Helping Seniors Make Informed Financial Choices

Editor’s Note:  The following article is the most important and timely article I have ever written on reverse mortgages.  I urge you to read it carefully, evaluate its message, pass it on to other interested seniors, and call me with your questions.  Thank you.  Harry  Gordon

When there is doubt, no matter how slight, the natural tendency is to postpone the decision.   In many cases this is the wisest possible course of action.  Your deliberate “time out” provides the time to secure all of the facts.  This assures that you are making the right decision.

However, if one decision you have put on hold is the decision on when to secure your reverse mortgage, waiting may not serve you well.  In truth, waiting could kill your dream.

If you have attended one of my seminars or read any reverse mortgage literature, you know that home equity is the number one factor in determining the amount of your lifetime monthly payment or the size of your line of credit.

Let me share some facts you need to know in order to make the best decision.  Northern Nevada has been identified as an “area of declining home values”   Most of us have already lost between 5 and 15% in the value of our homes.  The sad truth is, the worst may be yet to come.

Knowledgeable people like Ex Federal Reserve Chairman Alan Greenspan and a host of very savvy economists believe that the bottom may be a year or more away. We will know when the bottom has been reached six months after hitting it.

If past housing bottoms can be an indicator of what lies in store, we will linger at or near that bottom for at least twelve months.  From that point the upward climb begins.  Count on a four or five year time frame to reach the levels from which this slide began.  Therefore, your wait could be a very long one indeed.  Take a look at the graph on this page.  In times past, the house price decline line began to flatten as we were nearing a bottom.  As you can see the decline line remains quite steep and this suggests that the value of my home and yours will continue to slide for a yet to be determined period of time.

Moreover, current Wall Street home purchase contract futures suggest that residential property values will slide another 5% in the next twelve month period.  Perhaps the most pessimistic group states that house values have another 20% to fall and no upward improvement is expected until 2010.

 

 

 

 

 

 

 

 

 

 

One more point to consider.  How much you receive from your reverse mortgage is determined by home equity, age and the current yield on the ten year US Treasury. Due in major part to domestic and global uncertainty, Treasury yields are near historic levels.  Therefore, rates are currently on your side.

If evaluating your specific situation makes sense in your effort to make an informed decision, call me today for a free, no obligation, analysis.  My direct line is (775) 823-8400x101

 

Therefore, if the chart is correct, if Greenspan has it right, and if those who follow home values are on target in their forecast, your home will drop in value a minimum of 10% more over the next year or so before the climb back up begins.

If you are 70 years old and have a home, owned free and clear, a drop of 10% will represent over $1,425 of “lost” annual income.

One clear strategy is to wait it out.  Home values will once again reach prior levels.  But be prepared to wait a minimum of five years, probably longer.

Another strategy is to allow us to run your specific scenario showing the potential impact of age vs. the very real impact of declining values.  You then can make an informed decision.