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There are some cases where a reverse mortgage can be a good move, regardless of the fees involved. if you are near retirement and your kids are doing well on their own and don't need your equity in your house, and your mortgage payments are keeping from being able to retire, it would be a good solution.
Let's say you have $100,000 equity in your house. You have several options available with a reverse mortgage that you don't have otherwise:
You can get a reverse mortgage, receiving a monthly amount for a fixed number of years.
You can get a reverse mortgage, receiving a smaller amount for the rest of your life.
You could sell the house and with the $100,000 in hand buy a new house worth over $180,000 with a reverse mortgage, thereby moving into a nicer house, or a smaller house in a better location, with no mortgage for as long as you, or your spouse are alive, as long as both are over 62. All you have to do is maintain the house, keep it insured and pay the RE taxes when due. You could even move from being near the water to owning a waterfront home.
With a reverse mortgage, you are not necessarily stuck living in that home. True, the equity you have in that home starts to dwindle and over time it will be down to zero, but a couple years after you begin the reverse mortgage you can still sell it and get back a portion of that equity. It's another choice you still have.
Most people who would take advantage of such options, don't even know they exist. In any living arrangement there are trade offs. You have to make the best choice out of all the options. For some people the best option is a reverse mortgage. To categorize all reverse mortgage situations as bad, ignores the possible situations that others people may be in.
reverse mortgages and their success will be highly specific to individual situations .
they may be okay in a few hypothetical situations but i think if you look at the forums on them overall they are not working out as the takers thought . mostly because they are so costly and the way the payments are figured over your lifetime they are a lot smaller then folks hoped and many times fall short of what is needed in the end anyway .. it is like trying to be a little bit pregnant .
if you can't make ends meet because the house is not bringing in enough then you still fail financially . usually folks resort to these because they are hurting for cash .
Last edited by mathjak107; 06-10-2016 at 07:42 AM..
I want to keep the home as part of my real estate portfolio in the future for my son....income from rentals could cover mortgage for them and I could pay the house off myself in a year. Good idea?
Please share advantages and disadvantages.
Thx
If you could pay the house off in a year, I fail to see why you'd want to get any new loan at all. Just keep the current loan!
But, you will never owe more than the house is worth, so no matter how much the interest rate accumulates, you won't owe that amount unless the house is worth it.
And if it is worth it, then sell it. No need to worry about owing a huge amount ever. (what I have learned from a trusty loan officer).
But, you will never owe more than the house is worth, so no matter how much the interest rate accumulates, you won't owe that amount unless the house is worth it.
And if it is worth it, then sell it. No need to worry about owing a huge amount ever. (what I have learned from a trusty loan officer).
It can still be a very bad deal. Just because you are not underwater doesn't mean it isn't a terrible waste to borrow a little and end up owing a lot more due to compounded interest and fees.
But, you will never owe more than the house is worth, so no matter how much the interest rate accumulates, you won't owe that amount unless the house is worth it.
And if it is worth it, then sell it. No need to worry about owing a huge amount ever. (what I have learned from a trusty loan officer).
understand how these loans work .
you get about 1/2 the value of the house at the time you apply but the loans are capped at 150% of the full value of the house . so a 300k home could actually owe as much as 450k in accumulated fees and interest . that comes out of any appreciation you or heirs might see when the home is settled up . you won't have to pay anything extra but that capped amount will come out of appreciation if any . in the mean time you got 150k out of the whole deal and the lender takes up to 450k of the value if it appreciates .
you get 150k , they get 300k out of the 450k value , does that sound like a good deal ?
Last edited by mathjak107; 06-10-2016 at 12:36 PM..
If a reverse mortgage is the only source of funds you have to do what you have to do. Can't take a house with you and if anyone wants it they can start preparing to buy. In most cases at some point the house is going to get sold anyway so do what YOU need to do.
I agree that reverse mortgages are expensive, do not pay as much as many think they will, and are generally not for most people.
That said, I say if you are single, no concerns for leaving an estate, no intentions of selling and relocating, and need a few more bucks a month to be able to enjoy life, then a reverse mortgage could fit you and would be worth looking into.
I say over all not a good deal, but it could work for some.
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