Reverse mortgage...redux

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crankcall said:
My concern are end of the road costs. You hit the wall where you need actual care and heaven forbid long term care and that shite is expensive. If you gave away your equity and lived large , and are comfortable being a ward of the state in a crappy home go for it . I do want to be the guy that thought eighty one was the ceiling and I’m cashless and turning eighty five .


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That angle is one way of looking at it. I`ve been mortgage free for years though. The house is now at about 725K, it has appreciated at 6.4% annually since `98. The CHIP calculator suggests using a 3% appreciation annually, after repayment of P&I there would still be around 650K-ish home value using 3%. Add in monthly pensions and a good chunk of cash in reserve, I should be good to go at age 78 to 80. As always, YMMV, The asteroid or WW3 could happen this afternoon.🤘
 
Glenn/RZ500 said:
That angle is one way of looking at it. I`ve been mortgage free for years though. The house is now at about 725K, it has appreciated at 6.4% annually since `98. The CHIP calculator suggests using a 3% appreciation annually, after repayment of P&I there would still be around 650K-ish home value using 3%. Add in monthly pensions and a good chunk of cash in reserve, I should be good to go at age 78 to 80. As always, YMMV, The asteroid or WW3 could happen this afternoon.🤘
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Chip rates are close to 8%. Ouch. What is the upside to reverse mortgage vs heloc? Heloc rates are ~5% and cash flow is infinitely flexible instead of a defined monthly transfer.
 
GreyGhost said:
Chip rates are close to 8%. Ouch. What is the upside to reverse mortgage vs heloc? Heloc rates are ~5% and cash flow is infinitely flexible instead of a defined monthly transfer.
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The CHIP rate is 7.29%, the HELOC is 5.49%. That`s a substantial difference, about 83 grand on a loan of 176K over 10 years. That is 20 grand upfront and a monthly payment of 1300 bucks for 10 years. The CHIP thing is no monthly repayments, P&I, until you move or die. If I`m dead, so what, my friends still get serious coin. If I`m not checked out, there is still substantial money left, lots to rent or downsize. I see my financial planner next week, is it all a crapshoot, in the end nothing matters anyway. To be continued....
 
HELOC doesn't need to be repaid, either. If you have other income that covers day to day, you don't need to withdraw from the HELOC unless you want to.

If the HELOC is at a lower interest rate, that even furthers that choice over a structured reverse mortgage.

My sister and brother-in-law are long since retired, and are making regular mortgage payments on their house, because he (financial wizard) can make more on the invested capital than the interest on the mortgage costs!

I'm not that brave.
 
Brian P said:
HELOC doesn't need to be repaid, either. If you have other income that covers day to day, you don't need to withdraw from the HELOC unless you want to.
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Also, you can withdraw from the HELOC itself, to cover the cost of the monthly payment. There is no policing of where the funds come from.

At least that was the case on my old HELOC.
 
Glenn/RZ500 said:
The CHIP rate is 7.29%, the HELOC is 5.49%. That`s a substantial difference, about 83 grand on a loan of 176K over 10 years. That is 20 grand upfront and a monthly payment of 1300 bucks for 10 years. The CHIP thing is no monthly repayments, P&I, until you move or die. If I`m dead, so what, my friends still get serious coin. If I`m not checked out, there is still substantial money left, lots to rent or downsize. I see my financial planner next week, is it all a crapshoot, in the end nothing matters anyway. To be continued....
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Technically, you need you need to make interest payments on a heloc but it's all a shell game. You pay the $200 interest payment and withdraw $2000 and they don't blink an eye. There is no requirement to pay down principal while you own the home unless you do something to scare the bank.combine the much lower interest rate with the flexibility (maybe I don't need 1300/mo for Sept to Dec but I need 5k in jan) and I don't see how the reverse mortgage wins in any analysis.
 
Lightcycle said:
Only snag I can see is that HELOC may require proof of income to show you can make the payments. If OP is retired, this might make the reverse mortgage the only loan that they can qualify for.
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Yeah I thought of that after. He has a pension, that should satisfy a reasonably large heloc.

