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Old 01-27-2015, 11:53 AM
 
Location: Wisconsin
21,539 posts, read 44,018,537 times
Reputation: 15140

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Well, if you paid $250,000, put down $150,000, you took on a mortgage of $100k.

To refinance today, assuming your income qualifies you, the most any lender will give you without requiring PMI insurance is 80% of $245,000 = $196,000. Your mortgage balance now may be in the low 90's, which means you could pull about $100,000 or thereabouts after closing costs.

So, whether you invest $90/$100k - the result is more or less laid out as above. Fyi, stock market having a bad day today with some saying more to come in 2015 because of strong dollar resulting in weaker earnings reports for the multinationals and slower growth going forward.

If you do this, be sure you keep adequate cash reserves. Imo, any investments should be made with an eye to the long-term increase of your net worth over the next ten-fifteen years, not as a means to shore up income today. Immediate cash needs should be drawn from cash reserves.

Last edited by Ariadne22; 01-27-2015 at 12:02 PM..
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Old 01-27-2015, 12:34 PM
 
Location: Mount Airy, Maryland
10,462 posts, read 5,930,681 times
Reputation: 16156
The line that read $150,000 is a lot of your net worth caught my eye. Don't get me wrong, that figure is not uncommon, but it tells me that you may be in a home that may be too much for you. But again I don't know your specifics. Is this a larger and nice home when compared to others in your area? Or is it about as small and cheap as you want to go? The reason I ask is if downsizing is an option then it may be worth considering. Bad time to sell with prices down? Sure, but don't forget the new house you could buy is also at a low price point.

I'm not trying to talk you into anything, even reverse mortgages, but it's just a thought.
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Old 01-27-2015, 02:30 PM
 
13,319 posts, read 25,565,364 times
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I refinanced my house from a 15-year to a 30-year at 3.5%. It lowered my monthly payments by almost $900. My pension income should cover my basic living expenses, that is, I did not intend to pay off the house by retirement age anyway. I would rather pay the mortgage than have a reverse mortgage, with all the fees and all, although I haven't worked it out on paper. I do intend to stay in my house to the end or until I sell it to move to a CCRC, and if the latter time comes, should have enough equity even with the refinance.
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Old 01-28-2015, 06:02 AM
 
Location: Mount Airy, Maryland
10,462 posts, read 5,930,681 times
Reputation: 16156
I'm 55 and don't have a mortgage anymore. I'm very happy with this situation and I don't intend to have one in retirement either. Live is less stressful when you are debt free.
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Old 01-28-2015, 09:20 AM
 
2,038 posts, read 1,948,524 times
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Your retirement house is for low expenses not equity gains. There is no benefit to you if your retirement house increases in equity because you can't use it. Do not leverage your retirement house. You are mistaken if you think the equity in your retirement house is of any concern. Pay off your retirement house, that is what you should be thinking, not reverse mortgage your retirement house. Do you know how fast you can lose $5,000 or $10,000 or $20,000 in stock market investments? That can be a daily occurrence. The equity in your retirement house is not intended to be an investment so don't think of it that way. Having a paid off house or even 50% paid off is intended to lower your expenses in retirement.

Last edited by fumbling; 01-28-2015 at 10:12 AM..
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Old 01-30-2015, 01:59 PM
 
Location: State of Superior
8,628 posts, read 13,892,617 times
Reputation: 2770
Quote:
Originally Posted by fumbling View Post
Your retirement house is for low expenses not equity gains. There is no benefit to you if your retirement house increases in equity because you can't use it. Do not leverage your retirement house. You are mistaken if you think the equity in your retirement house is of any concern. Pay off your retirement house, that is what you should be thinking, not reverse mortgage your retirement house. Do you know how fast you can lose $5,000 or $10,000 or $20,000 in stock market investments? That can be a daily occurrence. The equity in your retirement house is not intended to be an investment so don't think of it that way. Having a paid off house or even 50% paid off is intended to lower your expenses in retirement.
B
You are building a case for a Reverse Mortgage . Paid off home loans are the best way to go, and for a lot of people that lost savings during the last recession left them with little choice, especially if they needed to pay off the bank or whatever, and did not have the income to do so. When you look at all the numbers doing a refi or a new mortgage is not cheap ether. With interest rates so low, you can actually gain on a reverse cause your funds from the reverse pays interest, which can offset the fees when doing a reverse. The best of both worlds would be to sell your current paid off home ,then do a reverse to buy mortgage, where you will not have to pay anything on your new, maybe downsize, home. It's like free money, so to speak! Also, in a prime market area where homes are increasing in value, you could pay off the Reverse with the gains in home equity., then do another Reverse and pocket the difference
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Old 01-30-2015, 03:36 PM
 
