Reverse Mortgage case study 2

Welcome to 62 Babyboomers!

A 62 year old senior owns a home and is retired. They have a good income from a pension (or investment portfolio), and they are getting ready to start receiving social security. They have decided to get a reverse mortgage on their home and leave the equity of the home in a credit line on the reverse mortgage. The value of their home is $250,000

Here is what happens to their available cash line of credit.

At the time of the loan the credit line was established with $137,727

That credit line is based on the amount of cash the government will allow for that value of home without a current mortgage debt (house is paid off), and for a person of that age. Over time, this is what happens to the line of credit.

5 years : $181,389

10 years : $238,891

15 years : $314,623

20 years : $414,363

25 years : $545,722

30 years : $718,724

This is why a reverse mortgage is a senior citizen entitlement. This is guaranteed growth over time that happens no matter what happens to the value of your home.

When a senior turns 62 years old, if they get into a reverse mortgage, they are setting up a credit account that they can use at any time in their life. You don't have to go to a bank and apply for a loan. You are now the bank.

If your home goes up in value, great, that equity is yours as well. If your home goes down in value, who cares, you still are gaining asset value with the credit line. If you have an emergency, you can pull out whatever you need, whenever you need, with no transaction fee, no penalties, and no tax implications.

Bottom line....a reverse mortgage guarantees that your home grows in asset value no matter what happens to the housing market.

Still have questions?

bob

bob@az62.com

888-277-4990

Government Entitlement, What does that mean?

A reverse mortgage is a government entitlement. The U.S. government has invested tens of millions of dollars to establish the reverse mortgage program. They have limited it to seniors because it is an entitlement for senior citizens. Reverse mortgages provide guaranteed growth in credit lines if a senior leaves the equity in the home, guaranteed monthly income if the senior sets up tenure payments, and the ability to pull the equity out of the home if the senior needs the money now. The additional benefit the government offers is the ability to stay in your home without any additional mortgage payments for the rest of your life.

The best example of another senior citizen entitlement is Social Security.

I hear people say to me every day that reverse mortgages cannot be an entitlement because they cost so much. My answer is always, "How much did you pay in to receive social security?" Entitlement does NOT mean free. Entitlement means that it is of benefit to the person who is getting it.

Entitlements are heavily regulated by the government. If reverse mortgages were a bad thing, the government would not continue to support the program.

Getting seniors to educate themselves on reverse mortgages is the hardest part. What you do not know about reverse mortgages costs you money.

bob

bob@az62.com

www.az62.com

623-214-6663

For all who think Reverse Mortgages are bad

Besides the fact that reverse mortgages are backed by HUD, and that they are considered entitlements by the government, people still bad mouth the product. Its time to consider some individual cases to determine what a reverse mortgage really does for a senior.

A 70 year old senior citizen is living on a fixed income of $1200 per month.

Two months ago they were just prescribed medicine by their doctor that costs $300 per month.

They own their home, but their savings has been dwindled over the years so they really do not have much to draw on to pay for living expenses or for the new prescription.

Their options are :

1) Skimp on food, skip all forms of entertainment or "going out", and try their best to live on $900 per month.

2) Get a $100,000 mortgage on their home, with monthly payments of $890 a month.

3) Get a reverse mortgage on their home, and get $61,000 in cash (or a credit line that grows over time), and get to live in their home for the rest of their life.

The government wants you to live in your home for as long as you can. The cost of assisted living outside the home is extremely expensive. If the senior got a forward mortgage for $100,000 there is a risk that they would default on the loan and be faced with a very bad future.

Are you starting to see the benefits of a reverse mortgage?

(More case studies to come)

Bob

Bob@az62.com

www.az62.com

623-214-6663

Borrowing From the Parents

Parents will do almost anything to help their children and grandchildren. Ever since they were born, the parents have been responsible for their health and well being. So what happens when a grown child, or a grown grandchild tell them about a problem that they have? Of course, the parent or grandparent step up to try to solve the problem. It's what they have always done. From the first time the child or grandchild went to the bathroom in diapers and had to be changed, to the first steps and first bruise, to pushing a good education on a reluctant child. Parents always know whats best, and always see that child or grandchild as a little boy or girl.

Mom, I let my credit cards got out of control.
Dad, I need to get a house so that I can get married.
Mom, I lost my job and cannot afford my house payment.
Dad, I got behind on taxes and now the IRS is calling me.
Mom, we just found out that our child is sick and needs hospital care.

There are many ways that a child or grand child can ask for help. There are only a limited number of ways that parents can help.

If one of those ways is to get a loan on your home.....WAIT.

Things you should know:

1) A regular mortgage puts your home at risk if you are ever unable to pay the payments. Are you depending on the child or grandchild to pay you back as they have promised they will?
2) A regular loan will always charge you more interest on the debt than a reverse mortgage. If you have any bad marks on your credit the difference can be up to 5% more interest paid annually on a regular mortgage.
3) A regular loan takes you "out of retirment" and puts you back on the clock. Payments are scheduled and therefore you are back on a schedule.
4) A regular mortgage is a one time solution. It does not prepare you for any future emergencies. A reverse mortgage gives you a credit line, that grows over time, and is availble for you when you need it.

