Letter to OCJournal, KFNN 1510, and Phoenix Business Journal

Letter from the ugly stepsister of the home mortgage.

Don’t I look like Cinderella now?

My name is reverse mortgage. You all called me ugly the last couple years when I was saving every senior citizen from losing 20% of their home value.

This letter is to all those financial counselors who called me ugly.

Look who has egg on their face now! All my customers are locked into their 2005 or 2006 home values. Their equity is either in their hands, or growing in a credit line. In fact, their credit accounts have grown by $4500 per $100,000 in equity each year!!!

So now your looking at me with a different eye, but you still think I am ugly. Wake up, I am the most beautiful creature you have ever seen. I am a government backed entitlement that provides two safe havens for seniors.

1) If you need the money, you can have it, and you can live in your home mortgage free for life.
2) If you don’t need the money, even better, you can keep it in the credit line that grows 1/2%, compounded daily, every year. This means $4500 growth per $100,000 in equity the first year, and more each consecutive year you keep it in the credit line.

Lets see the financial specialists talk bad about me now.

Bob@az62.com
www.az62.com
888-277-4990

The Last Day of the Month

What I was told about retirement when I was young was that it was a time in which you were able to get out of the "rat race", slow down the pace of life, and start really enjoying life. Since I began consulting on reverse mortgages I realized how incorrect that was. Yes you do leave the daily grind of a job, but the bills still come in like you were fully employed. The seniors I talk to today are concerned about one thing....making the money last the rest of their life.

If you don't plan for retirement, you are met with some hard choices. If your monthly income from interest, social security, and any pension you may receive does not meet your monthly bills, you are headed for a crisis in the future.

The last couple of blogs have been about how good reverse mortgages are for those who own their homes and are not facing a crisis, but since this is the last day of the month, and people are going to begin seeing a whole new set of bills, it is time to talk about avoiding a crisis.

The hardest part about working with seniors and reverse mortgages is when you meet with a person who has waited too long, and is already out of equity and savings. Its heartbreaking not to be able to help them. Lets hope this blog reaches people who are headed for that crisis, but are still years away from losing everything.

A reverse mortgage accomplishes a couple of things that prevent the crisis.

1) If you have a current mortgage payment, a reverse mortgage gets rid of that.

2) If you have taken an equity loan that was on an adjustable rate, and is now jumping in interest payments, a reverse mortgage gets rid of that.

3) If you need cash, a reverse mortgage gives you a tenure monthly income that will be paid to you for the rest of your life, regardless of the value of your home. Plus you still retain ownership (title) to your home. Plus you get to stay in your home for the rest of your life.

There is a time to worry about your estate and what you can leave your children. There is also a time to start worrying about yourself. Ironically enough, those who try to solve the problem without a reverse mortgage often end up losing the house and are forced to move in with their children.

No matter what you have heard about reverse mortgages, you are only hurting yourself if you do not have a reverse mortgage consultant provide you with the numbers. (The numbers are the calculations of what you would receive in a payout, a tenure monthly payment, or a credit line on your home with a reverse mortgage.)

Bob

bob@az62.com

www.az62.com

888-277-4990

What are tenure payments?

They are the monthly payment option you can choose with a reverse mortgage. It means that you will receive the same monthly payment, every month for the rest of your life, no matter if your home value goes up or down, and no matter how long you live.

The Math:

HUD has calculated the number of months between your current age and the life expectancy for your age group.

HUD takes the total equity available to you, calculates the interest that the equity will earn over time as the monthly payments are made to you. In other words, the monthly payments are drawing down the equity in your home.

The basic fact is that HUD is calculating with insurance tables to keep your home at or above the loan value at the time of your death. If they fail to calculate correctly, your estate can simply turn a home into a bank that is worth less than the value of the reverse mortgage. In that case the bank or HUD has to pay the difference once the house is sold.

Some seniors like the security of the tenure monthly payments. Anyone who has been falling short on monthly bills is likely to choose this so they never have to face that again.

Having said that, I know how fast the credit account grows if the senior leaves the money in the insured account rather than getting the money out. Today I showed a senior that establishing a credit line of $154,000 would net them over $9,000 a year in interest.

