Bubble: A time period during which people confuse the meaning of "value" with the meaning of "price".
Posted on 03/25/2009 12:41:39 PM PDT by 2ndDivisionVet
OAKLAND, CA - More senior citizens are looking into reverse mortgage loans as a way to offset the income that has vanished as the result of losses in their investments. This is from data gleaned by Golden Gateway Financial here from usage data for its online reverse mortgage calculator.
However, on the other side of the equation, the company said, homeowners are seeing their home values drop, as evidenced by changes in the S&P/Case-Shiller Home Price Indices.
"For many older Americans, the time to act to stave off continuing losses is now," said Eric Bachman, founder and chief executive of Golden Gateway Financial. "Retirees who are unable to tap their investments or even return to work are turning to their home as their last line of defense, only to find its value is greatly diminished. This economy is effectively rewriting the financial rules of retirement."
According to the company, 46.1% of those researching a reverse mortgage during the fourth quarter had a forward mortgage on their property, compared with 51.4% in the first quarter, 53.4% in the second quarter and 53.8% in the third.
Golden Gateway said this data backs up its hypothesis about using a reverse mortgage to replace investment income.
The average home value slipped from $449,200 in the first quarter of 2008 down to $412,627 for the fourth quarter.
For older Americans considering tapping their home equity to help fund their retirement, a drop in home value corresponds to a similar loss in cash available through a reverse mortgage. The company advises potential borrowers already hurt by investment or job loss to consider locking in their home value now in order to avoid future declines in available equity.
"For these borrowers it makes sense to avoid selling stocks or other assets at or close to the bottom when a reverse mortgage allows them to participate in the potential upside of a rebound in property values," continued Mr. Bachman.
Any FReepers out there that are savvy about these reverse mortgages? Is this as bad an idea as I think it is?
You got to be kidding me!
Depends upon how soon you're planning to die.
It means you can kiss your inheritance good bye, your parents have decided to spend it.
I’m a former mortgage loan officer. From what I understand of these loans, they can sometimes be a benefit for a person over 62. IIRC, the borrower is given a lump sum or annuity, based on age and equity in the home. The senior(s) no longer have to make payments on the house, and the bank cannot take back the house until both seniors (in the case of a couple) have passed away. Borrowers must be counseled by a third party before taking out the loan, which is government regulated.
Here’s an intersting artickle, Dave...
I can’t believe that members of the “greatest generation” would fall for this insane idea. Only IF your health were compromised, and your time short, would these then be a “good” idea!
In a word, yes.
Locally, a retirement age couple used the reverse morgage to free money to purchase “stuff” and an expensive RV.
The husband died. The widow is left with huge debt and no saleable assets. Seems the persons who consider reverse morgages are the same group that look to 2nd/3rd morgages as ATM’s. Just a general observation.
I see it as theirs to spend anyway.
I have my own wealth to accumulate, keep from the gov’t, and spend/give as I wish.
Bubble: A time period during which people confuse the meaning of "value" with the meaning of "price".
I don’t know enough about reverse mortgages to despise them yet, but debt is debt.
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Yep, it’s their’s to do with as they wish. My parent’s only real asset is their home, they have no reason to do the reverse mortgage though, they get along just fine.
I will share that inheritance some day if they precede me in death. Along with my 7 siblings that is. Depending on the circumstances at that time, I will probably give my share to a sister, who has a need.
Good luck on that first part.
I’m following all the LEGAL tax reduction strategies that I can.
I’m a loan officer for a Mortgage Banking firm. These loans although not for everyone are lifesavers for many Seniors. I have been doing them for about 5 years and have never had a client that has come back and told me that they were sorry for their decision.
More information is available at americashrm.com
Bad idea
IMHO
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