I've written a few articles on this site about reverse mortgages, which can be a tool to bridge the gap until Medicare kicks in or to postpone applying for Social Security. A reverse mortgage can get rid of an existing mortgage payment or give retirees the ability to tap home equity and use it as an income source without adding a mortgage payment to the picture.
With respect, don't confuse enthusiasm with a sales pitch. I freely acknowledge that a reverse mortgage is not perfect for everybody. I've written plenty of content over the years explaining when people should not get a reverse mortgage.
You raise a good point, but don't forget that different people have different goals. When you're not retired yet, you're building your assets for retirement. What you said makes sense - you want to limit interest costs and build equity as quickly as possible. Once you're retired, you're trading the assets you've built for the retirement lifestyle you want. In retirement, it's all about the monthly cashflow. It often doesn't make sense to take on a monthly mortgage payment and limit your retirement lifestyle simply because you'll have more home equity in 20 years than you would with a reverse mortgage. Many retirees have no plans to sell and move. They don't care how much equity they have. What matters is how much money they have every month to spend on fun things and absorb unexpected emergencies.
Many people are skeptical of reverse mortgages because of how they used to work. Reverses have improved significantly over the years. Others just don't understand how it works. Financial advisors are probably not going to recommend something they don't understand well because of their fiduciary duty to their clients.
Thanks for reading! Anybody who knows me personally knows I'm not a "sales pitch" kind of guy. I really do think it's a best kept secret. Almost nobody knows you can purchase a home with a reverse mortgage. Of those who have heard of it, few actually know how it works or how it can be advantageous.
That is exactly the idea! The reverse mortgage for purchase enables you to keep more of your cash in the bank instead of sinking it into home equity to buy a home outright and avoid a mortgage payment. Or, it can help increase your purchasing power as well. Mortgage payment is often the limiting factor when buying a home, so if that can be taken out of the way, it's easier to spend a little more if you need to on the purchase price.
I don't 100% agree with this strategy. The fatal flaw in my opinion is how retirement times with the next bear market. What if you buy and hold right up to retirement and the market crashes 12 months before you retire? If that happens, you could be screwed. Thirty or forty percent of your portfolio could be up in smoke and you have no time to make it back.
I agree that it's a bit of a racket. Title companies make a good amount of money. In the old days, a title company rep would have to go down to the county and search the property records in person before issuing a policy. Today, that process is electronic, automated, and fast, yet the title companies still charge a lot in my opinion. Lots of money for relatively little work. Kind of a racket, but it's still worth it to buy an owner's policy when you buy a home.
Owner's title can be expensive, but I think it's definitely worth the money. Imagine having to deal with that whole mess without having the title insurance company and their lawyers on your side. Glad everything worked out for you!
Comments:
I've written a few articles on this site about reverse mortgages, which can be a tool to bridge the gap until Medicare kicks in or to postpone applying for Social Security. A reverse mortgage can get rid of an existing mortgage payment or give retirees the ability to tap home equity and use it as an income source without adding a mortgage payment to the picture.
Post: Getting to the Number
Link to comment from October 3, 2022
With respect, don't confuse enthusiasm with a sales pitch. I freely acknowledge that a reverse mortgage is not perfect for everybody. I've written plenty of content over the years explaining when people should not get a reverse mortgage.
Post: Reverse Engineering
Link to comment from July 19, 2022
You raise a good point, but don't forget that different people have different goals. When you're not retired yet, you're building your assets for retirement. What you said makes sense - you want to limit interest costs and build equity as quickly as possible. Once you're retired, you're trading the assets you've built for the retirement lifestyle you want. In retirement, it's all about the monthly cashflow. It often doesn't make sense to take on a monthly mortgage payment and limit your retirement lifestyle simply because you'll have more home equity in 20 years than you would with a reverse mortgage. Many retirees have no plans to sell and move. They don't care how much equity they have. What matters is how much money they have every month to spend on fun things and absorb unexpected emergencies.
Post: Reverse Engineering
Link to comment from July 13, 2022
Many people are skeptical of reverse mortgages because of how they used to work. Reverses have improved significantly over the years. Others just don't understand how it works. Financial advisors are probably not going to recommend something they don't understand well because of their fiduciary duty to their clients.
Post: Reverse Engineering
Link to comment from July 13, 2022
Thanks for reading! Anybody who knows me personally knows I'm not a "sales pitch" kind of guy. I really do think it's a best kept secret. Almost nobody knows you can purchase a home with a reverse mortgage. Of those who have heard of it, few actually know how it works or how it can be advantageous.
Post: Reverse Engineering
Link to comment from July 13, 2022
That is exactly the idea! The reverse mortgage for purchase enables you to keep more of your cash in the bank instead of sinking it into home equity to buy a home outright and avoid a mortgage payment. Or, it can help increase your purchasing power as well. Mortgage payment is often the limiting factor when buying a home, so if that can be taken out of the way, it's easier to spend a little more if you need to on the purchase price.
Post: Reverse Engineering
Link to comment from July 13, 2022
I don't 100% agree with this strategy. The fatal flaw in my opinion is how retirement times with the next bear market. What if you buy and hold right up to retirement and the market crashes 12 months before you retire? If that happens, you could be screwed. Thirty or forty percent of your portfolio could be up in smoke and you have no time to make it back.
Post: Buy High Sell Never
Link to comment from June 29, 2022
I agree that it's a bit of a racket. Title companies make a good amount of money. In the old days, a title company rep would have to go down to the county and search the property records in person before issuing a policy. Today, that process is electronic, automated, and fast, yet the title companies still charge a lot in my opinion. Lots of money for relatively little work. Kind of a racket, but it's still worth it to buy an owner's policy when you buy a home.
Post: Homebuyer Beware
Link to comment from June 27, 2022
You typically only get owner's title when you buy the home. It's rarely purchased when refinancing.
Post: Homebuyer Beware
Link to comment from June 27, 2022
Owner's title can be expensive, but I think it's definitely worth the money. Imagine having to deal with that whole mess without having the title insurance company and their lawyers on your side. Glad everything worked out for you!
Post: Homebuyer Beware
Link to comment from June 27, 2022