All Forum Posts by: Jeremy Bernard

Jeremy you might need a different attorney or I might not understand reverse mortgages.  Since your gma is no longer living in the house, she had 6 months and the bank takes possession.  they will offer your family to buy the house at market value or they will sit on it and eventually auction it off.  If the sale nets more than the reverse mortgage amount, your gma will get a check.  Medicaid will garnish that money to help pay the assisted living fees. I dont think they can do that in the unfortunate event of your gma passing before the house is sold, but Im not 100% on that.  Good luck in any case.

 An update to the reverse mortgage saga, turns out it is worth pursuing for now. I am working on getting her an updated living trust/will to avoid probate, along with finding out the current amount on the loan to start securing financing. Side note this is also going to be my first rental I think. I appreciate all the feedback and comments it motivates me and gives me items to consider. 

My Grandma has a reverse mortgage on her house, she is no longer living in it. I don't fully understand how the reverse mortgages work, my dad at this point is about to turn the keys over to the bank. Is it worth pursuing to try and get at a discount, or because it is basically bank owned it would be just like any other bank owned property?

Things to consider

Federal Taxes
State Taxes
Your increased income may increase your AGI which may result in you not being eligible for certain deductions/credits as they are AGI based.
Your increase income may expose you now to other taxes such as the Net Investment Income Tax(NIIT).

Best of luck

Jeremy,

Using funds from your 401k can be accomplished in different ways. I am not a tax or retirement account advisor so please consult the necessary professionals. 

You can withdraw the funds, pay the 10% penalty and then pay income taxes on the amount. You can calculate the % if you analyze which tax bracket you are in. 
You also can borrow from your 401k. You can take a loan for up to 50% of your account balance, up to 50k annually. You pay the loan back, with realistic interest, to yourself. I believe the loan does not affect your DTI either.
You can also convert your 401k into a self directed IRA and then you can use the full amount to invest in real estate, no penalties or income taxes will be paid on qualified uses of the funds. I cannot expand much on that process but know it is a good tool if your 401k is well funded.

I have a great group of CPAs I work with in my real estate business. If you want I can shoot you their info for you to have a consultation with them. 

Reverse mortgages are awful and shouldn't be allowed.

Read the contract. It will explain what the options are for terminating the contract. 

Reverse mortgages are the worst. Hopefully this lending practice dies with my generation. 

I've pursued two different off market properties like this and in my experience its a dead end. In both situations the family who had ownership (they didn't own s**t) had no equity because the mortgage balance wiped it out. Just finding what is owed on the properties was a headache. Both properties are distressed, sitting, and rotting away as I type this response. One of them is across the street from my house. It's a cute house, good location, good opportunity, but just sitting collecting dust. From my understanding these properties eventually end up at auction. When that happens is nearly impossible to find out unless you know someone that knows someone. 

So you'll pay income tax - I think the bracket would be 24% plus a withdraw penalty of 10% and you'll lose the tax deduction as well. So 34% in taxes. So you withdraw $200k, you pay $68k in taxes. 

Not a very good idea in my opinion honestly

You can take a loan for 50k or 50% of the value for "free" (you'll pay back the interest to yourself)

Lots of better strategies here in my opinion