When thinking about retirement, does it make sense to downsize and use all of the equity from the big home to have no mortgage on the little home? Those are thoughts I think about even though retirement is some time off. The other option I have is to buy the little home with a Reverse mortgage loan. This requires a minimum down payment of 50% of the sales price. If your not familiar with a Reverse mortgage purchase loan, there are no payments on this type of mortgage. This allows me to buy the home, with no payments but also not use all of my equity from the sale of the big home.
Reverse mortgage financing today is anywhere from 3.875% (ARM loan) to 5.125% for a fixed rate loan. Certainly not cheap. The question though is can i yield a higher rate of return by taking my equity from the big home and investing it with my wealth manager? Not sure of that either.
However, for some individuals, the option of not using all the equity from the big home will be appealing. Since I am not retiring for another five years (if everything goes my way... it has proven not too) I can re-evaluate this at that time!