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There is nothing wrong with a 401k loan in the right circumstances.
Suppose someone marries another with large credit card debt of $10,000
or something like that and they don't have a lot of money to spare for
one reason or another. Most credit card debt is in excess of 20% and
some even over 30%. Using 401k money for that as long as the person
is continuing to have the maximum withheld every year is just fine.
What would be better on a bill would be mandatory 401k participation if
available from the employer and if not then mandatory IRA contributions.
As long as you are "dreaming" about tax bills that you wish for ...
It's a 14k debt on his mortgage. To take a loan on that would be retarded.
You're 62. I assume you have some equity over the $14K. Go get a reverse mortgage to pay off the note. Of course, you have to live in the house. No credit check. No payments ever. All you have to do is pay the taxes, insurance, and upkeep. When you die your family can sell the house and pay off the mortgage. Or if you decide to move, you can sell the house and pay off the reverse mortgage and go get another one somewhere else.
Location: Los Angeles, but looking for my niche in ME, or OR
326 posts, read 433,974 times
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Quote:
Originally Posted by FloridaHappy
You're 62. I assume you have some equity over the $14K. Go get a reverse mortgage to pay off the note. Of course, you have to live in the house. No credit check. No payments ever. All you have to do is pay the taxes, insurance, and upkeep. When you die your family can sell the house and pay off the mortgage. Or if you decide to move, you can sell the house and pay off the reverse mortgage and go get another one somewhere else.
No brainer.
I still can't quite wrap my mind around this one... But I'll look it up, and not hijack the thread...
The OP wants to pay off the mortgage and the post you responded to
advises taking out a new mortgage and adding to the debt every month.
The reason you are confused is that the advice doesn't make any sense.
See, another one that doesn't understand a reverse mortgage. Yes, it adds to the balance every month. WHO CARES? The OP doesn't have to pay it off. There are no monthly payments ever.
When the OP dies his estate can pay it off and keep the house, sell the house, pay off the bank, and then distribute any overage to his heirs, or, if the balance is so high that the property isn't worth what he owes, the bank gets the house and gets stuck with anything over what it brings at auction. No recourse to the estate.
Okay, here it comes. "But I won't have anything to leave to my kids!!" SO WHAT?? Let them get theirs the way you got yours...earn it!! There's no reason for an older person to have to live on cat food to leave an estate to their kids.
The reverse mortgage pays off the $14K the guy owes on his property. He can even take monthly payments to add to his 401K payout giving him a higher standard of living. It'd have to be a real dump to not be worth more than $28K, which is what the house would have to be appraised at to get just the $14K he owes.
We live in a $250,000 home in a nice neighborhood, 5 acres, pool, etc., with NO MONTHLY PAYMENTS. Bought it with a reverse mortgage, paid 45% down, and will never have to make a payment to a bank. We pay the taxes and insurance and maintenance. I still can't believe it. Greatest thing since peanut butter.
OP: How much do you make a year? Are you still working? Taking out a loan against your 401K at this point is a bad idea. I would just keep making your mortgage payments and knock it out that way. Probably can't be more than a couple years at this point, right?
See, another one that doesn't understand a reverse mortgage.
I understand reverse mortgages thoroughly.
Reverse mortgages are for people who need income.
The OP did not indicate that was needed.
Your problem is English. The OP wants to pay if off.
You must be in the business of selling reverse mortgages.
They are a horrible and expensive deal that prays on the elderly.
Oh wait ... you knew that. You just want to make money off it.
Quote:
Originally Posted by FloridaHappy
There are no monthly payments ever.
See, another one that doesn't understand a reverse mortgage.
Yes there are. Every time a payment is made to the person taking out the reverse mortgage, the debt is increased.
Every month - higher and higher. It is a monthly payment from the homeowner to the reverse mortgagor.
I understand reverse mortgages thoroughly.
Reverse mortgages are for people who need income.
The OP did not indicate that was needed.
They are a horrible and expensive deal that prays on the elderly.
Oh wait ... you knew that. You just want to make money off it.
See, another one that doesn't understand a reverse mortgage.
Yes there are. Every time a payment is made to the person taking out the reverse mortgage, the debt is increased.
Every month - higher and higher. It is a monthly payment from the homeowner to the reverse mortgagor.
preys on the elderly . A reverse mortgage is not a great product for the masses, but is a good product for many. Not horrible by any means.
Quote:
It is a monthly payment from the homeowner to the reverse mortgagor
. I have no idea what this sentence means. Someone who takes out a reverse mortgage does not have to make any payments on the loan as long as they live/occupy the property.
Last edited by TimtheGuy; 04-13-2011 at 12:49 PM..
Otherwise, it is a great way to leave an elderly person in the lurch.
I won't elaborate, but one can search using [fraud elderly "reverse mortgage"]
There are jillions of examples of elderly people being tossed out of their homes.
Quote:
Originally Posted by TimtheGuy
Quote:
Originally Posted by mortimer
It is a monthly payment from the
homeowner to the reverse mortgagor.
I have no idea what this sentence means. Someone who takes
out a reverse mortgage does not have to make any payments ...
They "get" payments.
The payments come with a high interest rate and increased debt.
Every time they "get" a payment, far more debt is added to the
mortgagee's balance sheet than they "get" in cash in their account.
It is, in effect, a payment TO the mortgagor.
Just because someone is old, doesn't mean they learned enough about
finance to be considered savvy. Lots of people just don't get it.
Often times, maybe most of the time, the old person with equity
can be better served by just taking out a HELOC and using money
when they need to at a much better interest rate without all the fees.
ON TOPIC again: the OP has absolutely no reason to take out a reverse mortgage,
a HELOC, a 401k loan or anything. They are just trying to pay off a remaining balance
of only $14k. If for some reason a person needs to make that balance "go away"
quickly, they could take out a Visa/Master Card cash advance as long as they didn't
let the balance hang around with 21% interest for very long.
That is, ONLY if they have a VERY good reason to do it.
ON TOPIC again: the OP has absolutely no reason to borrow from the 401k.
The OP is 62 and can just withdraw money from the account - penalty-free.
Last edited by mortimer; 04-13-2011 at 01:52 PM..
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Yes, it adds to the balance every month. WHO CARES? The OP doesn't have to pay it off. There are no monthly payments ever. 
. A reverse mortgage is not a great product for the masses, but is a good product for many. Not horrible by any means. 
