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Old 03-08-2015, 08:18 AM
 
Location: Near a river
16,042 posts, read 18,971,705 times
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Quote:
Originally Posted by mathjak107 View Post
many seniors are taking advantage of reverse mortgages to purchase. these are different from reverse mortgages you take on hmes you already own.

they require a large down payment of 1/3 to 1/2 but you never make another payment again. you do pay taxes and expenses but no mortgage payment.

the house is sold by the bank when you are no longer in it and anything left after payments of what is owed is given to heirs.


it can be the best of both worlds . getting a more expensive house in a better area and keeping cash.
We may do this in a few years and add what cash we didn't put into the new place added to other and take out a longevity annuity. That way not only do we not pay anything on the house other than taxes and upkeep, we pad a lifetime income stream.
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Old 03-08-2015, 08:18 AM
 
Location: Los Angeles area
14,018 posts, read 17,732,288 times
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Quote:
Originally Posted by CSD610 View Post
Why not purchase a smaller home that is 1/2 of the $140,000.00 and keep the rest in cash?
Where do you live that there are homes selling for $70,000? That is just mind-blowing.
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Old 03-08-2015, 08:35 AM
 
1,439 posts, read 722,050 times
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Quote:
Originally Posted by nicet4 View Post
Cash is King. I am sure we have all seen retired people living in a very nice housing while driving very nice cars but devoid of an cash there wasn't a lot they could do.

I like the idea of a condo but my psychological makeup would not fit well. I like owning my patch of dirt and if I want to hang pink curtains on my window I wouldn't tolerate someone telling me I couldn't. Nah, condo is out and I wouldn't like pink curtains anyway.

Leaving something for the kids? No way, I already did that. I raised them with everything they wanted and paid nearly everything it took for four years of college so they could live on their own and support themselves well. The only thing I made them do was take out a $1,250 student loan every semester so they would have some skin in the game. Other than that I paid for it all; tuition, books, apartment rental and even $100/week cash allowance all the way through four years so I owe them nothing and I've told them to expect nothing at my end.
Agreed with having to deal with the restrictions of condo living.....not only that but, like you, I need my space and also a place to blast my tv/music if I want, work on my vehicles, our own pool, etc....all of which are pretty much out of the question in a condo community.

Re: the kids (heirs).....reason I asked if there were any involved wasn't really referring to leaving them a fortune only not to saddle them with a debt issue they might be responsible for dealing with.
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Old 03-08-2015, 08:55 AM
 
Location: Maryland
282 posts, read 305,856 times
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One bad thing about any reverse mortage right now is the low interest rates.
The amount of money the lender bookkeeps is based on the prevailing interest rate. So a low rate gets the borrower a low amount of money. If interest rates were high (8-10%) then these products might be more appealing, IMO.
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Old 03-08-2015, 09:02 AM
 
Location: Grove City, Ohio
10,132 posts, read 12,381,010 times
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Quote:
Originally Posted by luckyram View Post
Agreed with having to deal with the restrictions of condo living.....not only that but, like you, I need my space and also a place to blast my tv/music if I want, work on my vehicles, our own pool, etc....all of which are pretty much out of the question in a condo community.

Re: the kids (heirs).....reason I asked if there were any involved wasn't really referring to leaving them a fortune only not to saddle them with a debt issue they might be responsible for dealing with.
I like my space too.

I think I found the perfect house for us, it's a 3 br 2 ba double car garage with only 1,080 sq ft which is the perfect size for us and with the size the utilities are little. Very nice and secure neighborhood there is only one way in and out so the traffic you see sort of belongs there. I like that.

My wife has a bedroom for a lady cave, I have my bedroom for my man cave and together we have our bedroom where we sleep. Kitchen/dining is nicely laid out and there is a small living/sitting room and we never use ours anyway. We could really live in a 500 sq ft house if all we had was what we use.

I want a shallow in ground pool for the backyard so the grandkids have a place in summer. "Shallow"? It's a normal size pool but does not have a deep end... about mid chest high in the "deep end" and waist high in the "shallow end. Very safe for young children but that is what we had when we were growing up and our house was where all the kids went. With eight kids you couldn't dive, couldn't go under to the deep end but it was great for water volley ball and tag. With three and four year old grand kids there is no way I could have a pool with a deep end.

As far as heirs I am not planning on leaving anything to them other than a life insurance policy that is enough to cover all our final expenses and then some.

