At age 62 with a 50% equity at the average value of $300,000 in 2006
- Value $300,000 had reduced by $75,000.00 on average to $225,000
- They were 62 at the time now 65 years of age.
- Margins at the time were 150 to 175 on average
This person at the time would have received around $188,000 if they had done the Reverse Mortgage at this time year 2006
Now dated 2009 the same person is now 65 years of age the same home is now $225,000 and going down at the average rate of 1% per month depending on the area that you live in.
At age 65 with 50% equity with and average value of $225,000
- Value $225,000 current and reducing by 1% per month
- They are now 65 years of age
- Margins have double to 300 or higher
The same person who waited three years would now receive $115,000 from a Reverse Mortgage which totals the loss of over $73,000.00 dollars.
If they had chosen the number one choice in a Reverse Mortgage which is the Equity Line of Credit (78% of the people choose the Credit Line) it would have grown to over $25,000 dollars in the same period.
Even though they waited to see if the value was going to grow and they thought they would receive more money the older they got they have lost over $100,000 over a three year waiting period.
So if you are a person who is currently 62-65 years of age and you are waiting to see what happens you should not wait any longer and here is why!
Even if the value of Real Estate stops right now and does not go up you would still lose money over the next three years. The single reason is the margins which are being charged on the loan. As we have seen over the last three years the margins have more then doubled and are expected to keep increasing as more and more people choose to get a Reverse Mortgage.
The issue is very simple to understand it is because of supply and demand the more people who choose to get a Reverse Mortgage today the more of a demand for investors to purchase Reverse Mortgage backed securities.
This is the reason the margins keep increasing, as Fannie Mae, which is the single purchaser of these securities has reached the limit of how many the can purchase and they have to look elsewhere for new investors the package has to look and feel better profit wise.
Think about this! These are the Stats over the last three years
According to NRMLA, federal statistics show that the volume of federally insured reverse mortgages – called Home Equity Conversion Mortgages made nationwide in the five-month period from October 2003 through February 2004 (12,848 loans) was 112% higher than the level during the five-month period ending February 2003 (6,061). HECM volume in February 2004 alone (4,148) was a new monthly record, and was 273% higher than the level of February 2003 (1,113).
Also remember that 10,000 people turn 62 years old every single day and as this people look to the Reverse Mortgage the numbers keep growing and over 200% and more each and every year. To attract more investors into purchasing these long term mortgage back securities they must have a great return on investment. The margin in the investor’s rate of return, and the profit for the lender to make these loans possible to the senior over the years since the investor must wait for their return on investment.
So if you are one of the older seniors who had looked at a Reverse Mortgage in the past think again waiting does have a larger cost attached to it then the cost of today closing cost. The same person above would have had closing cost at around 11% up front but would have gained over the same period over $100,000 in saving and growth on the credit line.
In today’s economic uncertainty it is more important to protect the security of your future even if you do not need to money today. This is the single most reason most people select the Equity Credit Line for the future! Do not wait another day to secure your financial future with the expectation of inflation which is inevitable in the future, simply because after deflation come inflation and interest rates will rise and the cost of goods and services will also rise this is the facts. The Reverse Mortgage will be you hedge against inflation in the future.
The other fact to remember is if values go back up in the future which they lost certainly will do we just don’t know when you will have the option to always refinance the Reverse Mortgage and receive more money without some of the closing cost that you paid on the first one. Savings are inevitable just like inflation and increase in real estate values, just don’t let the cost of the future destroy your future today.
