You must reply to at least three colleagues in a manner that extends the discussion. A simple “I agree/disagree” will not be accepted. respond in a manner that further extends the discussion.
Personally, I think home mortgages should be avoided as much as possible. Sure they can be useful in certain situations, but the idea of putting up ones shelter, their home, as collateral for money, seems very risky. As seniors, we may be in good health, but anything can happen at any time. A reverse mortgage requires the borrower to stay at that home. If they become sick and start to stay in a hospital, that loan immediately becomes due. So if you end having to stay in long term care for 12 months and then can come back home, you may not have a home to come back too! The site attached sheds some light on the cons. As a male, I most likely will die earlier than my spouse. In some situations, such as her being 61 and me being 63, if I were to die then, she would be required to move out of the house because no one under 62 can be listed as a borrower. If you move out, that loan becomes due, and if the economy is in a recession and home prices have fallen greatly, selling your home may not be enough to cover the loan! So sure while I do think there can be benefits, for me the risk just seems too high. I would get slightly sick and then get worried about having to go to long term care, passing away and leaving my spouse on the hook, etc. Everyone has their own risk tolerance however and while I certainly am willing to take plenty of risk at this age, I do not see myself willing to do so in retirement.
Chapter 4 Housing Issues
I think the most interesting idea was the idea of appreciation and how it was portrayed in the chapter. When I was younger, as recently as this year even, I had little knowledge of the specifics of homeownership. I thought the same way the people in the chapter did- that no matter what within a few years a house will appreciate and you can make money. However, I now know this is obviously not the case. Especially since I was able to purchase my first home with my girlfriend at the beginning of October. The research I’ve done since this time has opened my eyes to the reality of the situation. Simple structural things like a roof repair can cost as much as $10,000. If you were to buy a house for 50k and put even another 50k into it to improve it you will not be able to sell it for 100k let alone more unless you got some substantial deals or lucky with a buyer.
Basically, flipping houses is not always realistic related to the market, and you should not rely on your home value towards your retirement goals. (Unless of course the retirement goals is a home value of $0!)
Tom Selleck (the original Magnum PI) is on a lot of ads trying to encourage seniors to initiate a reverse mortgage. He frames it as “just a loan” and not that anyone is trying to “take your money”. What do you think about the usefulness of reverse mortgages?
Reverse mortgages are an interesting concept and one that can be very useful for those people that have retired and and want to leave any more to anyone. The problem really comes when you are wanting to sell your house after having a reverse mortgage for a couple years. Because now most of the money you thought you had in your home will go to the bank where you took out the mortgage. This is especially problematic if one was taken before you moved into a smaller home and were going to be relying on the wealth you had amassed in your property.
While they have there place, I would recommend selling your home and downsizing this way you know exactly how much money you have and there are no hidden costs that can eat up your money, you will also be able to earn interest and returns on this money rather than earning money for the bank.