Thats right, that little 1/2% interest credit facility, because it compounds daily, nets them $9,000 per year in growth on the $154,000 credit line. Once they have waited a year, with no mortgage payments, they can start pulling out $9,000 per year, TAX FREE.

So while I understand the need for a senior citizen to feel secure, I never forget to tell them how leaving the money in the insured credit line, as long as they can hold on for a year, can give them a good monthly income without having their equity decrease.

Bob
bob@az62.com
www.az62.com
888-277-4990

Reverse Mortgages are perfect for seniors who are downsizing homes.

Reverse Mortgages are perfect for seniors who are downsizing homes.

Are you relocating to a southern state for better weather? Are you moving into a smaller home or condo for retirement?

Any good financial consultant will tell you that putting cash into non-interest bearing accounts is not a smart move. Then why are you putting cash into a home that you plan on staying in for a long time, without your money earing any interest?

REMEMBER: A reverse mortgage does not keep you from earning money on the growth of the value of the home. A reverse mortgage is the lowest interest rate loan in the mortgage market, PLUS, you do not have to make any payments. When the home grows in value, your net worth grows right along with it. When the home is sold by you, or your estate, the reverse mortgage is paid off and the remaining equity is paid to you in cash.

You have probably seen how little of your mortgage payment went to pay off principle on your home. With a reverse mortgage the loan amount increases by interest only. Right now the interest rate is 2.85%. The federally insured credit account pays 1/2% more in interest than the rate of the loan, and it compounds daily. If you have a trusted financial counselor, you can consult them on how much you can make on the money you put in savings rather than paying for a home.

Reverse mortgages are a government entitlement for senior citizens. The only ones who lose are the ones who believe that all reverse mortgages are bad and they want nothing to do with them. Reverse mortgages are NOT only for folks who need cash to live. They are a great tool for ever senior citizen.

Bob
bob@az62.com
www.az62.com
623-214-6663

The Best Entitlement Ever Created For Baby Boomers

The Best Entitlement Ever Created For Baby Boomers

Many people are skeptical about reverse mortgages. People think that they are going to lose their homes the moment they sign, or lose all the inheritance that their kids would get. Nothing could be further from the truth. Reverse Mortgages are a gift from the government. They are guaranteed by HUD and the interest rate on the HUD backed products are lower than any other interest rate on the mortgage market.

Today the interest rate on a reverse mortgage is 2.85% (Please note that that interest rate is valid now and will remain valid until the federal reserve changes their lending rate.)

The moment you turn 62, you can start having the equity in your home work for you. Typically the lender can put the cash into an FDIC insured account that will earn anywhere from 1/2 % to 1% over the interest rate you are paying on the reverse mortgage. This is compounded interest, so the growth in the account will be significant over a 10 year period. As your cash account grows, and your home value grows, you are earning twice on the same asset.

Yes, reverse mortgages are great for those who need to increase their fixed monthly income, or pay for medical bills, or even pay for a once in a lifetime vacation....but for those of you who do not need the money and have just turned 62, it is a great tool to make your home grow in value.

If the housing market takes a dive, like it did this year, you are insured against that loss. You have already pulled the value out and are earning interest on it. The loan is non-recourse so even if the loan is upside down at the time of your death, your estate is not liable for anything besides the home itself.

If the housing market grows, like it does most years, your net worth grows from two sources...the homes value and the money in the interest bearing account.

Any good reverse mortgage lender should be able to provide you with a table of the earnings on that account over time. You will be amazed at how much money people are missing because they are not getting a reverse mortgage the moment they turn 62.

Bob
bob@az62.com
www.az62.com
888-277-4990

Why don't more people do a Reverse Mortgage?

There was a time during the 1970's and 1980's that reverse mortgages were not backed by the government (HUD). During that time, some less than honest people were issuing reverse mortgages and taking advantage of seniors. Now everyone is scared that the reverse mortgages of today are the same as back then, and they do not want to get hurt.

The truth is that today's reverse mortgages are good for every senior. A reverse mortgage allows the senior 62 or older to put their equity in their home to work. It can be put to work earning interest, or it can be put to work improving your life. I talk about the uses of funds from reverse mortgages in my previous blogs. In this blog I will let you know the history of the reverse mortgage and how it turned from a questionable product into a great entitlement for seniors.

