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  • This is a frequent question that is addressed considering a reverse mortgage. In the end only the homeowner can decide which is best for them and their family.

    Most of the time however our clients have lived in their home for quite some time. Often they have raised families, have done inumerable improvements, have strong ties to the immidiate community, and the comforting feeling familiarity brings.

    My point is when considering moving as a "$$" decision it is impossible to put a dollar figure on those things I mentioned.

    Then of course the cost of moving is high. As a licensed R.E. Broker (CA DRE Lic. 01144254) it is my experience that most sellers prefer an established real estate firm/agent when selling their property. This being said plan on paying a 5% commission on the sales price of the home so a $400K home would be $20K+/-. Plus the closing costs and the cost of getting the home ready to sell. In this market the house that sells best is the one that is virtually perfect in appearance and priced below other similar properties in the area. So how much money will it cost to get the house "ready" to sell?

    Then there are the costs associated with the move. Because most people would be moving into a smaller space there are also the "what do I do with my stuff" questions. Storage for a couple hundred dollars a month?

    Of course one has to consider the frustration of trying to find a new place to live....and the cost.

    Don't forget about possible tax consequences of selling the current residence. You probably have lived in your house for 2 of the last 5 years which means that up to $500K of gain is tax free for two people assuming both have been on title. Only $250K is tax free if only one person has been the resident and on title for 2 of the last 5 years. So what if any tax consequences will there be on the sale?

    Of course if you are living in a large home (large to you) and it is too much to maintain then moving might make a lot of sense. Perhaps moving to be closer to family or for other ease of living issues makes good sense too.

    At the "end of the day" however when it just comes down to which decision is best based on affordability then there are several issues to consider.


    Terry Dyer
    All American Reverse Mortgage

    Lic. in CA,AZ,OR,WA,FL,IL

  • Login to rate this answer:   Answered on 9/3/2007
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  • As Terry stated above this is not an easy question to answer. The best place to start is with your current financial situation. Start by listing in detail your current expenses broken down on a monthly basis. Be sure to list the expenses that are related to your home, or would be paid off from the proceeds in a separate column so that you can arrive at a total for these expenses.

    Next calculate your current take-home pay, and subtract all your expenses other than the home related expenses. This will give you the amount of your current income that will be available to meet the expenses on a new home.

    Next, arrive at a REALISTIC value that you could sell your home for today and subtract the amount of money you need to pay off your existing mortgage and any other debts you would pay off with the proceeds. If you were to sell your house there will be expenses. A good rule of thumb is to assume expenses between 8% and 10%. This will cover the real estate commission and other miscellaneous expenses including moving. Subtract these expenses as well. Now, subtract an estimate of the closing costs associated with purchasing a new home. The rule of thumb here is 6% to 7% for closing costs and miscellaneous expenses.

    What you should end up with is the amount of income you have available to support a new home, and the amount of funds you have available for purchase that new home. If it's not enough to get what you really want and you may find it worthwhile to take out a reverse mortgage and stay in your existing home.

    Recently, HUD allowed reverse mortgages to purchase a new home. So you might also consider purchasing a less expensive home with lower taxes or expenses, and using a reverse mortgage to help you afford the home.

    When arriving at your final decision, consider all the financial implications, as well as the personal implications and find a reverse mortgage specialist who will take the time to go through this analysis with you on paper.

    Stephen Kinney
    Stephen Kinney Associates,Inc

  • Login to rate this answer:   Answered on 10/30/2008
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.