Provide best way to increase cash flow in retirement, 1sell house go to apt 2go to condo 3 go to life cycle?
Life cycle is where you deposit a sizeable amount of money but you do not buy. There is a monthly payment like a condo or if they provide from cradle to grave it's quite a bit more.
- 1 decade agoBest Answer
You can consider a reverse mortgage. This means that you borrow money each month from a bank against the value of your home, until you die or decide to move.
The bank will use actuarial tables to calculate your life expectancy. They use that to calculate a monthly payment to you that they will make until you die, or until you move out of the property. This means, each month you will get a check in the mail, and you will owe the bank a little bit more as time goes on. They do the math so that the amount you get paid each month, plus the accrued interest, will be close to the house's value at the point in time they expect you to die or move.
They cannot "call the loan" as long as you are alive and living in the home, and you never have to start repaying it until you die or move, which is great cashflow management.
Since the bank will try to estimate how long you will live, if you live longer than that amount, you will actually be getting more money than your home is worth.
In any case, when you die or move out, the house will be sold to repay the amount you owed the bank.
However (and this is the good part):
1. You can never ever owe the bank more than your house is worth when you die or move. If you live to be 125 and the bank pays you out $500,000 over the months between now and then, and your house is only worth $280,000 when you die, the bank essentially loses the $220,000 difference (your heirs will not be responsible for the difference. It's the bank's loss.)
2. If you happen to die or move in less years than the bank forecasted, you would have borrowed less than your house is worth. In that case, the proceeds from any sale would be enough to cover the loan, and your heirs get to keep the difference as an inheritance.
3. If your spouse lives longer than you, the house will not be sold out from underneath them. The repayment of the loan needs to take place when the last borrower dies or moves out.
Reverse mortgages are insured by the FHA/VA, which is a government program. Therefore the bank actually passes those losses to the government, which is why the banks are so eager to do the loan. The reason the FHA/VA is willing to take the risk is they expect home prices to keep up at a reasonable pace, so that even if you live longer than expected, your real estate will also go up in value covering any potential losses. Plus, the FHA/VA is all about helping seniors avoid having to dine on cat food.
I know of one reverse mortgage company I see on TV commercials called "Financial Freedom". http://financialfreedom.com/
You can call them and ask for more details. Otherwise, your local bank may offer reverse mortgages as well, and they should be able to help you too.
- ErikaLv 43 years ago
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