Investors Looking to Tap the Reverse Mortgage for Capital
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.
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
Generally, we determine the cost of the loan on an annualized basis. The longer a borrower lives in the home the cheaper the loan actually becomes over time.
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.
What is catching a portion of their attention is the fact that interest rates are just unbelievably low. It makes the cost of that money very attractive.
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.
In my conversations with the borrower I always discuss the fact that rates will not continue at their current position indefinately. They will go back up.
Most people expect rates to be low for a good while with all the pressures from the powers that be doing whatever they can to keep them down.
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.
People must consider not only the interest rate but also the closing costs when factoring the true math to determine if this is really a good idea.
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.
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
Generally, we determine the cost of the loan on an annualized basis. The longer a borrower lives in the home the cheaper the loan actually becomes over time.
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.
What is catching a portion of their attention is the fact that interest rates are just unbelievably low. It makes the cost of that money very attractive.
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.
In my conversations with the borrower I always discuss the fact that rates will not continue at their current position indefinately. They will go back up.
Most people expect rates to be low for a good while with all the pressures from the powers that be doing whatever they can to keep them down.
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.
People must consider not only the interest rate but also the closing costs when factoring the true math to determine if this is really a good idea.
posted by Credit Counseling at
10:39 PM
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