The first reverse mortgage was done in 1961. The concept then, just as now, was to unlock the equity in the home so that the owner could use that money in a more productive way than to simply own an asset. The first publicly offered reverse mortgage product was presented to the public in Ohio in 1977.

The concept has always been good. You have worked to pay off part of all of your home, you are in a position in which you want to keep your wealth, and if the equity in your home could work for you it is a good thing. The key to a good reverse mortgage is, and always will be, how the funds are used. If the interest rate is too high, if the money is forced into an account that carries high risk, or if it is simply mismanaged, then the reverse mortgage turns from a great tool into a real problem.

In 1981 Congress began reviewing the reverse mortgage products and decided that the government needed to regulate and insure these products to protect the public. They realized the benefits of the reverse mortgage to the senior. They also realize that an insured product will bring back consumer confidence in the reverse mortgage product.

February 1988 Ronald Regan signed reverse mortgage insurance legislation into law. This was the turning point for the reverse mortgage product. From that day on, the reverse mortgage was government backed and insured.

You should always ask if the reverse mortgage you are getting is a HUD backed, and insured product. There are some private reverse mortgage products that do not carry this guarantee.

Bob
bob@az62.com
www.az62.com
623-214-6663

Reverse Mortgages are too expensive?

NO

Every loan you will ever do on a home will have two variables that effect the cost of the loan. Those variables are "Points" and "Interest Rate"

The truth is that banks and loan officers always get paid. They either get commissions on the points paid up front, or they get paid for the interest rate that they were able to get you to agree to.

Reverse Mortgages have a high cost up front (points) and a very low interest rate. Typically you will pay the loan origination fee of approximately 2% of the loan value. You will also pay the mortgage insurance that is required on all reverse mortgages. This is also 2% up front. (Please note that these fees are incorporated in the loan and are not out of pocket expenses.)

What you get is the lowest interest rate in the industry. This means that the mortgage brokers are getting paid well for originating the loan, and you get a low interest rate.

There are a variety of reverse mortgage products, so be sure to check all your options carefully to see which loan will cost you the least over the time period that you need the loan. If you plan to sell your home in the future you will want the loan to accumulate the least amount of interest. If you are planning on keeping your home for life you may want to maximize the amount of money coming to you now or in monthly payments.

If you have any questions about reverse mortgages, feel free to call me at 888-277-4990. I will be glad to help in any way I can.

Bob
bob@az62.com
623-214-6663

Can a Reverse Mortgage help You Get More Money Each Month?

Yes

This is one of the first reasons that Reverse Mortgages were established. Seniors with fixed incomes are struggling more and more to meet their monthly bills and to buy the right foods to stay healthy.

As I stated on my first blog, I will keep all my answers consistent and honest. This is one of the ways in which a reverse mortgage eats away at your net worth. When you get a reverse mortgage and it is used to increase the monthly income of a senior, the payments are called tenure payments.

When you get a reverse mortgage and set up tenure payments, you are effectively setting up an "insurance-like" instrument. The tenure payments are guaranteed to be paid each month for the rest of your life. No matter how long you live, these payments will be made. The loan is backed by HUD, so the payments are guaranteed by the government.

While you are receiving these payments, the loan repayment amount increases by the amount paid to you that month plus the interest on all of the previous payments.

Like all reverse mortgages, you keep title to your home, and there are NO mortgage payments. If the home increases in value, you can refinance the reverse mortgage and get more money each month. If the home goes down in value, your payments still stay the same.

After you pass away, the person(s) that you willed your estate to will have the option of paying off the reverse mortgage loan or selling the house. They will have up to a year to sort out what they want to do. If the house is worth more they can sell it and get the extra value in cash. If the house is worth less than what is owed, they simply turn it over to the bank and walk away without having to pay any of the lost value.

I started in this industry because there are too many seniors living below the poverty level that own a home. It is time for the home to start working for you.

Bob
bob@az62.com
www.az62.com

Can Reverse Mortgages be used for gift giving?

Yes


Reverse Mortgages are an excellent tax tool that enables seniors to use the equity in their homes as a gift for whatever purpose they wish. The reverse mortgage is a loan, so the money received is not taxable. You can use it for whatever purpose you wish.