We'll probably just pay for it but I wanted to ask.
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Old 03-08-2015, 09:06 AM
 
34,368 posts, read 41,455,107 times
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Quote:
Originally Posted by nicet4 View Post
John (68) and his wife Ellen (67) are thinking about selling their mortgage free home for $140,000 and buying a smaller single floor plan home for $120,000.

Of course they could pay cash and pocket $20,000 but would there be an advantage of put 20% down payment taking a $96,000 30 year mortgage at 4% and keeping the $116,000 cash for "in case of" then paying $482/month to live in a house that will likely never be paid off?

To be clear the $482 represents about 10% of their retirement income stream and the $116,000 would only be used in an emergency.
I guess it comes down to whether the mortgage provider will go for this idea as its obvious that the provider wont see the full value from the mortgage unless the house is signed up as collateral.
Personally at 68yrs old i'd pay cash and downsize to a smaller place then use the change to have some fun in life in my later years.
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Old 03-08-2015, 09:18 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
29,773 posts, read 54,424,430 times
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We are in a similar situation, or will be in a few years. Our plan is to sell (at current prices about $700k) and pay cash to downsize to a smaller house on a bigger lot, in a less expensive are for under about $200k. Part of the fun of retirement for us will be renovations, and a massive vegetable garden. It will not only keep us busy, but active. I can't imagine being at all happy living in a condo or renting. Paying only insurance and property taxes on the new place will be a small portion of our retirement income, and we will no longer need the income tax advantages of mortgage interest. When/if we end up in assisted living, the sale of the home will help make up the difference in what our long-term care insurance pays.
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Old 03-08-2015, 09:19 AM
 
71,515 posts, read 71,694,121 times
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Quote:
Originally Posted by newenglandgirl View Post
We may do this in a few years and add what cash we didn't put into the new place added to other and take out a longevity annuity. That way not only do we not pay anything on the house other than taxes and upkeep, we pad a lifetime income stream.
it sounds like a well thought out plan. this is what i mean when i try to convey to folks with a little knowledge you can learn to stretch what you have and improve cash flow.
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Old 03-08-2015, 10:16 AM
 
Location: Sarasota, FL
2,636 posts, read 1,544,789 times
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Quote:
Originally Posted by Escort Rider View Post
Bad idea in my book unless they can take that $116,000 and buy income producing securities that do a lot better than CD's but that are still pretty safe. Otherwise the $20,000 in cash should be adequate for an emergency fund. Why have a mortgage hanging over your head at that age?

Another variable, albeit a minor one, is whether they can get a tax deduction out of the mortgage interest. Some people do not have enough deductions to itemize and so they use the standard deduction. Would the mortgage interest allow them to itemize and take advantage of it?
Putting aside whether you like living in a condo vs. a private home, and looking at this question as purely a financial one, it seems that its mostly a comparison between the mortgage rate and what they can get in interest on investments. There's some fine tuning involved when you consider tax implications. If it were me, I'd consult an accountant, because this is not an easy question.
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Old 03-08-2015, 10:35 AM
 
685 posts, read 564,434 times
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Quote:
Originally Posted by nicet4 View Post
John (68) and his wife Ellen (67) are thinking about selling their mortgage free home for $140,000 and buying a smaller single floor plan home for $120,000.

Of course they could pay cash and pocket $20,000 but would there be an advantage of put 20% down payment taking a $96,000 30 year mortgage at 4% and keeping the $116,000 cash for "in case of" then paying $482/month to live in a house that will likely never be paid off?

To be clear the $482 represents about 10% of their retirement income stream and the $116,000 would only be used in an emergency.
Funny, we had to analyze this scenario after we moved here. We're in our mid and late 50s. A house for us (ignoring the upkeep for now) allows us to do what we want to it. It provides more privacy than a condo/apt. With the mortgage being as low as it is (3.25 fixed for 30 years), it made buying easy.

There are two scenarios:
1) When one predeceases the other, we each agreed we're leaving here for where is to be determined.
2) We keep the house until our deaths and it's sold by the Trustee. The beneficiaries will get money cleared from it. Paying less than $800/month plus fairly low property taxes is affordable for now.

We know we'll never pay off the house. But it doesn't hurt us and in the meantime, we're living better than in other structures. The market here in the timeframe we project will probably be fine.

So, we're doing it. Rental prices keep climbing. Houses are looking a little more attractive to people.
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