A New Way of Looking at Reverse Mortgages

It has been awhile since we posted to this blog . . . and this commentary on reverse mortgages is probably long overdue.

Over the past several months, we have spent a lot of time educating both professionals and consumers on the benefits of a reverse mortgage.  We are focused on dispelling common myths as well as showing powerful illustrations on just how valuable a reverse mortgage can be for a retiree.  Now don't get us wrong, we are not saying that a reverse mortgage is for everyone - but if there is any uncertainty in someone's long term plan for retirement, we would strongly suggest they take the time to learn about a reverse mortgage and the possible benefits to them.

A reverse mortgage is a federally insured product that is available to homeowner's age 62 and up that have sufficient equity in their home.  The rule of thumb is that at age 62, the homeowner would likely qualify for a reverse mortgage amoung of approximately 60% of the home's value.  A reverse mortgage also falls into a "non-credit qualfiying" category - meaning that credit, income and assets are typically not relied upon in the qualification (if the homeowner needed to come in with cash to close, it would have to be verified but beyond that there is typically no asset requirements).  And likely the best part of the reverse mortgage is that it is a loan that does not require repayment as long as the homeowner remains in the home.

Beyond the basics of the reverse mortgage lie many retirement planning tools that people typically don't think of.  It could be a solution that would allow someone to defer Social Security to accrue a higher benefit; it could be a solution to allow someone to defer withdrawals on qualified accounts to ensure that they won't run out of money; it could replace a traditional mortgage liability with monthly income allowing for a timely retirement . . . the options are many.

We came across an article today that takes some of our theories on using reverse mortgage proceeds in retirement to another level.  This article provides an in depth look at three different strategies for using a reverse mortgage to create retirement income.  It definitely validates our stance on the benefits!  We encourage any of our readers to also take a look at this article: http://www.fpanet.org/journal/ReversingtheConventionalWisdom/.

We would also like to extend invitations to our readers to attend our educational seminars on reverse mortgages.  On the markets that we serve, we offer them on a weekly basis - call our office to find out when the next seminar is!  We also are happy to do one-on-one consultations to provide the answers a homeowner needs to determine whether this product is right for them.  Contact us at 888-556-5366 for answers to any of your reverse mortgage questions.

Happy Reading!

Playing the H.A.R.P.

If you have watched the news over the last week, you have likely caught a glimpse of President Obama speaking about a new plan to save underwater homeowners that have mortgages owned by Fannie Mae or Freddie Mac.  Too good to be true?  Maybe.  What is not too good to be true is the opportunity to have a Gradient Home Mortgage Professional perform a complimentary Second Opinion for you to determine what kind of solutions are available; including whether or not you qualify for a H.A.R.P. (Home Affordable Refinance Program) loan.

There is not a magic wand that will magically wipe away the effects of the housing crisis.  There are, however, viable refinancing solutions available to a great number of Americans that are being left on the table.  We have yet to see how the new H.A.R.P. guidelines will affect our industry . . . we can only hope that the program will be better executed the second time around.  H.A.R.P. is not our only saving grace; we have many other refinance programs that can help.

There are several changes proposed under the new H.A.R.P. initiative.  Some of the prominent changes are:

·         Removing the 125% loan to value (LTV) ceiling for fixed rate mortgages – that means no LTV restrictions . . . in theory a homeowner could owe $250,000 on a home worth $150,000 and if they qualified otherwise, they could refinance into a current market rate.

·         Eliminating the need for an appraisal when there is a reliable Automated Valuation Model estimate provided by Fannie Mae or Freddie Mac.

·         Extending the program through 12/31/2013.

·         Removal of risk based fees – what this means to homeowner’s is lower interest rates under the program.  Currently there are risk based fees added into the interest rate making the average H.A.R.P. rate about .25% higher than a market rate.

Whether you are eligible to “play the “H.A.R.P.”” or just look to a traditional refinance option; it is imperative that you are taking advantage of the services available to you through Gradient Home Mortgage.  Our Second Opinion Reports are done by professionals that take all strategies into consideration when creating a report.  Your home is likely one of your largest investments; let us help you ensure it is treated that way.

Call to Action!

It has been an interesting couple of weeks from an interest rate perspective.  Last week, rates fell to their lowest level since 1971.  One would think that would cause a new frenzy of eager homeowner's looking to refinance yet the turn out has been fairly lackluster.  The MBA reports an uptick in refinance applications but the number is not where one would think it should be.

There are a lot of things that are likely behind the disappointing "increase" in applications - a lot of realistic things.  But there is also a fairly large group of people that aren't exploring their options for the wrong reasons.  I hear from many people that they have not bothered to look into refinancing as they just "know" it won't work due to home values or other assumptions.  It still takes me by surprise when someone responds that way but has yet to speak with a professional about what options they have.

If you are a homeowner or are striving to be one, now is the time to step up and take some actions!  Get a Second Opinion from a mortgage professional if you currently own your home.  If you are hoping to be in the market to purchase a home, get in front of a mortgage professional right away to see what your options are . . . make sure you truly understand them as well!

At GHM, it is our mission to educate.  We want all our clients to be informed and to take advantage of the services we offer them . . . services that come at no cost!  It is time to put your financial house in order - this rate environment will not last.  Do you really want to be kicking yourself when this rate boom is over for not taking the time to explore your options well it was here?!

Debt Ceilings, Defaults, Downgrades . . .Oh My!