I think of reverse mortgages like a pay day loan. Better than the mob if you don't qualify for any conventional channels.
 
GreyGhost said:
Yeah I thought of that after. He has a pension, that should satisfy a reasonably large heloc.
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If OP qualifies for a HELOC, that would be the way to go.

Day 1 of a reverse mortgage, you are accruing interest on the entire loan amount, eroding your equity much quicker
Day 1 of a HELOC, you are only paying interest on whatever you withdraw and the rates are lower to boot. Your equity remains intact for longer.
 
GreyGhost said:
Technically, you need you need to make interest payments on a heloc but it's all a shell game. You pay the $200 interest payment and withdraw $2000 and they don't blink an eye. There is no requirement to pay down principal while you own the home unless you do something to scare the bank.combine the much lower interest rate with the flexibility (maybe I don't need 1300/mo for Sept to Dec but I need 5k in jan) and I don't see how the reverse mortgage wins in any analysis.
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I`ll need to speak with my planner to clear or confirm some HELOC questions. Is it correct that if I took a HELOC for 100 grand and spent it all over 10 years, making interest payments only during that timeframe, the principal could be paid back in entirety when I sell the home, or my beneficiaries would pay it back if I was deceased? " Scare the bank ".....is that possible :LOL: I`d imagine they could recall the loan in entirety for who knows the reason. Miss an interest payment?...that `ain`t me.
 
Glenn/RZ500 said:
I`ll need to speak with my planner to clear or confirm some HELOC questions. Is it correct that if I took a HELOC for 100 grand and spent it all over 10 years, making interest payments only during that timeframe, the principal could be paid back in entirety when I sell the home, or my beneficiaries would pay it back if I was deceased?
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Yep.

Glenn/RZ500 said:
" Scare the bank ".....is that possible :LOL: I`d imagine they could recall the loan in entirety for who knows the reason.
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In rare instances, they could recall the loan if your FMV of your house dropped precipitously or you max out your loan and stopped making payments. But it takes a lot to "scare the bank". Foreclosing is the nuclear option for them and consumes a lot of resources on their part. Much better for them to have you stay in your home making payments, even if it's on some kind of reduced payment plan.
 
Glenn/RZ500 said:
If I took a HELOC for 100 grand
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Well, we now know what motorcycle @Glenn/RZ500 is planning on buying!


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Sweet ride!

Can we get a test ride for helping you out in this thread? 😁
 
Brian P said:
….

My sister and brother-in-law are long since retired, and are making regular mortgage payments on their house, because he (financial wizard) can make more on the invested capital than the interest on the mortgage costs!

I'm not that brave.
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That’s my gig too.

In 2000 I took out a mortgage and invested the funds. Thanks to strong markets, and a good wealth manager have made the borrowed amount double in 5 years. Plus about 15% of the initial mortgage is paid off.

As long as market returns are outperforming mortgage costs, it’s a no brainer for me.
 
Everyone's financial circumstances are different and everyone has a different perspective on cost and risk tolerance.

Do you have a HELOC now? If not, and you're on a pension you may be limited as to what you qualify for. Banks look at the value of your home, but also your ability to pay off your debt. Also, a HELOC is callable by the bank. Not likely to happen, but what if it did?

If I needed a reverse mortgages I'd get qualified for the maximum, but structure it so that I got a small lump sum for immediate travel or toys, then a monthly amount to supplement pension income to increase travel and fun times. This would minimize interest over the long term.
 
Carney is talking about taxing principal residences. How does that pull out the rug on the reverse mortgage?
 
nobbie48 said:
Carney is talking about taxing principal residences. How does that pull out the rug on the reverse mortgage?
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Taxing principal residences is such a complicated land mine that effect of reverse mortgage will be a rounding error. If they try and implement it their needs to be a starting value (maybe current market value?) and from that point forward you track renovations/investments in the property so they are captured in the cost of the property.
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