Training for a Kona Hawaii Half Ironman my coach would ask the question, “When would now be a good time?”—an excellent refocusing question. Just as this question helped me get the most out of my Ironman training, this question can help you take the proper mortgage financing steps that allow you to maintain financial peace of mind.
Home values have skyrocketed 18% to 30% across the nation over the past two years. Equity lost is becoming equity available. Today, can a Reverse Mortgage take advantage of the equity in your home and enhance the quality of your life? Below are just four reasons why now may be a good time to consider a Reverse Mortgage:
- Current low interest rates
- Reverse Mortgages offer a fixed rate
- Every year, new regulations reduce your “maximum claim amount”
- Purchase a home with no monthly payments
Real estate interest rates are cyclical. Today we continue to benefit from an interest rate trough. Yes, interest rates may have reached their all-time lows in the first quarter of 2013. And, we may not see these low rates again in our lifetime. The question is not, “Will interest rates rise?” The question is, “When?” A one percent upward interest rate bounce is not uncommon in the mortgage industry. Your Reverse Mortgage is directly affected by current interest rates. The lower the interest rate the greater the Reverse Mortgage money available—you suffer a ten percent Reverse Mortgage loan amount decrease for a one percent rate increase. For example, a $400,000 Reverse Mortgage Maximum Claim amount would suffer a decrease of $40,000. This is significant.
For many years Reverse Mortgages only offered adjustable interest rates. Today, Reverse Mortgages offer fixed interest rates. Over the years mortgage programs are created, changed and sometimes eliminated. We may have fixed rate Reverse Mortgage loans for many years to come. Then again, market changes could force the elimination of the fixed rate. Today, the Reverse Mortgage fixed rate of interest is very low.
A higher Maximum Claim Amount allows you to get more money from your Reverse Mortgage. Up until late 2008 the maximum claim amount was $362,500. The current Maximum Claim Amount is artificially high. The artificially high limits act as a government stimulus cushion—softening the pain from the deflating real estate values of last decade. In October of 2009 this Maximum Claim Amount was set at $625,500. Recently, in the last two years, government regulations have been decreasing the amount of Reverse Mortgage loan amount available to you. Before future regulations affect your Reverse Mortgage, when would now be a good time to take advantage of current loan amounts available to you?
“No mortgage payments” is a very powerful piece of anyone’s retirement plan. Not everyone can achieve a paid off mortgage. However, using a Reverse Mortgage to purchase a home can effectively achieve “no mortgage payments”. Suppose you sold your current home to move down to a less maintenance townhome. You want to purchase this townhome with all cash. However, the equity in your home leaves you $100,000 short of your “all cash” goal. A purchase Reverse Mortgage will allow you to move into your new townhome with no monthly mortgage payments.
Could a Reverse Mortgage help contribute to your financial peace? This question should be asked to all of your financial advisory team. Who could be on your financial advisory team? Your family, your accountant, your financial adviser, your pastor and your mortgage lending expert all could be a member of your team. Working together your team will help you determine if now is a good time to employ a Reverse Mortgage.