Joined: 28 Mar 2015
Location: South Florida
Pay off mortgage.... Then take out a reverse mort as annuity
Have a very large sum coming. Thinking of paying off my mortgage, then taking out a reverse mortgage to pay me a monthly annuity with no mortgage payment. How would I determine my irr?
Sat Mar 28, 2015 10:10 pm
oldguy Senior Member
Cash: $ 715.00
Joined: 21 May 2006
The Rev Mort is a notoriously poor investment - altho Congress is currently trying to make it more helpful to seniors. It is considered to be a last resort for retirees who have no other means of support. The current interest that you'll pay on a RevMort is about 6.3%. And the max loan amount is about 50% of the value. And the fees, costs, are somewhat steep also. (I feel sorry for Fred Thompson on TV trying to sell them).
It might be better to keep your house in the family - and invest the large lump sum in a conventional manner - such as in an index fund where it will grow tax-deferred, provide income to offset inflation, pay your living expenses, and also make the payments on your current mortgage?
Are you age 62 or over? And currently retired?
Sun Mar 29, 2015 2:12 am
christcorp Preferred Member
Cash: $ 38.85
Joined: 05 Mar 2015
Totally agree. A reverse mortgage is only good as a "LAST RESORT" before starving and having your house and possessions repossessed because you can't pay your taxes.
Depending on how large the sum of money is you're getting, you could turn that into an annuity to supplement your income. But even that wouldn't be my first choice. Just that it's a better choice than a reverse mortgage.
You obviously are making it OK with your current mortgage and current monthly expenses. So, why don't you simply take the lump sum you're getting and pay of your house. If you have any left over, pay off any other debt. THEN..... you have an additional $600, $700, $800, or whatever your mortgage payment WAS per month, that you can use to supplement your income. Make that your OWN ANNUITY PLAN.
Example: If your mortgage was $800 a month; $600 for the home loan and $200 for taxes and insurance.... Then continue to put away $200 a month when the home is paid off to cover your taxes and insurance; put $500 a month into a somewhat safe investment; and give yourself a $100 a month PAY RAISE or living expense raise reward for being a smart investor.
Thing is, you already have an annuity in place. It's call your MORTGAGE PAYMENT!!! If you pay off the house, that's money you no longer have to spend as a BILL. You can save it, invest it, spend it on luxury, etc. You don't need an annuity and you definitely don't need a reverse mortgage.