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No one recommends Reverse Mtg as investment tool ...
Posted by Bobbi in CT of ? on 5/13/05 7:17pm Msg #37633
The most recent seminar (attorneys, bank VPs, loan officers, financial planners) do NOT recommend using a reverse mortgage as an investment tool. The variable interest rate starts high and can get higher as time goes on. If HUD backed (average person's home), the up front frees are "Really High" as quoted by loan originators. According to them, "do the math" negative return on investment because the mortgage rate will always be higher than anything you can earn on the investment. I don't remember the examples, but they mathmatically proved this with two real-life loan scenarios. It's not the purpose of the cash-out/no payment loan product; spend the money on yourself and day-to-day needs to improve "quality of life".

Most practical and best uses have been quality of life (repairing home, vacations, new(er) car, breakfast at McDonald with the girls after church on Sunday [LO did one for an elderly woman who could no longer afford the $3 because fixed income and rising cost of living, gave her a little extra each month for breakfast out, senior citizen trips, furnace repair and paint the house]. Another example was a couple who purchased a new second home in Florida mortgage free (which goes to the kids ) because the principal residence wasn't going to be kept by family after death anyway - also gave family a "vacation home" to enjoy now. Purchasing long term care insurance and using extra $$ per month was another option.

One example give from a loan officer (who has a masters in gerontology and specializes in only these type of loans), was a $312,000 (based on HUD cap with $34,000+ closing fees) reverse mortgage: $75,000 paid off existing morgage with monthly payments, there's a reserve amount for monthly $30 fee and a few other costs, remaining $$ is in a HELOC that Earns a variable rate of interest on balance in account. Elderly borrower then took dream-of-a-lifetime cruise with adult child (paid for both of them) and draws $200 per month from HELOC to meet "comfortable" cost of increased living expenses plus no longer has to worry about how to make mortgage payments.

It's a specialized product and doesn't work for all, but under the right circumstances can good for "quality of life" or tax and estate planning. Key is the money isn't "income" so it is not taxed as income - just have the "extra" you need automatically moved from HELOC to your checking account each month. Except for the Weathly High-End homeowner product, the HUD-backed products have a cap based on the county and state the home is in. No requirements on what you can do with the cash if you get the loan - could blow it all at the casino if you wanted.
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Messages in this Thread
 Reverse Mortgages - Carol_SoCal on 5/13/05 1:01pm
 Re: Reverse Mortgages -  SamIam_CA on 5/13/05 1:12pm
 Not a good choice for family - Melody on 5/13/05 1:20pm
 Re: Reverse Mortgages - Mike/NJ on 5/13/05 1:29pm
 Re: Reverse Mortgages - Sonja on 5/13/05 2:03pm
 Correct re Trustee/Estate. Not quite correct re Medicare. - Melody on 5/13/05 4:22pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. - Sonja on 5/13/05 5:34pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. -  BrendaTX on 5/13/05 6:28pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. - Sonja on 5/13/05 7:00pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. - BrendaTX on 5/13/05 7:11pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. -  SamIam_CA on 5/13/05 7:21pm
 Thanks, Sam...I should have said: -  BrendaTX on 5/13/05 7:38pm
 Being blunt: -  BrendaTX on 5/13/05 7:54pm
 Re: Being blunt: I think you said it just right n/m -  SamIam_CA on 5/14/05 11:40am
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. - Sonja on 5/13/05 8:00pm
 What started out as questions and exchanges of ... - Ernest_CT on 5/13/05 9:44pm
 Re: What started out as questions and exchanges of ... - Sonja on 5/14/05 11:40am
 Last.... - Sonja on 5/14/05 12:21pm
 Re: Last.... -  BrendaTX on 5/14/05 12:32pm
 Re: Last.... -  SamIam_CA on 5/14/05 12:36pm
 Would you kindly... - Sonja on 5/14/05 1:02pm
 Sam... -  BrendaTX on 5/14/05 1:47pm
 You make perfect sense to me - now go enjoy the weekend! n/m -  SamIam_CA on 5/14/05 2:13pm
 Re: You make perfect sense to me - now go enjoy the weekend! n/m -  BrendaTX on 5/14/05 2:48pm
 As the poster knows... -  BrendaTX on 5/14/05 12:27pm
 Think what you want n/m - Sonja on 5/14/05 1:03pm
 Re: Correct re Trustee/Estate. Not quite correct re Medicare. -  HisHughness on 5/14/05 5:43pm
 Good estate planning tool... - Bobbi in CT on 5/13/05 2:28pm
 Re: Good estate planning tool... - Carol_SoCal on 5/13/05 2:37pm
 Re: Good estate planning tool... - Kevin Ahern on 5/13/05 4:32pm
 No one recommends Reverse Mtg as investment tool ... - Bobbi in CT on 5/13/05 7:17pm
 Re: Reverse Mortgages - PeterL_CA on 5/13/05 7:51pm
 Re: Reverse Mortgages - ERNA_CA on 5/14/05 2:19pm



 
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