Bob
bob@az62.com
http://www.az62.com/
623-214-6663

Reverse Mortgage Humor

If you think that marrying someone under 62 years old is financially irresponsible...you may be a reverse mortgage loan officer.

Neighbor 1: Hey have you seen Irma?
Neighbor 2 : No, ever since her house bought her an RV she has been out traveling the nation.

If you call your parents every day asking them to move in so that you can get a reverse mortgage on your house...you may be a reverse mortgage loan officer.

Have you heard that 94% of all the homes that seniors live in are unemployed?
Yup, the other 6% work for HUD.

If you will buy a mobile home as long as the wheels are removed, it has a foundation, permanent tie downs and the land comes deeded along with the mobile home....you may be a reverse mortgage loan officer.

Bob

bob@az62.com

www.az62.com

623-214-6663

Where does your mortgage payment go?

Lets talk a bit about forward mortgages. (Forward mortgages is a name given to traditional mortgages by the reverse mortgage industry.)

Every bank uses the phrase “Pride of Ownership”. We all know that you do not really own all of a home until the mortgage is completely paid off, but what about when you have 50% of the mortgage paid off? Do you have pride of ownership then?

If you have a traditional mortgage and have 50% of the home paid off, you are said to have 50% equity, or 50% loan to value. What happens to that 50% that is paid off? Who benefits from it? Do you receive any benefit from having 50% of the home paid off? Yes. You receive the opportunity to remove the extra insurance policy that banks have for people who have less than 20% loan to value. Being able to not pay the bank an extra fee is not really a benefit, but I wanted to include it just to make a point.

You do not really benefit from having 50% of your home paid off, other than owing less money in total. Your payments do not go down, unless you refinance. If you have a late payment, or miss a payment, you pay fees, and charges and your credit score is effected negatively. It doesn’t seem right that a customer who pays a bank on time for 10 or 15 years, and then has financial trouble, is treated the same way as a person who has not paid on time from day one.

The bank does benefit. The bank’s portfolio of loans has a loan to value just like your home. When a bank has a better loan to value, they can get more investors, get more money to loan, and earn more money. For that benefit that you give them, what do they give you? Nothing.

What if you had an emergency and needed some of that 50% equity, could you go into the bank and get it from a teller? No. In order to touch that money you would have to go through an entire loan process. They would check your credit, do another home appraisal, and possibly even charge you points up and a higher interest rate than your 1st mortgage to access that equity. On top of all that your monthly payments would go up significantly.

Now take a quick look at a reverse mortgaged home in the same situation. Don’t think that a reverse mortgage is ONLY for removing all the equity in the home. A senior that gets a reverse mortgage, replacing their current mortgage, and leaves the equity in a line of credit, has the following benefits over a forward mortgage.

1) No monthly payments

2) No late fees for missed payments

3) No negative performance on their credit report

4) Immediate access to their line of credit

5) No credit check or other requirements for taking from their line of credit.

6) No additional forms or contracts to sign for taking from their line of credit.

7) Growth in their line of credit over and above the cost of the loan.

8) The ability to make payments against their loan whenever they want

9) Immediate transfer of principal from loan balance to credit balance.

10) Self management of entire credit and loan accounts…on your own schedule…after all you are retired aren’t you?

Retirement means that you are free from time clocks. Why are you still punching in every month with your mortgage?

Bob Fisher

bob@az62.com

www.az62.com

623-214-6663

Using Reverse Mortgages to cure Sub Prime Problems

If you are a senior who currently has a sub-prime loan, please take notice. The current rates on reverse mortgages are around 3%! You really need to have someone provide you with information on how to convert your current mortgage to a reverse mortgage. I cannot speak loudly enough on how much you will save over the long run.

The sub-prime loan problem has hit all of America. A low initial rate followed by outrageous interest rates has been the biggest bait and switch in history. It has hit every age group, young and old.

In hard times turn to your family. Its good advice. Let me give you some advice on how to work within the family to achieve long-term stability.

1) If the borrower is over 62, and there is still equity in the home, do a reverse mortgage immediately.

2) If the borrow is under 62, and there is still equity in the home, and you have a mother, father, or trusted relative over 62 living with you, deed the home to that relative so that they can do a reverse mortgage and you won't lose the home.

3) If the borrower is under 62, and there is still equity in the home, and you have a mother, father, or trusted relative over 62 that currently, or can in the future, live with you for 3 months out of the year, deed the home to that relative. Even if they have a reverse mortgage on their primary home, they can, under those circumstances, do a secondary home under a reverse mortgage. (Please note that the interest rate on a secondary loan is higher, but it does stop the monthly mortgage payments, and you can start paying down the principal of the reverse mortgage with any money you can afford to put towards that purpose.)

The key point I am trying to make is that individuals over the age of 62 can get out of the incredibly high mortgage payments that are being forced on homeowners who signed up for a sub-prime loan with a "teaser" rate. I am also trying to re-enforce the fact that in hard times like these, senior citizens have the entitlement of the reverse mortgage. If you are not a senior citizen over the age of 62, then contact one that you trust to help you get out of your sub-prime loan. Deeding the home to them, having them live with you, and willing the home back to you after they pass, is one of the best ways to save your house from foreclosure.

Bob bob@az62.com

www.az62.com

623-214-6663