4 Options - Need your smarts!

[Jade W.]

Hi,

We have 4 options we're faced with right now.  Would love to hear some opinions on which one makes the most sense based on other’s experiences.  The longer we wait to decide with rising interest rates, the less options. 

COVID knocked our business out. We're in our 60's and rebuilding it will be very difficult. We own a home with tremendous equity.   We need to have income.  Husband is ready to stop the stress-train and take a breather.  Life is short.  We are too young yet for Social Security and even then that income will not be enough to live. We do not have children, and will not be leaving an inheritance.  

Option 1 - Sell our House.

The problem is that real estate is dramatically increasing in this location - we’d never be able to move back and buy anywhere near here.  Even a small house/condo takes too much out of our profits. This is where our careers are - so if we wanted to try to rebuild it that door would also close.  Due to a senior relative living with us, we’ve been unable to scout across the country and find a new place to move.  This will take a few months.  Until they sadly pass, leaving for that long is not possible. This area is increasing in value every year, it is in very high demand.  If we hang onto it - the worth should keep rising. After paying Capital Gains, and paying cash for a new house if we move, we will have only a certain amount left to invest and live on.  (see option 3 - *)

Option 2 - Use Equity Line

We have a semi-large untapped HELOC. This could get us through a few years - but doesn't solve anything long-term. Doesn't really remove the stress. Once this reserve is gone, selling is forced. Right now real estate is peaking . What if it falls, we sell in 2 years and lose even more money?

Option 3 - Take Jumbo Reverse Mortgage Fixed

• The reverse mortgage would give us the same amount of cash as selling and we keep our home  We could slow down, invest the money - and go look when we are able.  We could pay cash for a new house once we find a new area - and then decide on selling this house without giving it up before we’re 100% sure.  The rates on this mortgage are very high, and have risen dramatically in the last few months, now at 9%.  The longer we wait to decide, the higher they’re going.  Investing right now is volatile.  If we kept this - 15 years from now - the interest would supersede the house’s worth, we'd be in the negative.  We would need to refinance this loan as soon as rates drop.

Option 4 - Take Jumbo Reverse Mortgage Line-of-Credit

This loan offers even more money, in the millions.  We can take only what we need now, thus accrue interest only on that amount.  These loans are high with a 5% margin.  And will rise for the foreseeable future.  Starts at 8%.  We could buy a house in another area - try living there part-time before deciding.  Sell this home or that one in a few years and still have a good amount of equity left. 

With the reverse mortgage - if our business comes back - we can stay here for as long as want.  But they are not without risk. 

Any wisdom to share?  Thank you so much!