Reverse Mortgages On Sale

     This past Sunday we were hit with a blizzard, and while I was stuck in the house I was all over the internet reading articles about Reverse Mortgages.  It struck me that the costs have dramatically decreased since earlier this year, and I don’t think enough has been said or written on this subject.  One of the articles I read was by Jane Bryant Quinn, who is a leading commentator on personal finances.  She began her article with the following statement:  “If you’ve been snubbing a reverse mortgage, or counseling your elderly parents against it, take another look.  These expensive loans are now on sale for less.”

     Earlier this year, it was standard for lenders to charge a servicing fee which could amount to $4,000 to 6,000 depending on the size of your loan.  Today that fee has virtually disappeared from the scene.  Until October of this year, everyone who took an FHA Reverse Mortgage (about 99% of all reverse loans) had to pay a 2% mortgage insurance fee to HUD to insure the loan.  This cost anywhere from $6,000 to over $12,000 depending on the appraised value of your home.  On October 4^th HUD unveiled a new Reverse Mortgage product called the HECM Saver which reduced the upfront insurance cost to 0.01% of the appraised amount of your home, or about $35 to $40.  You receive a little less money when taking the Saver loan, but the reduction in cost is huge.

     Don’t borrow money unless you need it, but if you need it don’t be afraid of the HECM Reverse Mortgage – it’s become an excellent value.

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Avoiding Elder Exploitation

Men and women of any race, economic level, and health status can be victims of elder financial abuse or exploitation.  The person trying to take advantage of you could be a stranger, or someone you trust – even a family member.  These helpful hints, adapted from a report of the Mature Marketing Institute in collaboration with the National Committee for the Prevention of Elder Abuse are presented here so you may become pro-active in protecting yourself.

1.     Stay active and socialize in activities you enjoy with your family and friends.  Avoid isolation, which can lead to loneliness, depression and leave you vulnerable to financial abuse or exploitation.

2.     Consult with people you trust when making financial decisions.  Check credit card and bank statements for accuracy.  Sign your own checks whenever possible.

3.     Stay organized.  Review legal documents (will, trusts, power of attorney) at least once a year.  Contact your attorney with any questions.

Finally, don’t be afraid – be careful.

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Merry Christmas

My wish for a happy, safe, blessed Christmas for everyone!  I’ll be back on Monday.

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Your Future Is Now

     Oftentimes when I meet with clients, I hear statements like: “I don’t need the money right now; but when I do need it, I’ll get in touch with you.” Today, I’ll attempt to show you how faulty this line of reasoning is, and how to make your home’s equity work for you now to take care of your future.
     As you are hopefully aware, the HECM Adjustable Rate Mortgage (ARM) allows the borrower to elect to place their funds in a Credit Line or Line of Credit, from which the borrower can withdraw funds as needed. Interest only accrues on the balance of funds that have been withdrawn, and it thus operates much like a Home Equity Line of Credit. Of course, with the Reverse Mortgage Credit Line, you are not obligated to make monthly payments.
     Now for the huge difference: the Reverse Mortgage Credit Line grows in size as time goes by. That’s right, I said it: the unused balance of your Credit Line becomes larger each month. Your unused balance is not gaining interest, so you’re not going to be taxed, but it will grow just as if the bank was paying you interest.
     If you look at a typical Reverse Mortgage Loan Comparison (which any lender will show you), you’ll see a figure called the Credit Line Growth Rate. At this moment in time, the Growth Rate will be your Interest Rate plus 1.25%. On the Reverse Mortgage Loan Comparison I created today, the Interest Rate is 2.51% and the Credit Line Growth Rate is 3.76%. I know I’m putting some of you to sleep with these numbers, but stay with me now; this is where it gets interesting.
     Our borrower, Mr. Sample, closes his Reverse Mortgage Loan at the age of 64. He places his funds ($230,000) in the Credit Line Account which has a Growth Rate of 3.76%. At the end of the first year, his available Credit Line balance has grown to $238,800.98. Not too shabby, but since the Growth Rate compounds, it grows faster and faster each month. At the end of 10 years, the available balance has grown to a whopping $334,819.36, and all Mr. Sample had to do was make a decision for his future without waiting until he was up against the wall.
     Good decisions are generally made when we’re not under pressure. Do yourself and your family a favor and think about improving your future today.

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Granny and Clyde

     Oh my, Seniors scamming Seniors – how low will some go for a buck? The Wall Street Journal writes about the increasing trend of older people ripping off other older people. According to the Journal, Regulators say there has been a significant increase recently in the number of cases in which older investors have been taken advantage of by elderly scam artists. These lowlifes represent themselves as financial planners or financial advisors and prey on Seniors.
Watch your wallet, and carefully check out anyone with whom you’re considering doing business.

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