Do the Math When Using Reverse Mortgage for Investments
I don't suppose I need to tell you that we've lost somewhere around thirty five percent in value in the stock market in one year. Some seniors are now picking up their phone and calling me because of this.
These folks are attempting to use a reverse mortgage to access their home's equity. There are some excellent reasons to use a reverse mortgage. Then again, there are some excellent reasons not to.
Most importantly they must have a desire to stay in their home for an extended period of time. This is vital because the cost to get a reverse mortgage is not conducive for a short term mortgage
As the borrower stays in the home for longer periods the less pricy the loan becomes as we determine the cost of money on an annual percentage.
As some of the these phone calls are losing tons of their hard earned money they are calling to to pull money out of their equity to reinvest in other investments to recoup their losses.
That which is really palatable now is that rates are so low. In particlular the adjustable rate, with a line of credit option, is quity low.
For the week of January 6 to January 12 the rate on the adjustable is well below 4%. If we look at this loan over the last 15 years, it's average is around 6%.
As a loan officer I'm not required to represent my customer's best interests. However, as an ethical person I do my best to discuss the costs as opposed to the return the customer will receive by investing reverse mortgage money.
They cannot expect the low rates to hold up forever and must consider these rates driving up to their average level.
Many in the marketplace are taking the position that rates will be low for some time with so much pressure to keep them low.
When rates are high it is difficult for big business to borrow. This is hardly ever good, especially when the economy is in such bad shape as it is now.
We'll have to see. My concern for some of these people is that some of these folks are not taking into consideration to true cost of getting this money to make their investments.
Whichever investment the borrowers choose should have very good returns to not only beat the interest rate on the money, but the cost of getting the reverse mortgage in the first place.
These folks are attempting to use a reverse mortgage to access their home's equity. There are some excellent reasons to use a reverse mortgage. Then again, there are some excellent reasons not to.
Most importantly they must have a desire to stay in their home for an extended period of time. This is vital because the cost to get a reverse mortgage is not conducive for a short term mortgage
As the borrower stays in the home for longer periods the less pricy the loan becomes as we determine the cost of money on an annual percentage.
As some of the these phone calls are losing tons of their hard earned money they are calling to to pull money out of their equity to reinvest in other investments to recoup their losses.
That which is really palatable now is that rates are so low. In particlular the adjustable rate, with a line of credit option, is quity low.
For the week of January 6 to January 12 the rate on the adjustable is well below 4%. If we look at this loan over the last 15 years, it's average is around 6%.
As a loan officer I'm not required to represent my customer's best interests. However, as an ethical person I do my best to discuss the costs as opposed to the return the customer will receive by investing reverse mortgage money.
They cannot expect the low rates to hold up forever and must consider these rates driving up to their average level.
Many in the marketplace are taking the position that rates will be low for some time with so much pressure to keep them low.
When rates are high it is difficult for big business to borrow. This is hardly ever good, especially when the economy is in such bad shape as it is now.
We'll have to see. My concern for some of these people is that some of these folks are not taking into consideration to true cost of getting this money to make their investments.
Whichever investment the borrowers choose should have very good returns to not only beat the interest rate on the money, but the cost of getting the reverse mortgage in the first place.
posted by Credit Counseling at
10:38 PM
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