Location: Central IL
15,238 posts, read 8,532,850 times
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Quote:
Originally Posted by gentlearts View Post
Here is my dilemma. We moved 4 years ago and were intent on making our mortgage manageable with our retirement income, so put 1/2 down payment. Fine and dandy, except we paid about $5k too much and so the house is barely worth what we paid so far.
I am haunted by the fact that we have about 150k laying stagnant, when we could be investing this money.
I don't know whether to get a reverse mortgage, thereby gaining $650 a month, or refinancing, and taking the equity out and investing it. Then, we would have a bigger mtg payment, but might recoup it from investing it.
What to do?
You're sweating because you THINK you paid $5k too much on a $300k house? So, like 1.5%? I think you're going to end up losing more trying to finagle some weird deal....what interest rate are you paying and is it adjustable? 10 year mortgage or longer?
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Old 01-30-2015, 05:22 PM
 
2,038 posts, read 1,948,524 times
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Quote:
Originally Posted by darstar View Post
B
You are building a case for a Reverse Mortgage . Paid off home loans are the best way to go, and for a lot of people that lost savings during the last recession left them with little choice, especially if they needed to pay off the bank or whatever, and did not have the income to do so. When you look at all the numbers doing a refi or a new mortgage is not cheap ether. With interest rates so low, you can actually gain on a reverse cause your funds from the reverse pays interest, which can offset the fees when doing a reverse. The best of both worlds would be to sell your current paid off home ,then do a reverse to buy mortgage, where you will not have to pay anything on your new, maybe downsize, home. It's like free money, so to speak! Also, in a prime market area where homes are increasing in value, you could pay off the Reverse with the gains in home equity., then do another Reverse and pocket the difference
I am building a case for a paid off house with no debt. You are saying load up with debt, pay off the debt with debt? Debt is free money? This makes no sense.
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Old 01-31-2015, 03:15 PM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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IMHO, never play with the roof over your head. A home after a certain age is not an investment, it should as Fumbling says be an asset that keeps housing expense at a minimum during senior years. Also, a paid-off home is a ticket into a good assisted living facility, it represents the cost of buy-in for that. Investment money, imo, should come from elsewhere.
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Old 01-31-2015, 03:43 PM
 
Location: State of Superior
8,628 posts, read 13,892,617 times
Reputation: 2770
Quote:
Originally Posted by fumbling View Post
I am building a case for a paid off house with no debt. You are saying load up with debt, pay off the debt with debt? Debt is free money? This makes no sense.
o' but it does ! However everything needs to be paid off for it to work. I agree in retirement there should be no,mortgage hanging over your head. Ok , let's say you are wanting to sell your big home you lived in for 40 years, it's debt free, so what ever it's sold for is cash in your pocket.......here is the rub though , many folks who want to do this...but they still need a place to live! Some want to see the world, some want to become full timers and now, for the first time have the money to buy a 300,000 dollar motor coach. Some buy a condo, it's usually in a warmer climate. Very few retired people has a 30 year mortgage hanging over their head, and it's because they have all that cash in their pocket !, from the sale of the family home. One way or the other, what ever you do will cost a lot of Money! Now,the way to keep that money in your pocket and still have a new place to live where ever you want, is to take out a reverse mortgage to buy.. You do not even have to own to get a Reverse , you can build what ever you want too. Now when you finally decide to make this move to a warmer place you can do a Reverse Mortgage on the new abode. Yes you will have to spend some of that cash from the sale of the home place according to the Reverse rules, but, you will when closing on the new castle ( up to 600,000 ) the Government will back you up by writing you a big check! Now you have a new home in the South with no payments, and the ck you get will draw interest, so, yes , you ARE using some others Money , namely the US Government . There are some other ways to make this happen, with even less invested, but that's for another discussion. I know this works.......I did it, and I built the home of my dreams !
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