Issue 21.12
Have you been pondering the idea of a Reverse Mortgage or formally known as H.E.C.M.? It can be a very attractive avenue to travel to help stabilize your financial future. The concept is a good one but what about the timing? There seems to be so many variables to consider when determining if the time is right?
A housing market at the hopeful end of a major collapse hardly seems like the time to jump into an equity based loan product…right? Though it seems logical a lower home value would allow less actual asset to the consumer in a Reverse Mortgage scenario, there are more factors to consider. For instance, the interest rate actually can make a larger difference in the outcome of the proceeds than value.
Let me explain: A home valued at $200,000 and a fixed interest rate of 4.75% (going rate) would have a very similar percentage of return as a home valued at $225,000 with a 5.56% fixed interest rate using the same fee structure for both scenarios. The likelihood of values increasing by 12.5% in the next few years are questionable at best but the likelihood of rates increasing is much more.
Another factor to be considered when determining if the time is better now or later may be the ability to refinance at any time without penalty. This gives you the best of both worlds. Not only can you take money from your equity now but you can refinance using a higher value later and the fees are much less on the second go round as the Upfront Mortgage Insurance has been paid with the original mortgage so the only additional insurance charge would be for the difference in the new loan and the original one. Depending on how long a time span has elapsed since the original loan, equity based on age will also increase as the borrower will be older therefore qualifying for a greater ratio of equity allowing the possibility of additional monies from the newly obtained equity.
For more details about how this concept may assist in your decision or for answers to any of your Reverse Mortgage questions, call today. My name is Scott Gibson with Axiom Financial and I will gladly explain options and answer your questions in a non-pressure environment. 435-767-1092.