Comfort in Your Reverse Mortgage
Michael Branson (CEO ARMC) 3/5/08 11:05pm
I just finished reading yet another article on the internet by AP Economics writer, Martin Crutsinger, in which he states Sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month. His article quotes the chief economist for the Association of Realtors as believing that the housing prices may be almost ready for a rebound but goes on to say that many other economists are not so optimistic and believe that values may continue to drop, citing the fact that sales of both new homes and existing homes have tumbled for the second straight year.
What does this mean? Well, according to Ian Shepardson, chief U.S. economist for High Frequency Economics also quoted in the article; "Expect sales and prices to keep falling," "There is no end in sight for the housing disaster.". For Homeowners with traditional forms of financing, this could spell disaster if they are on an adjustable rate that is about to go up and if they try to sell their home, find that prices have gone down, and they can't keep making the payments. What does this mean to senior homeowners who have an existing reverse mortgage, well, it has much less of an impact. That's not to say that anyone selling a home in today's market is not going to be affected by the same issues when selling a home. But senior homeowners with reverse mortgages have the comfort of knowing that they never have to make another payment, the values can go any way they choose and that senior homeowner will never be forced to sell as a result of their payments going up and not being able to make the new payment.
Senior homeowners with reverse mortgages know what the terms of the reverse mortgage are and how much money for which they qualify at the inception of the mortgage. They can choose a number of different options for the manner in which they receive their money. Senior borrowers can receive all the funds at once to pay off another mortgage or for any purpose they choose, can obtain a line of credit to draw upon as needed, can opt for a monthly payment to augment their income for life or can combine all of these options. Regardless of how they choose to take the funds, they never have to make another payment, and since the loans are non-recourse, no matter how much money they receive, how much interest accrues, or how much property values decrease, the borrower and the borrower's heirs can never owe more than the property is worth. In today's real estate market, that is real comfort!
No one knows how long this existing downturn in the market will last and there is no way to know when the existing 10.3 month supply of homes on the market noted in the AP article will be reduced back to a more reasonable timeframe. However, seniors can find comfort in their choice of a reverse mortgage, knowing that they have chosen a viable mortgage instrument which gives them access to cash or retires existing debt without the worry of what will happen if they can't sell, their payment increases or their other expenses increase to a point where they can no longer make their payments in an uncertain market .