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Reverse Mortgage Information

Use a HELOC to Step Into a Reverse Mortgage

Posted on March 16, 2023
Reverse mortgages are financial tools specifically designed to help seniors tap their home equity for retirement income. But they have two big drawbacks: 1) fees and expenses in relation to loan amounts are very high and, 2) they are aged-based loans meaning that the younger the borrower, the smaller the loan amount available.

You need to be at least 62 to qualify for a reverse mortgage. But, while there are no hard and fast rules, the “best” age for reverse mortgage borrowers is about 75. This is an age at which you can qualify for a decent loan amount and still have enough years to left smooth out the impact of high origination fees.

One option for retirees is to consider using a HELOC as a “bridge” to a reverse mortgage. For example, a 70-year old who owns his home outright could take out a HELOC requiring interest-only payments for 5 years. He then draws $500 per month for living expenses plus enough to pay the loan interest. Here’s what such a loan might look like after five years (assuming 7% average interest):

Year Draws to Supplement Living Expenses Draws to cover HELOC Interest Total Draws Home Appreciation @ 4%
1 $6,000 $238 $6,238 $250,000
2 6,000 721 6,721 260,000
3 6,000 1,277 7,277 270,400
4 6,000 1,915 7,915 281,216
5 6,000 2,649 8,649 292,465
  $30,000 $6,800 $36,800  

 

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Recent Posts

  • Reverse Mortgages – Are They Just Plain Wrong?
  • Retirement Income Planning and Home Equity
  • Home Equity Loan With a Reverse Mortgage – Your Home Pays You
  • Reverse Mortgage Definition
  • Reverse Mortgages: Information You Need to Know
  • Pay off Mortgage Question
  • Reverse Mortgage – Providing Peace of Mind Without Sacrificing Safety or Security
  • Reverse Mortgage Interest Rate
  • Reverse Mortgages – Learn The Facts First!
  • Reverse Mortgage Counselors – Michigan
  • A Reverse Mortgage Could Provide a Comfortable Retirement
  • Reverse Annuity Mortgage – Tapping Into Your Equity
  • The Reality Retirement Calculator – assessing needed income for retirement
  • AFR – Applicable Federal Rate
  • Advantages and Disadvantages Of A Reverse Mortgage
  • Met Life Predicts Surge in Reverse Mortgages
  • Use a HELOC to Step Into a Reverse Mortgage
  • Reverse Mortgage Payment Options – Are You Prepared to Self-Insure Life Expectancy?
  • Reverse Mortgages – A Tax Free Income For Senior Citizens

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