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Wade pfau reverse mortgage calculator12/29/2023 ![]() ![]() That said, you should consider a reverse mortgage a last resort, not your first choice. Let’s face it: You get only one shot at retirement and you should make the most of it, even if it means spending assets you had hoped to bequeath to your children. Our Humble Opinion: Despite all the drawbacks, you shouldn’t rule out a reverse mortgage. The costs involved are far lower than with a conventional reverse mortgage, and it ensures the house stays in the family. ![]() That gives the parents access to extra cash, while the adult children can be fairly confident they’ll eventually get their money back, plus interest. ![]() To help their parents pay for retirement, adult children or other family members might provide a credit line that is secured by the parents’ home. One option for well-heeled families: Arrange a private reverse mortgage. If those expenses prove too burdensome, you may be compelled to move, at which point the reverse mortgage has to be repaid. In addition, keep in mind that you still have to handle the home’s maintenance, property taxes and insurance. At the bottom of the initial calculation, click on “Details.” As you’ll see, there’s a host of fees charged, plus the initial loan interest rate will likely be higher than on a conventional mortgage. To get a handle on the expenses involved, try playing with the calculator offered at, which is the website of the National Reverse Mortgage Lenders Association. You can typically borrow more if you’re older, interest rates are low or your house is appraised at a high value. At that juncture, the total amount owed, including all accrued interest, can’t exceed your home’s value. Instead, the loan is repaid when you move permanently or, more likely, after your death. For example, tapping a line of credit could allow you to avoid taking a distribution from your investment portfolio when it has lost value, or it could cover the cost of long-term care, says Wade. Pfau found that if the couple took out a reverse mortgage after depleting their portfolio would have left their heirs nearly 1.8 million in tax-free home equity. Contact a Reverse4America representative for suggestions with your specific situation.A REVERSE MORTGAGE lets you borrow against the value of your home without paying back any of the loan during your lifetime. The H4P also has a number of other exciting applications. Using an H4P, you can make a down payment of roughly 50% of the new home’s value ( $150,000 ), still have $150,000 cash remaining, and as long as you live in your new home, pay the property taxes, homeowners insurance, and HOA dues ( if applicable ), you will never have to make a monthly mortgage payment. Since you are no longer working, and don’t have significant monthly income, it will be difficult to qualify for a loan on a new home. ![]() You want to move close to your kids and the homes in that area are around $300,000. Your current home has a 1st mortgage of $200,000, so following a sale, with commissions and various fees, you will end up with a little less than $300,000 cash. Example: Say you own a home worth $500,000, but you are now an “empty nester” and want to down size. Wade Pfau, PhD - Princeton, CFA Several recent research articles published in the Journal of Financial Planning have investigated how opening a standby lin. Roughly, an H4P can be around 50% of the home’s value. The details of the percentage of the loan versus the value of the home vary based on the borrowers age and a number of other details. This very popular recent Reverse Mortgage option is known as a “HECM for Purchase” or H4P. This option is a relatively recent option for an FHA insured Reverse Mortgage. ![]()
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