SENIORS FEAR NET WORTH NOT ENOUGH

Over Half of Seniors Fear Current Net Worth Can’t Sustain Their Retirement
July 22nd, 2009 by admin Published in News, Reverse Mortgage.

Its no secret that the current economic crisis is having a lasting impact on many older Americans, forcing them to make difficult financial decisions due to having such little time and resources available to recover from losses in their retirement portfolio.

A new survey conducted with United Sample, in partnership with Golden Gateway Financial that polled a nationwide sample of more than 500 senior citizens aged 62 or older and found half of the respondents net worth has decreased by 10 to 30 percent. This is forcing many older Americans to put off retirement until after age 70.

"Even though some economists are beginning to grow optimistic, older Americans continue to feel real pain and must make hard tradeoffs and decisions," said Eric Bachman, founder and CEO of Golden Gateway Financial. "This is the worst possible time for the 40 percent of seniors now considering delaying retirement to be searching for jobs. It’s unfortunate that the hopes and dreams of these retirees are being put on hold."

Before the economic crisis, 67 percent of respondents planned to retire before age 70
Now, the number of seniors planning to retire by age 70 dropped to 40 percent
Before the economic crisis, 30 percent of those surveyed planned to retire after age 70

Now, almost 50 percent of seniors plan to retire after age 70. More than 40 percent of seniors polled said the current economy has had some kind of negative affect on their ability to retire. More than 50 percent of respondents said they are concerned that their overall net worth may no longer be enough to sustain their retirement. 86 percent of seniors said they had a reasonable understanding of their net worth, and 50 percent said that net worth had declined by between 10 and 30 percent .

Using Reverse Mortgages to Augment Lost Savings

Seniors using reverse mortgages to repair diminished nest eggs
Thursday, 25 June 2009 10:43
BY GERALD J. ROBINSON
NEWJERSEYNEWSROOM.COM

Seniors' portfolios hammered by the stock market decline are getting a boost from reverse mortgages. Such mortgages allow seniors to get monthly payments based on the equity value in their homes – the amount that the value of the home exceeds any mortgage on the home.

It's reported that in recent months the number of reverse mortgages backed by the government jumped nearly 20 percent from the same period last year. And it's not just the stock market decline that's at work: a tough housing market has made it more difficult for seniors to sell their homes and downsize.

Especially for older individuals who intend to remain in their homes for the rest of their lives, the reverse mortgage may be the ideal way to deal with a cash shortfall. It's especially attractive because it can provide monthly payments to the homeowner for life and does not have to be paid off until the owner's death or when the home is sold.

The amount of cash flow that a homeowner can get out of a reverse mortgage mainly depends on four factors:
1. The homeowner's age
2. The amount of equity in the homeowner's home available to support the loan
3. The interest rate on the reverse mortgage
4. And closing costs.

Aging has its compensations, at least in figuring a reverse mortgage payout. The older the homeowner, the better, because the payout increases with the homeowner's age on the date the mortgage begins...

...If there's no mortgage on the home the cash flow from a reverse mortgage will be higher than if there's a mortgage. This is because the equity in the home is 100 percent of its market value. But even if there is a mortgage on the home a reverse mortgage can be attractive, depending on the amount of the mortgage and the value of the home.

A rough idea of the amount of monthly payments that can be obtained from a reverse mortgage can be gleaned from online calculators. Take, for example, the calculator at the AARP website. It shows that a 71-year old Sarasota, Florida homeowner can get a monthly cash flow of $851 if his mortgage-free home is worth $250,000.

Reverse mortgages are not simple. A good source for learning more about them isFannie Mae's Money from Home: A Consumer's Guide to Reverse Mortgage Options. It can be found at fanniemae.com. Fannie Mae's consumer's guide is required reading for anyone seriously thinking about a reverse mortgage.

Gerald J. Robinson, Esq., a former tax counsel to the New York City law firm of Carb, Luria, Cook & Kufeld, is a member of the New York and Maryland bars. He is the author of the treatise, Federal Income Taxation of Real Estate, now in its sixth edition. © Gerald J. Robinson

HECM: THE ONLY GAME IN TOWN??

HECM Reverse Mortgages Are Almost The Only Choice Left
Monday, June 22, 2009 by Admin. at Let Your Home Pay You

Reverse mortgages have been in existence for more than twenty years. During that time there have been quite a few incarnations of this equity release mortgage designed for senior homeowners as a way to supplement retirement incomes and lifestyle.

There have been reverse mortgages offered by individual financial institutions and insurance companies, usually referred to as proprietary loans because the institutions would custom design them and usually retain them for their own investment portfolios.

There have been "single purpose" reverse mortgage home loans, usually offered through communities or non-profits. FNMA had a reverse mortgage called "The Home Keeper,"but discontinued offering it last year. There were equity share products, like Equity Key and Rex, which participated in future home appreciation at the end of the loan term.

Now The Only Game In Town

However, since the meltdown on Wall Street and the frozen credit markets, there are virtually no reverse mortgage loan products currently being offered other than HECM* reverse mortgages, which are insured by FHA and backed by HUD. HECM reverse mortgages historically captured the lion's share of this market anyway, but now it is almost the only viable choice left standing during this economic crisis.

Fortunately, enhancements to the government reverse mortgage were included as part of President Obama's Economic Stimulus Plan back in February. The lending limit was increased from a national loan limit of $417,000. to $625,500. This increase offers senior homeowners with higher value homes the opportunity to access a much larger portion of home equity than they would have been able to with the lower limit.

The one caveat to this enhancement is that it is temporary and will only be available through the end of this year, unless Congress decides to extend it. With property values declining throughout the country, it might be a wise decision for those folks with property values greater than $400,000. to take a serious look at HECM reverse mortgages BEFORE the end of the year.

If you (have a higher value home and) do not do it before the end of 2009 and Congress does not extend the higher loan limit, you could find yourself shut out of a government reverse mortgage all together. And who knows, if and when, alternative products will be available again.

*HECM stands for Home Equity Conversion Mortgage