reverse mortgage on starter home?

[readytorock]

I'm unsure of the details on reverse mortgages, but I'm curious about the following thought...

I just purchased my first house (townhouse). I paid $122,000 on it and put down 20%. Given my current level of income, I plan to have the house completely paid for in 2.5 years. I know there are tons of discussions here about paying off early vs investing that money, but for me it's a psychological thing... I hate the idea of paying over $40,000 in interest over the next 10 years and still having a mortgage when I go to sell it and move. Paying the loan off in 2.5 years means I only pay about $7k in interest.

I plan on staying in this first house for about 10 years before upgrading to my "final" house.

My question is, would it make sense, after the mortgage is paid off, to then do a reverse mortgage right away for 10 years and invest that money each and every month? I would assume investing that money would grow the money quicker than the real estate would appreciate, but I know that no one knows that for sure. Then as the end of the reverse mortgage approaches, I could buy my "final" house with the money I had been saving and investing every month from the reverse mortgage.

I guess I should be more informed on how reverse mortgages work. Whether the bank pays the appraised value, the appraised value minus a certain percentage, a price we both agree on at the time of the "sale" to the bank, etc.

Anyway, let me know your thoughts.

[readytorock]

Haha, nevermind, just found in my searching that reverse mortgages are only available to seniors. Please disregard.

[MonkeyMama]

I just had to add that reverse mortgages are expensive. It would make MUCH more sense just to invest the money that you are using to "pay it off in 2 years." A reverse mortgage would be the far more complicated and expensive route.

[jIM_Ohio]

I just had to add that reverse mortgages are expensive. It would make MUCH more sense just to invest the money that you are using to "pay it off in 2 years." A reverse mortgage would be the far more complicated and expensive route.

+1

what she said

If house is worth $115,000, when you reverse mortgage, you might get 80k or 90k in income (to invest) so to recoup 100% of your money you need a 25% gain.

Houses are not good investments to generate income if you live in it
Houses are good investments to generate income if you rent it- so better to rent out house and get same (or more) income than from a reverse mortgage.

[mdcrim]

Just take the money you would have been paying toward your mortgage and, once it's paid off, invest that money. Voila...