California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

The New Reverse Mortgage Formula Book Review

by Jeffrey L. Bangerter
November 04, 2008

The New Reverse Mortgage Formula How to Convert Home Equity into Tax-Free Income written by Tom Kelly is an excellent book to help you understand how the reverse mortgage works.

In Chapter 1 Tom points out that “Right Now, an American turns 50 every seven seconds.”

He goes on to point out that “The pressure on baby boomer households to generate income and maintain lifestyle in the traditional retirement years will take on a new focus.”

I agree since this last week I understand that one of our Presidential Candidates is thinking about removing the tax deduction on 401k contributions and as I am writing this on November 1st 2008 the stock market has eliminated about 40% of most people’s retirement assets, the need for alternative retirement sources is greater than ever.

In Chapter 2 he covers the question of “How much can I borrow and what will it cost?”

The paragraph that jumped out at me was on page 19 “Obviously, you cannot predict when we are going to die.

However, try to take a shot at guessing how long you will stay in your home.

Unless you are in a desperate situation and really needing cash, it probably will not make sense to obtain a reverse mortgage if you are going to stay fewer than four years.

That’s because of the fees involved.

If you plan to stay longer, and a growing number of people plan to do so, the reverse mortgage could be a viable option.”

I agree completely, if you know you are going to be moving the reverse mortgage loan is not a fit, if you just think you might move some day, I would still move forward.

Mr. Kelly also points out that “One common misconception of prospective borrowers is that they can qualify for a reverse mortgage equal or close in size to the value of their home.”

The reverse mortgage loan does not work like a traditional loan where you have a Loan To Value formula, it is based on the youngest borrowers age, the home value up to the maximum lending limit (now $417,000 in the continental U.S.) and the current expected interest rate which changes each Monday night.

To really know how much you can qualify for give us a call and we will give you a quote over the phone.

On page 44 there is a shot discussion about taking a spouse that is under age 62 off title in order to qualify for the reverse mortgage loan.

There is a good dialog but I want to caution anyone reading this that this is a very dangerous strategy as the younger spouse could end up losing the home after the older spouse dies.

If you absolutely have to do this or you will lose your home now, fine.

If not, do not take your spouse off title!

There is also a good overview of using a reverse mortgage loan to fund Long-Term Care.

I have always thought that the reverse mortgage makes sense as a funding vehicle for Long-Term care Insurance or as a tool to provide self funding for the care you might need.

HUD in their new rules does not allow your reverse mortgage lender or Loan Originator to recommend these products using the reverse mortgage funds.

This was put in place as a safe guard to prevent unscrupulous sales people from getting you into a reverse mortgage and then tying up all you new found cash into insurance or annuity products.

I do understand the concern but it is a little strange that you cannot be given any advice by the person who just helped you access the equity in your home, at any rate if you want to use this strategy you will have to seek out an insurance professional that is not also your Loan Originator.

The book was written in 2005 and a lot has changed since then, other than that I think this is a good overview of the reverse mortgage program.

Give Us a Call and We Can Review Your Situation!!!