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Refinance with interest-only loan or take reverse mortgage

i am 65 years old and want to do home repairs. it could approximately cost $80,000 and i have $250,000 of home equity loan balance. should i refinance with an interest-only for low payments or get a reverse mortgage or use ira money and pay tax on what i take out?

larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Perez,

I would like to suggest you to go for the home equity loan or refinance rather than going for the reverse mortgage, because in case of reverse mortgage, you have to give it to the lender after your death. You have now gathered good amount of equity and if your credit score is high, you can easily refinance it with lower interest rate.

Wishing you Best of luck,
Larry

Like | Dislike | Share | Posted: Wed, 10/24/2007 - 05:59 | Post subject:

evolovik26's picture
evolovik26 | Joined: August 15, 2007 11:43 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Larry you are wrong!
The ballance of the loan needs to be paid off in a case with reverse mortgage but the house goes to whoever stands to inherit. The only thing is the reverse mortgage is not as good as far as rates are concerned. It creates cashflow but eats equity faster then conventional loan.
If you looking to create a cashflow for yourself for next 10-20 years lookinto reverse mortgage
If you looking for lump sum and/or can get a better rate then your current mortgage without setting yourself back to much then you can refinance into conventional 30yr fixed.
If you looking to get cash over time as you do your project you can get a HELOC as it will have lowest costs and will allow to take as much cash as you need when you need. (it is adjustable however)

Like | Dislike | Share | Posted: Wed, 10/24/2007 - 08:22 | Post subject:

tgolden's picture
tgolden | Joined: January 6, 2007 07:29 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Perez,
I see there are some mixed opinions in this post. The one thing I see that is missing to make an accurate decision is what the value of the home is and where it is located. Even if you where interested in a reverse you may owe too much to actually have it be a benefit.
The question would be around your ability to carry the increase in monthly payment while in your golden years. based on the info supplied I would think a equity loan but if you increase your payment and do the repairs to be faced with selling the home due to an increasing adjustable rate and a monthly cash flow threat.....that would be a negative effect. If you are throwing the full 80,000.00 at repairs maybe you can consider a HELOAN as a second and get a fixed rate.
Regards
Tony g

P.S. - Yes, Larry sorry to say you are wrong. The home owner never gives up home ownership or equity ownership of home. It will pass on, sell or go to probate.

Like | Dislike | Share | Posted: Wed, 10/24/2007 - 17:26 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Reverse mortgage not an option...at age 65 you would only qualify for approximately $190k...this is less then what you currently owe on your Home Equity line...your upside down by $60k, this is even before considering your need for $80k for home repairs.
Obviously, if you can afford the monthly payments, then this would be the best option to meet your goals.

In most instances, only a small percentage of retired seniors would even qualify for a $330k loan...so this exit plan would not be helpful...the reverse option does not require credit, income, or job requirements, thus being a more useful and broader option for the senior on a "Fixed" income world.

Suitablility - is the key factor

Like | Dislike | Share | Posted: Thu, 10/25/2007 - 08:18 | Post subject:

jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Perez,

If you go for refinancing with interest only option, the initial payments may be low but after sometime you have to pay large amounts.

If you use IRA savings, you will have to pay tax on the money you withdraw according to your current income tax rate. If you can manage both your home equity loan as well as this tax, you can do that.

You may opt for a reverse mortgage as it will fulfill your conditions.

You may also consider refinancing with a fixed rate HELOC.

Like | Dislike | Share | Posted: Fri, 10/26/2007 - 04:20 | Post subject:

ctcloan's picture
ctcloan | Joined: October 27, 2007 11:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'm confused when you say $250k in home equity loan..you have a mortgage you owe $250k on or you have $250,000 in equity in the home? With a reverse, you will never have to pay it back as long as you reside in the home & after you pass away it will go to your heirs & they have the option of keeping the home if they wish. But you must have sufficient equity in the home to get the reverse mtg - generally 50 % equity in the home - the more the better! And, if you have no heirs & you have the equity in the home - why not get a reverse mtg & enjoy your home & the rest of your years?! You could take some of the cash you get & put it into an annuity - which will generate more cash flow for you. Why be a slave to your lenders? This is just my opinion of course but if another mortgage is the option you choose, then I would say a fixed rate interest only for you considering your age (not that you are too old - 65 is now the new 50 you know!). My husband & I both do residential & commercial mortgages so feel free to call us for advice with no strings attached! Everett & Lisa...386.597.1164