It has been quite a week in the financial markets.  We have narrowly sidestepped a federal default with no guarantee that we will hold our pristine AAA credit rating.  Political positioning has been off the charts and faith in our esteemed leaders has dwindled.  Everywhere you look there is speculation on the effects of a default and downgrade - that alone is enough to make even the most seasoned Financial Professional a bit weary.

All of this is very real.  There are serious implications that come with a gamble this large.  This debate and deficit cut has barely even started at this point.  S&P warned of a possible downgrade if deficits weren't cut by $4 trillion . . . we have all been waiting with baited breath for our lawmakers to strike a deal only to find out that the agreed upon cuts only added up to about $2.4 trillion.  Hmmmmmm . . .

So we have avoided the default but we still face a possible downgrade which could likely be just as catastrophic as a default!  I can only hope at this point that we can hold our AAA rating and continue to limp towards an economic recovery.  I think party politics aside that is what we all want!  Getting to that recovery is our challenge.  Consumer spending has fallen once again showing that the average person does not harbor much faith in our economy.  Without consumer confidence we as a nation are basically held hostage.  Government cannot fix the state of our economy, the private sector has to. 

One of the ways to work ourselves out of our "housing crisis" and make some real headway is to actually start buying houses.  Novel idea, right?  With all the media hype on crisis after crisis, the average person looking to buy is a bit gun shy.  What I wish all the media hype would cover is the fact that now still is a great time to buy.  How many of us can say that we don't think 4.5% is a good rate for 30 year fixed rate money?  I don't think anyone that was buying a home during the 80's or 90's would argue that 4.5% is a great rate . . . not when average interest rates back then were anywhere between 8-18%!  Hard to believe that people actually held a mortgage with a rate of 18%, isn't it?  We have almost gotten spoiled with our awesome run of historically low interest rates!

We all need shelter.  A home is typically one's largest investment, yet it is also a necessity.  When we look at our home purchase as a necessity providing the shelter we need, where do we really go wrong?  If you can qualify and provide the necessary down payment - more often than not you will be better off buying than renting.  Bottom line - those in a position to buy should take a long hard look at pulling the ripcord and actually taking the leap into homeownership.

Is it time for a Second Opinion?

If faced with a serious medical condition, you would certainly get the advice of a second physician.  If faced with a large repair on your home, you would likely get 2-3 opinions.  The point?  You would get a second opinion on most substantial occurrences in your life – why not your mortgage? 

Life happens!   Circumstances change and people move forward.  Your current mortgage is often overlooked when you move on with other chapters of your life which could result in the loss of thousands of dollars.  Why overlook one of your largest assets?

This is where our Second Opinion mortgage report becomes a necessity.  There are no gimmicks, just the straight facts.  Rather than gather all your personal financial information, we keep it to the point by asking just a few targeted questions to better understand the terms of your current mortgage.  We then take that information and compare it to a current mortgage plan designed to meet your individual needs.

Our a side by side comparison of your current mortgage payment  versus our proposed mortgage payment provides a detailed example of how much money we can save you on a monthly basis as well as over a 60 month and 15 year period.  The Second Opinion mortgage report also provides illustrations to build personal wealth.  This is must for anyone with a mortgage!

It’s never too late for a second opinion!  Call us at 888-556-5366 for more information regarding a no cost, no obligation Second Opinion.

Move Forward and Reverse!

A Reverse Mortgage is a product of the future, in both a conceptual and literal sense.  It is the only mortgage product that distributes equity to the homeowner without any immediate repayment requirements.

Reverse Mortgages aren’t like traditional mortgages and home equity loans that require regular payments be made until the loan is paid off.  Rather, a reverse mortgage pays out the equity in the home in the form of a loan that is not paid back until the homeowner moves, sells or passes away.  The proceeds of the reverse mortgage can be received in a lump sum, as a line of credit (accruing interest only on the outstanding balance), or as a predetermined periodic payment. 

For the right client, the benefits include:

Aging in Place.  The ability to retain homeownership and independence, free from financially worry.

Tax-Free Money.  Currently the Internal Revenue Service treats monies received from a reverse mortgage as loan advances and not taxable income; that said, a homeowner should always consult their tax professional before moving forward.

Freedom and Flexibility.  The money received from a reverse mortgage transaction is the homeowner’s to use in almost any way they choose.

Given the overall benefits of the program, the reverse mortgage program should no longer be considered a last resort.  In many cases, it should be the first.

Common Reverse Mortgage Myths Revealed:

The bank will assume ownership of my home if I get a reverse mortgage.  False!  The homeowner retains title to the property.   The lender extends a loan and holds a secure lien position but no ownership is transferred.

A reverse mortgage is for desperate people who have little income.  False!  A reverse mortgage can be a valuable tool used in a variety of situations to enhance quality of life and better manage assets.

I could be forced out of my home.  False!  Federally insured reverse mortgages specifically state that the homeowner cannot be forced out of their home.  The only requirements of a reverse mortgage are that the homeowner continues to keep the home as their primary residence, in good state of repair, with the property taxes paid and homeowner’s insurance coverage in place.

I have to have a good credit score to qualify for a reverse mortgage.  False!  A reverse mortgage has no credit score requirements.  Qualification is based on equity, age, and occupancy.

About Gradient Home Mortgage

At Gradient Home Mortgage, LLC our mission is to provide financing tailored to your needs regardless of where you are in the Real Estate Life Cycle. Whether you are a first-time homebuyer or an experienced investor, we will guide you through the home loan process and help you achieve your home financing goals.