Reverse Mortgages & The $1 Million Home

by Peter G. Miller
May 30th, 2008

Patrick writes and says, “our California home is valued at approximately $1,000,000 but we owe $450,000 on it. What will a reverse mortgage do for us? I am turning 61 and my wife will be 60 in 5 months. I need input for planning purposes.”

I would make the following suggestion: Don’t plan yet.

The reason for delay is this: Significantly higher loan limits for FHA-insured reverse mortgages are being discussed on Capitol Hill — think in terms of $550,000 to almost $730,000.

With such limits you could retire your current loan and the monthly expense it represents. At 6 percent interest over 30 years, you would save $2,700 per month on principal and interest by paying off a $450,000 mortgage. Plus, with higher limits you could also have a significant line of credit or cash from closing.

As always with such questions, sit down with a knowledgeable advisor such as an attorney who specializes in elder law and review your situation before signing any paperwork.

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