Cash flow and how it relates to using a reverse mortgage to pay off an existing home loan.
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More and more seniors are utilizing reverse mortgages to pay off existing home loans, helping free up monthly cash flow to keep up with ever increasing monthly living expenses. Its not a new phenomenon but one that is far exceeding any other reason for obtaining a reverse mortgage. As the senior homeowner battles increasing fuel and food costs, rising health care costs and the roller coaster pressures on their retirement portfolio, the folks also making monthly mortgage payments are looking for some kind of relief. Recent reports are also showing that a large portion of the retirement ranks do not have sufficient retirement portfolios that allow them to handle any increase in monthly costs. In fact, a large portion don’t have enough, period.
As an example, a 71 year old man with an existing $100,000 mortgage would be paying principle and interest of $615 a month on a 6.25% loan and $5979 a year in interest. They could pay that off with a reverse mortgage and not only keep that $615 each month in their pocket or checkbook but the interest that would accrue on the unpaid balance would be over $1000 less than what they paid out the previous year. That $615 could be the difference in the client keeping the lights on or reducing credit card debt or anything they had to pay off that they couldn’t afford to do before. In addition, they would have access to monthly tenure payments or they could put any remaining equity into the credit line for future purchases or to cover the unanticipated “rainy day”. The credit line on a reverse mortgage grows over time at the prevailing rates, currently in the 4.60% range, not a bad return on YOUR money.
Not only can the reverse mortgage remove the headache of making those pesky monthly payments during retirement years, it can give the homeowner piece of mind that they can increase their monthly cash flow and lower overall interest accrual. With the new housing bill about to go into place, there are still many potential reverse mortgage clients sitting on the fence waiting to pay off home mortgages that do not currently qualify because they owe more than the varying lending limits allow. Those limits range from $200,160 to $362,790 but are set to go to a national limit of $417,000 or higher in some places. As an example, a person in a $300,000 home in a county where the lending limit is $200,160 will see a large increase in the amount of equity they can access and it can be the difference in keeping the home where a subprime loan was set to adjust to an amount the client could no longer afford.
To see the amount of a home mortgage you would be able to pay off, click the “Calculate Benefits” button on the left hand side at www.libertyreverseadvisor.com/rickmcinturff/about.htm.
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