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Archive of Past Discussion Board
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Author: Bill Berry
Date: 03-01-05 21:19
What is the consensus of this discussion board concerning reverse mortgages? Are they appropriate? ethical? Do they make sense in certain situations. Opinions please.
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Author: Arthur Rudnick
Date: 03-01-05 22:51
Bill;
Excellent question:
For those that don't know, Reverse Mortgages are for those homeowners 62 years old and above, who have equity in their homes. A bank will allow the homeowner to tap into that equity in modal withdrawals and will not have to pay back the loan, until the home is sold or the homeowner dies.
The beauty of a Reverse Mtg. is that unlike a home equity loan or line of credit, the amount borrowed does not have to be paid back. When the house is sold, at settlement, the banks gets their money. The homeowner still owns their home.
Reverse Mtgs are now a big thing. They are being touted as a way to free up funds to pay for LTC premiums.
I am not convinced.
I can't see a person, mortgaging their home to free up a few thousand dollars each year to pay for a LTC premium. What I can see though, is a person without a LTC policy, who may require home care for an extended period of time, taking out a mortgage in order to stay at home and pay for LTC services.
I don't sell Reverse Mortgages, but I network with a broker who does. I've recently sent him one of my clients who has $700,000 equity in his home, but very little in the way of income. His home is his only major asset. With a low income and taxes what they are in NY (he pays $9,000/yr.) he took out a Reverse Mortgage and took a monthly payment of $2,500. That extra $2,500 each month changed his lifestyle. For him, it was the difference of struggling each month to pay his bills, to having enough money to feel comfortable.
They are certainly ethical, just as ethical as a 2nd mortgage or home equity line of credit. The difference is that with those 2, payments have to be made to the bank on a regular basis. That's not the case with a Reverse Mtg.
Up-front fees (closing costs) are higher than other conventional homeowner loans. Just like every other financial product on the market, they're not right for everyone. But for someone
"House-Rich & Cash-Poor" they may make a lot of sense.
Arthur
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Author: Josh Fink
Date: 03-02-05 18:37
Hi,
Also what you can do is tie in some life insurance. Use the extra money from from the mortage to pay for the life ins. Then when they pass, the kids some some tax free money to pay off the reverse mortage. Then the kids still get the house (if they want it) the folks get extra income and LTCI to protect their assests and dignity. Just another idea. Josh Fink
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Author: Steve Eads, CLU
Date: 03-03-05 14:32
You'd better get in the hard core learning curve for RM's if you have not already. It WILL be a major player for the Baby Boomers. I don't agree with pushing it for paying LTCi premiums...that's skates on sleeeezy!!!!
However, it is likely that most of us here will be licensed and meeting the RM needs of our clients in highly ethical situations.
Stay away from the wholesale houses that just want you for "birddoging". Same as the insurance biz there.
Steve Eads, CLU
www.LTCiPro.com
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