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?”
People, who will blow away the reverse mortgage payments they receive, are probably the same people who should never have a credit card nor an equity line of credit.
We are looking very hard at the reverse mortgage option at this time.
What happens to people past 65 if their pensions, ss and IRA/401ks fail or become no longer a support if they can’t make a mortgage payment. They will probably lose their home they have lived in for a long time. Who will take care of them if they lose their homes?
The reverse mortgage is a way get the mortgage paid off if you have still have one or to avoid a credit line takeout if the bottom drops out of our country in the next year or so.
The reverse up front closing costs are high and of course there is no free lunch. A reverse mortgage could eat up whatever value you have in your home and leave nothing for your heirs as the interest accrues over the years.
Our particulair downside is that you are required to take the full amount of the loan formula they calculate in a cash payout or partial cash and a credit line or monthly payments.
Homes in our area haven’t really decreased in value yet, and based on county guidelines for reverse mortgages. We could get a sizeable amount of money. More than we would really want at this time. You supposedly can pay back what you don’t need after you cash out to cut down on the interest costs over the years.
You have options to take the full sum, to go on a monthly repayment schedule or take out a certain amount of cash and have like a credit line if and when you need more.
My wife has a problem not leaving anything for our sons, DIL and grandkids, and she is concerned about losing the tax write off for our mortgage interest payments.
Currently the payments from a reverse mortgage are not taxable. Like so many people, most of our money/cash is in our IRA’s. If we want to give say a $1,000 to our sons or grand children. I have to have $1400 deducted from my IRA. Then, I have FIDO send $300 to the IRS for federal taxes and 100 to the Gobernator for Ca taxes. That is not an issue with the money from the reverse mortgage as at this time the money is not taxable.
We have some widow friends, where the reverse mortgage is paid as a monthly check, may be a life saver for them besides allowing them to stay in their homes until they are carried out toes first.
If Obama takes away the deduction for home mortgage interest, I will get more interested in the reverse mortgage.
My wife, who dislikes and distrusts OBoz0 more than I do, has serious doubts that he would allow millions of seniors to live basically rent free for decades thanks to reverse mortgages.
Thanks for the ping.
My trophy bride and I have had several tough discussions on this issue. I’m basically for it, and she isn’t.
That is where you find the basic requirements for a valid Reverse Mortgage in Texas. Article 16, Sec. 50 also includes Home Equity, homestead and other things.
“Regarding an estate, my grandfather told my father that if there was anything left, it would be the consequence of a serious miscalculation.”
Both of our sons feel that way about us leaving them an estate. They don’t want be saddled with our debt. However, if and when it is all over, and they have no costs, that would be fine for them.
A reverse mortgage is not an annuity as a matter of fact one of the disclosures addresses whether or not people would use the proceeds for an annuity. I'm not going to respond to any more of your posts because obviously you have an in-depth knowledge of this unique real estate mortgage product and I wouldn't want to confuse you with the facts!
I didn’t ask you where it was...I asked why it was that you thought I need to look it up! What did I say that wasn’t according to the laws in the state of Texas?
Only one person need be over 62 for it to be a valid RM in Texas. Thus one could be 90 and that person’s spouse could be 18.
do not do a reverse mortgage. period.
bad idea.
My experience with my clients the last 5 years is that the only kids who don't want Mom and Dad to get a RM are the worthless ones. Most want Mom and Dad to enjoy their senior years. Because most RM's are gummint insured the kids can never owe more than the house is worth when the folks are gone.
you are selling your house to the mortgage company and selling your right of leaving the house to your heirs.
It is just a bad idea.
I believe I pointed that out in my post....only people 62 or older can be on the deed! The 18 yr old bride would have no claim to the home...other than as a estate member.
You do not sell your house to the mortgage company with a RM and you retain all rights of ownership including the right to leave the home to your heirs.
We have a house and land in another state we’re no longer interested in. Both are paid off. I’m listing it as my primary residence for tax purposes. My wife is a resident of a different state for business purposes. Right now we’re traveling around looking for a home in another state.
I wouldn’t mind dumping the house and land on a bank or investor and receive a monthly alotment in exchange, until the equity is all used up.
Can a reverse mortgage accomplish something like that?
That is a common myth about RM's....the mortgage company never owns the home...your name remains on the deed...when you pass the estate (kids) merely need to pay off what is owned against the home and they keep the rest..no different that a conventional mortgage.
Probably not....the reason is that the home must be your primary residence and if you leave the residence for over 6 months then the loan becomes due and payable. Most lenders are quite flexible however.
Oh, that makes sense. So it’s just the amount of the loan that changes each month - no different from a regular mortgage except the loan increases?
I can see how that would be beneficial for many seniors. Do they have to be 65 or older? Do they get more money per month the older they are? This might be a good thing if my folks are feeling pinched by the recession/possible depression.
Most reverse mortgages require that you are an owner occupant... and you must “certify” to such. Owner occupant means that you live there most of the year 6 mos. +1. Mortgagees typically can do occupancy searches and verify that you indeed live in the property.
Most people with a strong equity position in the home use the reverse mortgage to pay off the first mortgage. Since the owner need not make payments to the reverse mortgage, they tend to use their monthly income stream for other living expenses.
Actually you need to be 62 or older...and yes...the older they are they can access more equity in their homes.
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