Reverse mortgages are no longer verboten

[jfoxcpacfp]

Most people don't realize that laws have changed to protect people who get reverse mortgages and to drastically lower the costs. Surprisingly, there are some very compelling reasons to have a Reverse Mortgage Line of Credit in your financial planning arsenal. They are no longer the last resort but can be a great tax-planning and investment protection tool.

Why I've Learned to Respect Reverse Mortgages - what do you think?

[VagabondMD]

Yes, they are.

[Sneezy]

I agree although that article is sparse on details

The concept of getting money out of a valuable asset without having to move from your home has always been appealing but is now much more appealing logistically.

The site www.mtgprofessor.com has lots of detailed articles and calculators for people at the point of making an actual decision

There are the usual caveats including high fees for set up and the fact the house may need to be sold at death (not good if kids or younger 2nd spouse is living there).

Personally, I see this as a form of insurance against outliving your assets.  Say you have 2.5M in assets and want to retire at 60 and take 100K/year.  4% is probably safe, but some people would really worry what happened if returns were low and they lived to 100.  This is a way to provide a ~500k backup if that happens

EDIT: It is also good to note that if you open a Reverse Mortgage Line of Credit and don't draw the line grows by the rate on the mortgage (3-5% per reference below) way above what you could earn in safe investments or your house is likely to appreciate.  So if you open the line at 62 you'd have a lot more than 500K by the time you hit 90 or 100 and your savings were running out

More detail at this link

 

 

[jfoxcpacfp]

Sneezy wrote:

There are the usual caveats including high fees for set up and the fact the house may need to be sold at death (not good if kids or younger 2nd spouse is living there).

That's one of the improvements: under the new rules, the younger spouse doesn't have to move out if the borrower dies as long as the spouse continues to make the tax and insurance payments and keeps up the maintenance.

I'm sorry you think the article was sparse on details - I was already over my word limit for the publication I'm sending it to and couldn't include more. I've got some excellent articles that I used for research, along with some reverse mortgage calculators, here. Be sure to read the 2 by Wade Pfau - his arguments are persuasive and originally caught my attention.

[Sneezy]

Ha, I didn't realize you were the author!

It was a great article, I just like ones where they lay out several scenarios (think Physician on Fire with Doctors A, B, C, D, E)

Obviously you had a word limit

Thanks for all your contributions to this forum

[jfoxcpacfp]

Sneezy wrote:

Ha, I didn’t realize you were the author!

It was a great article, I just like ones where they lay out several scenarios (think Physician on Fire with Doctors A, B, C, D, E)

Obviously you had a word limit

Thanks for all your contributions to this forum

Click to expand...

You're welcome. That's a good point about the scenarios. I'll consider it for a future article, thanks for the idea.