the trigger because of the cost. It's absurd; she should enjoy what she has worked so hard to accumulate. That will not be me.
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Old 09-15-2014, 10:01 AM
 
8,996 posts, read 5,189,970 times
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Quote:
Originally Posted by newenglandgirl View Post
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??
There is a limit to how much you can draw, which is set at the time the loan is originated. You won't necessarily be able to draw that 1k a month for the rest of your life.
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