Not everyone wants to leave a large estate. The reason for this is not that they are selfish, it may be a very smart move. Estate taxes are a serious hit to the remaining net worth of an individual who has passes away. Some seniors choose to put that money to work in the way they want while they are still alive.

Please note that there may be some tax issues with giving large amounts of cash to a single individual. You should consult your tax professional about gift taxes before writing a large single check to a single individual. You will not have any tax penalties, but the recipient of your gift may be taxed, check with your tax professional.

That having been said, the senior is free to do whatever they want with the money and there are no negative tax ramifications to their returns because it is not assets, but rather a debt. In fact if you give the money to a non-profit or charity, it could actually have a positive effect on your return if you are claiming a significant amount of income for that year.

Some of the ways in which seniors are putting their Reverse Mortgage income to work are :

1) Helping a child or grand child start a business or go to college. (Giving the money out in small checks as the tuition becomes due, or as the business buys equipment)
2) Giving money to a church or hospital to add equipment or build an extension. (Directing the purchase of the equipment or the construction of the addition)
3) Funding food and shelter for the humane society. (Paying small amounts each month as the shelter takes in more animals, buying a small piece of property to build a shelter, or directing the construction of additional animal houses within the shelter.)
4) Paying for a Habitat for Humanity home to be built in another state or foreign country. (Traveling to the location, helping with the build, and personally paying for the materials on location.)
5) Helping a loved one with medical care. (Personally helping to set up quality care and housing for a relative.)

As you can see the one common thread is that the senior gets to direct the use of their funds rather than just spreading the money out without responsibility or direction after they pass away. Not to mention the fact that the estate saves the tax amount of that portion of the home's value.

The key is that estate planning , gift giving, and sharing your wealth with others can be done, in part, while you are alive by using the equity in your home.

Please note that for seniors who are worried about their own future health care and well being, we suggest that you keep the money from your reverse mortgage and have it start working for you. But if you have retirement funds and other accounts that will be there for you when you need them, a reverse mortgage is a great way to get cash out of your home without a mortgage payment, and keep the house for the rest of your life. What you do with that money is your business and your pleasure.

Enjoy.

Bob Fisher
bob@az62.com
623-214-6663

What does it take to qualify for a reverse mortgage?

A reverse mortgage is a senior entitlement that is managed and backed by HUD. The only requirements are that you are 62 years old or older, and that your home has enough equity to fund the reverse mortgage.

There are no credit report requirements. You cannot be turned down because you have bad credit. You cannot be turned down because of a bankruptcy (as long as it is not still in process). You cannot be turned down because of credit card debt, personal loan debt, or other indebtedness that is not related to the home.

When you apply for a reverse mortgage, the company you are applying with should be able to provide you with a very close approximation of what amount of money you would control after the loan process is complete. This amount is estimated from the value of the home, the current equity or mortgage loans on the home, and your age.

Here are the other factors that could affect the amount of money you get.

1) Any hidden liens on your home (Loans or payments owed on your home that are not part of your mortgage.)
2) Repairs that HUD requires you to do prior to granting you a reverse mortgage. (HUD makes sure that your home will be habitable.)
3) Any unpaid taxes on the home. (IRS tax liens, past due property taxes.)

Other than that, the process should be quick and the numbers should be accurate to within a couple thousand dollars.

A good reverse mortgage company should be able to process your loan within 21 days, some companies can do it even faster.

You should also note a good reverse mortgage company should handle the entire process without any "out of pocket fees" for services like an appraisal, bug report, or home inspection.

Bob
bob@az62.com

Here are a list of misconceptions about reverse mortgages.

1) I lose title to my home (NOT TRUE. A reverse mortgage gives you immediate access to your equity and you retain title. You also do not have any monthly mortgage payments with a reverse mortgage)

2) When I die the bank will take my home (NOT TRUE. A reverse mortgage gives your heirs the choice of refinancing the home to pay off the reverse mortgage, sell the home and receive the funds remaining after paying of the loan, or if the home has depreciated in value and is worth less than the loan amount they can simply turn it in to the bank and walk away)

3) My heirs will have to pay any debt that I acquire in a reverse mortgage. (NOT TRUE. A reverse mortgage is based solely on the home value. If an amount is owed at the time of your death, the bank has to eat that debt...they cannot charge your heirs)

3) Reverse mortgages are too expensive. (NOT TRUE. The up front fees for the loan (origination fee and insurance fee) are expensive, but you do not pay for those fees out of your pocket, they are paid as part of the loan. After that, a reverse mortgage is the CHEAPEST loan you can get. No other loan offers the interest rates of a reverse mortgage.)

