Reverse Mortgage Money Now Accessed for Investments
It's no secret that the stock market is down some 30% over the last 12 months. With so many seniors with money in the market I'm starting to get a bunch of calls from a subset of this group.
They are looking to get a reverse mortgage. Of course the planets have to match up to their particular situation for me to entertain this with them.
When evaluating whether a reverse mortgage is the proper financial tool for any individual or couple I look at how long the borrower plans on staying in the home. This is important as the cost to obtain the mortgage are costly for short term reverse mortgages.
The longer one holds a reverse mortgage, or in a practical sense, stays in the home the cheaper the mortgage becomes on an annualized basis.
What some of these folks are wanting is to use proceeds to invest either back in the market or into other investments outside the market.
One of the teasers the reverse mortgage has for these folks right now is very low interest rates on the adjustable rate option.
As of this week the ARM is just under four percent. In the short run this makes this loan pretty nice. In the longer run it's average is in the six percent range.
In my dealings with people, although I do not have fiduciary responsibility, I have to point out that they best be getting a better return on whatever else they are getting involved in than the average.
One important item in the discussion is how rates, although quite low, will go back up to meet the averages. The current rate is a tease.
Many in the marketplace are taking the position that rates will be low for some time with so much pressure to keep them low.
The powers that really want to keep rates low are the major companies. The want to be able to borrow at low interest rates. Do they shape policy? Of course.
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.
They are looking to get a reverse mortgage. Of course the planets have to match up to their particular situation for me to entertain this with them.
When evaluating whether a reverse mortgage is the proper financial tool for any individual or couple I look at how long the borrower plans on staying in the home. This is important as the cost to obtain the mortgage are costly for short term reverse mortgages.
The longer one holds a reverse mortgage, or in a practical sense, stays in the home the cheaper the mortgage becomes on an annualized basis.
What some of these folks are wanting is to use proceeds to invest either back in the market or into other investments outside the market.
One of the teasers the reverse mortgage has for these folks right now is very low interest rates on the adjustable rate option.
As of this week the ARM is just under four percent. In the short run this makes this loan pretty nice. In the longer run it's average is in the six percent range.
In my dealings with people, although I do not have fiduciary responsibility, I have to point out that they best be getting a better return on whatever else they are getting involved in than the average.
One important item in the discussion is how rates, although quite low, will go back up to meet the averages. The current rate is a tease.
Many in the marketplace are taking the position that rates will be low for some time with so much pressure to keep them low.
The powers that really want to keep rates low are the major companies. The want to be able to borrow at low interest rates. Do they shape policy? Of course.
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
10:53 PM
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