Friday, March 28, 2008

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

No comments: