Issue 26.16
Sometimes when clients are moving to St. George I hear our real estate community talk about our summer days cooling down in the evening and mornings to give us some break from those 100 degree days. . Sometimes it feels though it is not until the middle of the night when we get relief from that heat.
A reverse loan works the same way. For example, sometimes we own a home and have a mortgage on it. And we say to ourselves if money gets too tight or if something happens in a pinch, we can always fall back on a reverse loan at some point in the future. .
The problem is you never know what is going to happen. 1. The government may pull that program or discontinue the percentages and make the loan less attractive. That is realty to say the least. A few years ago the loan was certainly more attractive than it is today. So, most likely the terms will not improve let’s put it that way. We are living longer and the longer that life expectancy pushes further in age, the more pressure FHA and HUD has to adjust the loan to the negative and or discontinue the program.
Generally speaking it never helps to wait. It never helps to wait generally for the following reasons:
- Most likely the loan terms and interest rates will not be lower and or more aggressive in the future. Nothing seems to get better in the future when it comes to lending or taxes. Just the opposite. They will probably rise and become less attractive as years go.
- Secondly, if we are making a mortgage payment on a home and we decide to do a reverse mortgage to eliminate that payment, then essentially we have wasted those payments. Client’s always say, “If I wait few years, the government’s program will give me an extra 10,000 in a reverse loan.” But, the problem is that if we make an 800.00 mortgage payment monthly, and wait five years, yes, they might give us 10,000 more because of our older age in the future. But, we have just made 10,000 in mortgage payments each year for 5 years. So, we have dumped 50,000 in payments to save 10,000. It never helps to wait when dealing with this loan if you are certain about staying put in the home you are in or buying the home you want to be in long term.
- The other side of the coin is that if you are saving your mortgage payments because we did a reverse loan, than the longer we save and the more benefit that loan brings to my wife and I. Secondly, if we own our home and we just simply open a credit line, and then the earlier we do that allows the credit line to grow and accrue interest so we have much more of a benefit and more funds to utilize in the future then if we waited and did the loan at a later age.
At the end of the day, normally it never helps to wai0 if we know a reverse loan is in our future. In a reverse loan, my feeling is that the earlier we can take advantage of the reverse loan the more bang for the buck we get out of the loan.
Whatever your situation if you are over 62 and you are looking at buying a home or staying in your home and you have a mortgage payment you are still making, then you need to stop. Let’s look at your reverse loan options and see if there is a better retirement plan for you that involves a reverse loan with no mortgage payments for life.
For more information contact your local investment advisor or call our office at 435 525 2222 for a free information kit.
Until next month,
Brandon.