• Question
  • Refinance Mortgage

    Asked on 9/1/2009

    My husband is 65 years old, and is retiring next year.
    I am 60 years old so as a co-borrower we want qualify for a reverse mortgage. Right now we have a home equity loan that is 11.95% interest rate with a 30 year fixed rate. I know this is extremely high. To long of a story to explain. We owe $56,000 on home equity loan. We plan on paying the house off with my husband's retirement next year. Is this a good thing? For right now should I refinance my mortgage? Are keep it like it is, since we will be paying it off next year. Thanks,Vee

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  • Categories: Mortgage Refinancing, Housing

Answers

  • NewRetirement User

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  • These are very good questions for you to be asking! Congratulations on having a good understanding of personal finance and things to ask.

    1) You are correct, you will not qualify for a Reverse Mortgage until you are 62 years of age

    2) You are also correct that your interest rate is quite high. But I don't have enough information to tell if you should refinance or not. I would recommend talking with a lender. Explain your situation and ask them if you would save enough on interest to cover the costs of refinancing. Also be very careful about any early pay off penalties.

    3) In general, paying off your mortgage for retirement is a great thing. Retiring with debt does not make much sense since you are using a fixed resource (your retirement savings) to pay off accumulating debt.

    4) I would also recommend that you assess whether or not you are genuinely ready for retirement. Have you secured enough resources to guarantee sufficient income for the rest of your life -- however long that might be? Do you have sufficient resources to pay for any Long Term Care needs that might arise?

    Good Luck!

  • Login to rate this answer:   Answered on 9/7/2009
  • NewRetirement User

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  • Dear Vee,

    These are complex issues and, while I agree with most of the previous answer, I would like to add my perspective. I am a reverse mortgage specialist. When your husband retires in a year, you will be 61, or just one year away from qualifying for a reverse mortgage. Can you and your husband wait until you age-qualify? That would be the very best thing to do, if you can. Also, in my opinion, it would be best to keep your retirement savings as cash; in other words, do not pay off the house. Let the reverse mortgage do that for you! Have you heard the expression "Cash is King"? In today's economy, you and your husband would be better served to keep your cash and then obtain the reverse mortgage when you age-qualify. Of course, this is predicated on you being able to wait it out.
    If I can answer any other questions, please do not hesitate to contact me.

    Karen Rayfield


  • Login to rate this answer:   Answered on 9/14/2009
  • NewRetirement User

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  • I would recommend that you leave it alone, pay off your house when you
    turn age 62. How much social security is your husband going to get? If he
    will get enough for you folks to live on until you reach age 62, then go
    ahead and pay off the house now. Then when you reach age 62, contact
    a reverse mortgage broker. If your house qualifies the mortgage company
    will buy your house from you at the currant value, and this will give you
    additional monthly income over and above the social security. Hope this
    is helpful.

  • Login to rate this answer:   Answered on 9/16/2009
  • NewRetirement User

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  • Hello Vee,

    Actually you can get a reverse mortgage right now with your husband as the only borrower. By doing this you would have to have a contingency plan if something happened to your husband. If he passed away before you, you would need to either pay off the mortgage, pay down the mortgage and get a reverse mortgage, sell the home or refinance the home to a regular mortgage.

    Reverse Mortgage rates are fixed for life at 5.56% right now which would in my opinion would be much better than your 11.95% rate.
    What a few of my clients have done is contacted there own personal insurance agent to get quotes on what it would cost for a life insurance policy to be able to pay down mortgage should the older spouse pass away before the younger (note you would not have to payoff mortgage completely to be able to qualify for a reverse mortgage should that happen).

    Personally, I think paying down your home in the market could be like throwing money down the toilet. As equity is a questionable asset at this point and we don't know how much worse our real estate market will get. I think there are better places to put your money than into your home that could very well lose more equity.

    Feel free to contact me with any questions.

    Anthony L

  • Login to rate this answer:   Answered on 9/24/2009
**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.