I have been a Reverse Loan Consultant for almost 15 years and when I first started in this amazing and wonderful industry, the fees were very costly but that has changed over the last several years and the loan has become a terrific option to utilize one’s equity without being obligated to make mortgage payments each month.
My previous post was part of an article that I will share the remainder of here, but it discussed how much equity is in American seniors homes; well over $12 Trillion dollars and growing.
Seniors number 1 concern, is outliving their money. Let’s face it. No one can live on Social Security and if one is fortunate enough to have a pension and investments, there is the concern about drawing down on them too soon and…
Running out of money.
A Reverse loan can eliminate that fear and worry and if a senior would get over their fear an bias about them, they will find out that they are very affordable.
As a matter of fact, I can offer a No Cost Reverse loan. It just depends upon the size of the loan.
And the Title stays in their name or Trust AND THE BANK NEVER TAKES OVER THE PROPERTY.
Here is the remainder of the article that I’m carry over from the previous post.
The Street: Education is Key When Discussing Reverse Mortgages
September 5th, 2016 | by Alana Stramowski Published in News, Reverse Mortgage
There are some facts that homeowners need to know before taking out a reverse mortgage though. A small, but important detail that often is overlooked is the fact that the amount withdrawn during the initial year of taking out a reverse mortgage determines the mortgage insurance premium when the loan is closes.
The fees used to be extremely high, in some cases, but now, the Department of Housing and Urban Development (HUD) limits origination feed to just 2% of the first 200,000 of the maximum claim amount plus 1% of additional home value, but not exceeding at total of $6,000. according to the article.
Reverse mortgages can be extremely complicated for those homeowners taking a look for the first time, but with the proper education, they can see how the product could benefit them to support their overall retirement plan.
Read the full article on The Street.
Written by Alana Stramowski
The NerdWallet recently discussed how more Financial Advisers are finally getting past their previous aversion to using a reverse loan for retirement planning and extend their client’s retirements fund’s longevity via using a “Standby” Reverse loan.
This change of view in the Retirement Planning community has taken a very, very long time. But more Advisors are now open to using a Reverse loan as part of their client’s retirement planning.
Although there are still some Advisors who remain stuck in a old “mindset” that using one, depletes a clients’ estate. And they refuse to even make an iota of effort to learn about how they can be so beneficial in preserving a retirement portfolio.
I occasionally will still encounter one of those “old dude” Advisors who refuse to get educated about the benefits of a reverse loan for their clients and quite often are rude to me!
In any event, here is a copy of part of the article from NerdWallet.
NerdWallet: ‘Standby’ Reverse mortgage Good for Tapping Home Equity.
Posted by Alana Stramowski On June 22,2016
In the past, the general consensus among financial planners was that a reverse mortgage was a horrible option, but now with reverse mortgages being safer and cheaper than ever, people are changing their viewpoint and being more creative with the ways in which the product can be used, according to a recent article on NerdWallet.
For many people, their investment portfolio is one way they can secure their retirement funds, and protecting it is one of their top priorities. If someone is over 62, a standby reverse mortgage strategy may be one option to help protect their portfolio and help make sure that it lasts throughout retirement.
“Recent research indicated that reverse mortgage lines of credit offer an important safety valve in retirement,” writes personal finance columnist Liz Weston for NerdWallet. “When the stock market plummets, retirees can tap credit lines instead of their portfolios.”
This method also can help give a portfolio some time to recover when the market rises.
There are numerous ways tapping into home equity can benefit anyone getting near, or in retirement. Funding home improvements with home equity is also a way to help keep someone in their home as they age and significantly cut down on how much of their nest egg they would need to tap into, the article explains.
These are the times when borrowing against home equity can be a smart decision, but those who do need to be aware of all of the rates and terms of reverse mortgages before jumping in headfirst.
At last, I am posting the final section of an article that was recently published in the Journal of Personal Finance. It was very long and I could not share it in it’s entirety on this site.
So I broke it up into seven parts and this is the last bit of it. Overall, it’s in interesting commentary on comparing using the Tenure payment option from a Reverse loan in lieu of receiving payments from an annuity.
New Research Shows Financial Planning Value of Tenure Reverse Mortgages
Posted By Jason Oliva On March 3, 2016
“Because of the assumption that withdrawals are taken from savings before tapping the line of credit, the line of credit option depletes savings but leaves some home value. Tenure, on the other hand, depletes home value more and leaves remaining savings.
“Overall, the tenure option does somewhat better than the LOC in terms of both consumption and bequest measures,” researchers state. “This reflects tenure not depleting savings and thereby leaving more money invested in stocks, the potentially highest return asset.”
Because the tenure option pays out a higher rate than the SPIA, the study indicates it is necessary to allocate $238,061 for SPIA purchase, compared to the $201,174 borrowing limit used to generate tenure payments.
The SPIA option leaves median consumption about the same, but does reduce consumption risk, according to researchers who note that under the SPIA home value is preserved for late-in-life needs or a bequest.
“If the goal is to maximize consumption without a bequest concern, the reverse mortgage options win out over the SPIA,” the study states. “If bequests are important, the decision requires evaluating tradeoffs between consumption and bequest.”