OP
OP
4FordFamily
Tang, Angel, and Wrasse Nerd!
Obviously much of what was said here is pretty common.
I will address misconceptions separately.
1) You lose the home, the bank wants the house, you are not on title.
a. Completely inaccurate. You are on title, the bank does NOT want the home they can no longer sell the home for a dime of profit so they sell it for the lien amount, and the ONLY way to lose the home is to not pay your taxes, insurance, or let the home fall apart.
2) Reverse mortgages are for the destitute
a. 95% of my clientele have a net worth over 2 million. Financial advisors send many clients to me for these reasons. I will walk through the four most common uses for this product, the last being the least common.
i. Put cash tied up in the home to work for the homeowner to invest every dime and maximize the estate value come passing. Yes the loan balance increases but the home appreciates, the line of credit grows by 4% every year, and they are earning far more than the measly interest rate with the investments. Many of my clients buy investment properties and command a ridiculously high ROI (sometimes approaching 20%) notwithstanding the tax shield benefits of writing off expenses and lowering your taxable income. There are two ways to become more wealthy 1) Make more money and 2) Pay less taxes.
ii. Use the line of credit (reverse so no payment required) mentioned above instead to just hedge the market. Seniors often live off of their investment portfolios. When the market is down (like now) when you are taking cash out to live, you are recognizing losses and thus significantly decreasing the value and time that your assets will “live”. In a down market, seniors draw on their reverse LOC instead and wait for the bull market to return to withdraw funds and pay off the line of credit. This has been “monte carlo” (scenario tester) as an effective tool to maximize the $ value and lifetime of your retirement accounts.
iii. Even more conservative are the seniors that get the line of credit just as a safety net. Many do not use them. But with fixed incomes not increasing and cost of living skyrocketing, it provides an option available to them later. The unused balance grows by 4% every year regardless of what the economy does or the value of the home. They often eventually use it for health expenses, unforeseen circumstances, home repairs, etc. As with any reverse mortgage – you can always make a payment and treat it like a normal mortgage should you wish to. This only provides OPTIONS. If you do not use it, nothing is different than your current situation. It is a safety net you did not otherwise have short of selling your home which most seniors do not want to do because they love their home, neighbors, and area.
iv. Finally, others cannot afford their bills and are scared of losing their home. They opt for a reverse mortgage so they can continue to live in the home. You can set up a lifetime set aside for taxes and insurance in which we will pay it on your behalf – and you’re protected from increases in either as we foot the risk.
3) Reverse mortgages are expensive.
a. Honestly the fees are virtually identical to regular FHA fees worst case, and best case fees are nothing or close to. It depends on your unpaid balance, home value, and whether you are dealing with the end servicer or a broker. Brokers make their money on the front end (in fees) because they sell the loan (to us) after you close.
As some general information – this program is an entitlement program. When you were old enough to use social security, you had worked hard and paid in to it your whole life. You worked hard to pay down your home and make good decisions until this point. This is another program available solely to seniors to take advantage of. The worst part about reverse mortgages is that I cannot have one, honestly.
I will address misconceptions separately.
1) You lose the home, the bank wants the house, you are not on title.
a. Completely inaccurate. You are on title, the bank does NOT want the home they can no longer sell the home for a dime of profit so they sell it for the lien amount, and the ONLY way to lose the home is to not pay your taxes, insurance, or let the home fall apart.
2) Reverse mortgages are for the destitute
a. 95% of my clientele have a net worth over 2 million. Financial advisors send many clients to me for these reasons. I will walk through the four most common uses for this product, the last being the least common.
i. Put cash tied up in the home to work for the homeowner to invest every dime and maximize the estate value come passing. Yes the loan balance increases but the home appreciates, the line of credit grows by 4% every year, and they are earning far more than the measly interest rate with the investments. Many of my clients buy investment properties and command a ridiculously high ROI (sometimes approaching 20%) notwithstanding the tax shield benefits of writing off expenses and lowering your taxable income. There are two ways to become more wealthy 1) Make more money and 2) Pay less taxes.
ii. Use the line of credit (reverse so no payment required) mentioned above instead to just hedge the market. Seniors often live off of their investment portfolios. When the market is down (like now) when you are taking cash out to live, you are recognizing losses and thus significantly decreasing the value and time that your assets will “live”. In a down market, seniors draw on their reverse LOC instead and wait for the bull market to return to withdraw funds and pay off the line of credit. This has been “monte carlo” (scenario tester) as an effective tool to maximize the $ value and lifetime of your retirement accounts.
iii. Even more conservative are the seniors that get the line of credit just as a safety net. Many do not use them. But with fixed incomes not increasing and cost of living skyrocketing, it provides an option available to them later. The unused balance grows by 4% every year regardless of what the economy does or the value of the home. They often eventually use it for health expenses, unforeseen circumstances, home repairs, etc. As with any reverse mortgage – you can always make a payment and treat it like a normal mortgage should you wish to. This only provides OPTIONS. If you do not use it, nothing is different than your current situation. It is a safety net you did not otherwise have short of selling your home which most seniors do not want to do because they love their home, neighbors, and area.
iv. Finally, others cannot afford their bills and are scared of losing their home. They opt for a reverse mortgage so they can continue to live in the home. You can set up a lifetime set aside for taxes and insurance in which we will pay it on your behalf – and you’re protected from increases in either as we foot the risk.
3) Reverse mortgages are expensive.
a. Honestly the fees are virtually identical to regular FHA fees worst case, and best case fees are nothing or close to. It depends on your unpaid balance, home value, and whether you are dealing with the end servicer or a broker. Brokers make their money on the front end (in fees) because they sell the loan (to us) after you close.
As some general information – this program is an entitlement program. When you were old enough to use social security, you had worked hard and paid in to it your whole life. You worked hard to pay down your home and make good decisions until this point. This is another program available solely to seniors to take advantage of. The worst part about reverse mortgages is that I cannot have one, honestly.
