Age a factor in reverse mortgage
DEAR BRUCE: I am 64 and just looked into a reverse mortgage. My home is my retirement and is worth about $650,000 - I owe $116,000. All I could pull out of the house is less than $150,000. After paying off the house it would leave me with only $35,000 to live on. I don't see any advantage in doing this. Did the loan officer, who is not a reverse mortgage specialist, get it wrong or am I missing something? - D.C., via e-mail
DEAR D.C.: I don't think you got it wrong, although the numbers do seem a little bit light. Your problem is your youth. That's it, that's what I said, "your youth," or should I say your relative youth. You're 64 and female. Assuming that you are in reasonable health your life expectancy exceeds 20 years and as a consequence the amount of money available to you in a reverse mortgage is relatively modest.
You might wish to consider selling the house outright. If you are single there will be some capital gains tax to be paid. If you are married the likelihood is that you will get to keep it all. In either event, you will then have the use of about $500,000 which could be invested quite safely in one type of bond or another at around 5 percent which would yield $25,000 a year for life without ever attacking the principal. You could withdraw a portion of that principal to raise your annual income.
Further, you would not have the expense of maintenance of the home that you currently have or the responsibility. The younger you are the less you get on a reverse mortgage. receive.
Source: The Cincinnati Post
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