Bob
bob@az62.com
www.az62.com
623-214-6663

Are Reverse Mortgages Good For Estate Planning?

YES

To me this is the biggest no brainer in history. The government has given seniors a mechanism in which they can pull the equity out of their home TAX FREE, and place it in whatever estate instrument they choose without penalty. Then at the time of estate settlement, the government sees the net value of the home as the value of the home MINUS the cost of the reverse mortgage including the equity you removed.

This means that you are able to put the money from your home wherever you want while you have complete control of it. I have heard many stories about the mishandling of estates after the estate owner has died. This is the one single way in which you can put your home equity in the exact position you want. If you want it to go to a charity, you can give it to the charity and make sure the money is used for the purpose you intended WHILE YOUR ALIVE. If you want the money to go to a relative or friend, you can make sure it happens in the way you want. A good example of this is a trust fund that you can set up with the cash and have it administrated exactly the way you want. Even if you primary goal is conservation of capital (NOT GIVING IT ALL TO THE GOVERNMENT), this is the perfect mechanism.

It amazes me that financial planners, estate planners, and CPA's continue to see reverse mortgages as a negative tool for senior citizens, and as something that should only be used in an emergency. The truth is that a reverse mortgage is a good tool for every senior citizen. That's why I am blogging about it, and that is why I am trying to reach every senior citizen with the opportunity before the government closes this entitlement.

Bob
bob@az62.com
www.az62.com
623-214-6663

Are Reverse Mortgages are a good financial tool for seniors who do not need cash?

YES

All you have to understand is that a reverse mortgage will turn your home into a cash earning machine. You do not lose title to your home, you do not lose control of your home. When you get a reverse mortgage you have the option of taking the money out, taking payments, or leaving the money in a credit account that you can draw from at any time.

Here is the key. Your credit account will always earn 1/2% more than the cost of the loan. This means that once this interest has paid for the fees involved in acquiring a reverse mortgage on your home (usually 12-15 months) you then have a large credit earning account. That 1/2% can be used to pay property taxes, pay bills, or you can keep it in the account to earn more and more interest every year.

Right now, every senior that does not have a reverse mortgage is missing this earnings potential. The reverse mortgage does NOT stop your home from going up in value. It DOES keep your home from losing more value.

I wish I could have gotten every senior citizen to buy into a reverse mortgage last year. It really bothers me that they lost 20% of their potential interest earning accounts simply because financial advisers scared them away from reverse mortgages.

Bob
bob@az62.com
www.az62.com

The Promise

Hello and welcome to a straight talk weblog about Reverse Mortgages.

My name is Robert Fisher and I am a consultant with Reverse Mortgage of Arizona. www.az62.com

I joined this group, that is directed by Hall Ewing, as someone who really cares about senior citizens and is dedicated to only providing solutions that will help. I will not support or sell something to a senior citizen that is not helpful. I understand the problems that seniors are facing. Circumstances like fixed income, conservation of net worth, and estate planning are serious issues that need to be faced with honest answers and sincere help.

Here is my pledge. I will write all the issues on this weblog that I see in talking to seniors every day. I will answer all questions that are posted to my weblog, and if at any time an issue is brought to my attention that proves that reverse mortgages are BAD for seniors, I will stop consulting seniors to pursue this opportunity.

Right now, here is what I believe.

1) Reverse Mortgages are the best senior entitlement EVER offered by the government.
2) There are no circumstances under which a Reverse Mortgage is a bad idea for a senior.
3) There are benefits in getting a reverse mortgage for seniors who want to increase their monthly fixed income.
4) There are benefits in getting a reverse mortgage for seniors who do not need any extra captial.
5) There are tax benefits to getting a reverse mortgage when doing estate planning.
6) Seniors who did not get a reverse mortgage last year lost more than 20% of their homes value!!!