Like | Dislike | Share | Posted: Sun, 10/28/2007 - 13:04 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I owe $250,000 of home equity loan. I know reverse mortgage can be a good option for me but i was also thinking whether i could take out money from the IRA

Like | Dislike | Share | Posted: Mon, 10/29/2007 - 05:01 | Post subject:

tgolden's picture
tgolden | Joined: January 6, 2007 07:29 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Perez,
I would check with who ever holds you IRA. That could be an option. Most IRA's allow you to pull from your account after 591/2 without penalty but there will be taxation on the money you pull. I would get the full details of your IRA and the options you have. Then compare your options.

The conventional HECM reverse mortgage may not support your needs based on what you owe. There are reverse programs that let you take more then 50% equity from your home. If you are wanting to get some accurate figures for your particular situation we can do what is called a RMA Reverse Mortgage Analysis. This will give you a true picture of what you can get from the reverse mortgage programs that are available and ethical. You have to be careful as many lenders are getting into the reverse mortgage market and you need to read the fine print of each program. To protect yourself the loan must be a non- recourse loan. If you would like further assistance or information you are welcome to contact me at my details supplied and I will put you in touch with someone who can give what you need to fully research the possibility of a reverse mortgage.
Regards
Tony Golden

Like | Dislike | Share | Posted: Mon, 10/29/2007 - 05:44 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

RMA? what eaxctly is it tony? some comparison

Like | Dislike | Share | Posted: Mon, 10/29/2007 - 06:18 | Post subject:

tgolden's picture
tgolden | Joined: January 6, 2007 07:29 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Perez,

The RMA is a software program we use to calculate how much money you can get from a reverse mortgage. It stands for a Reverse Mortgage Analysis. It gives you a no obligation review of how a reverse can work or not work for you. It will show you the differant programs available and spell out all the figures and costs.

You get a good faith estimate and an amortization chart showing you how the reverse mortgage works offer a period of years.

We do this for everyone that is considering a reverse mortgage. It is the best way to see if it is beneficial to consider for your particular situation. Reverse mortgages need to be thought through a lot more then a conventional mortgage. It is truly more of a financial planning tool then a simple mortgage.

Always remember that the process of a reverse mortgage although scary at times is not something you are obligated to do. Even if you proceeded all the way to closing the loan you still have 3 days to change your mind. No one likes to see that happen as it will probably cost you the appraisal fee but the point I am wanting to make is if you are working with someone other then us don't be pressured into anything. We believe it is very important to make sure that you understand the product, it serves the best purpose for your needs and you are comfortable with doing the loan.

That is why we like to spell everything out in the beginning with a RMA. You may find out from the report that the reverse mortgage will not help you or it is not what you thought it was.

We have helped many people over the past 3 1/2 years and would be glad to offer you the same educational service. You may already be working with someone and I don't want to interfere. I am hear to help but am also here to assist you with getting a reverse mortgage is you wish to do so with us. It is what we do and what we specialize in. As always, this is a new product to many people and is very differant then understanding conventional mortgage. Please make sure you ask as many questions as possible and get a clear understanding of the process. We pride ourselves on over explaining to the product and process.

I always say to the people I do reverse mortgages for. My job is to talk you out of a reverse mortgage if I can! If there is not a better way forward and the reverse mortgage fits your needs then I will support and assist you through the entire process.

If you would like an RMA sent to you or more in-depth information about reverse mortgages please feel free to contact me. My contact links are at the bottom of my posts. You can email me if you wish.

I hope this helps and let me know if I can answer anymore questions for you.

Regards
Tony Golden

Like | Dislike | Share | Posted: Mon, 10/29/2007 - 10:45 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

thanks a lot Tony. You've been of great help.

Like | Dislike | Share | Posted: Thu, 11/01/2007 - 04:24 | Post subject:

lisa.scherzer's picture
lisa.scherzer | Joined: January 4, 2008 08:48 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

doesnt look like you will qualify for a reverse mortgage. I would suggest pulling from the IRA for the home improvements as opposed to taking on more debt. You may want to look into refinancing that home equity line of credit since those are usually adjustable rates that tend to be quite a bit higher than a fixed rate mortgage would be at this time. Maybe refinance into an interest only fixed rate?

Like | Dislike | Share | Posted: Sun, 01/06/2008 - 01:46 | Post subject:

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