Reverse Mortgage Revisted

Using your nest to help with your nest egg is becoming a more common way to round out a financial plan during retirement. Even after the bursting of the housing bubble, the biggest financial asset many retirees have is their home. But because that money is tied up in the equity of the house, it's an investment that has been difficult to count on as a source of income. Reverse mortgages have long been an option. However, until recently, they were skeptics amongest retirement planning consultants. High upfront costs, poor disclosure and dodgy sales pitches made them an option that many advisers avoided. Now, with the introduction of reverse mortgages backed by the Federal Housing Administration in late 2010, more financial planners are adding them to their tool kit. Primarily, they're using them as a way to provide a steady stream of tax-free income that can last the rest of a retiree's life. They can also be used as a way to provide a cushion against a big, but temporary, drop in the markets. Social Security and a reverse mortgage, for some people there might be enough money to cover their needs-based expenses. While any financial-planning decision should be thought through, a reverse mortgage literally involves the roof over your head. Take the time to understand the implications of a reverse mortgage, the costs and the different options. It's a tool, Still its worth to be checked out. Borrowers need to be sure they will have enough money in future years to pay real-estate taxes and homeowners insurance. Married couples should be sure both names are on the mortgage to avoid a situation where after the death of the sole spouse named on the loan, the surviving spouse has to pay off the loan. And retirees should be wary of brokers pushing higher-fee reverse mortgages. A reverse mortgage is essentially a loan that allows the owner of a house or condo to convert some of the equity in the property into cash. Such mortgages differ from a traditional loan in that the money doesn't need to be repaid until the home is sold or no longer used as a principal residence. Another major difference is that there are no credit and income requirements. These mortgages can be set up to pay out all at once in a lump sum, on a monthly basis or as a line of credit. (Details can be found at the website of the Department of Housing and Urban Development. Go to hud.gov and search for "reverse mortgage.") One of the quirks of reverse mortgages that makes them appealing for a financial plan is that when set up on a monthly basis, over a period of many years a homeowner could receive more money in payouts than the house is worth at the time of the loan. The example here was shown to me and it seems to make sense, A 66-year-old with a house valued at $340,000. After subtracting the closing costs on a low-cost, FHA-backed floating-rate reverse mortgage known as a "Saver," that retiree could get a loan for about $173,000, which translates into a monthly check of $1,006 for the rest of his or her life. By age 86, the payouts would have totaled more than $240,000; after another decade, the total would be $360,000. A "standard" reverse mortgage, with higher closing costs, would pay out $414,000 over 30 years. There has been alot changes in the Reverse Mortgage program, all directed at protecting the consumer. My team has the program and is always ready to answer questions, no hassle, no pressure, just answers. John Hacker (01313169) www.letsgobuyahome.com jhackerleads@gmail.com 949-275-3247