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The reverse mortgage fits into this category. It has its myths and untruths and it's not easily referenced because there are so many Internet resources from newspapers and misinformed resources that allow those exact issues to continue to follow the product around. You know the one, the one where the bank keeps the house. That particular notion is based on some of the original reverse mortgages before FHA introduced their Home Equity Conversion Mortgage or HECM program in the late 80s. The reverse mortgages of old were simply "equity share" products where the homeowner exchanged cash today for a portion of their future home value growth tomorrow, whether it was upon their passing or if they moved to a different home. It usually ended up with the bank owning the home because there was no equity left. The bank would use a portion of the equity to purchase an annuity in the clients name and it would pay them a certain amount each month until the money ran out and then the home was no longer the customers. That does not exist today with the FHA HECM.
As mentioned in the first part of the Reverse Mortgage Beginner's Guide on Today's Seniors, the Reverse Mortgage is not for everyone. It should be considered in more circumstances than most think but for multiple misconceptions, it continues to hold onto its reputation as a last resort for some house rich, cash poor seniors. A reverse mortgage is a financial vehicle to help turn an illiquid asset (your home) into cash or liquidity for homeowners 62 and over that have a large portion of equity established in their homes or more simply- a cash flow instrument using a home's established equity.
Our goal with the Beginner's Guide is to educate and empower those in positions to increase their monthly cash flow. This can be done when other methods could not provide a level of income needed to meet the client's needs. Those could include depleted savings, pressured portfolio's, selling the home and bad initial stage planning. In some cases it could be as simple as having a spouse die and there's no longer 2 income streams from Social Security paying the bills and now are just one. Experts will tell you that you should have saved more, that you should have planned better, that you're lucky, "some folks have lost more in this market and you have to hold on for the rebound" and you will have to adjust your standard of living. An issue here is that your need is today and there is no guarantee that your portfolio will come back and if you have an income need and are drawing from that same portfolio, it will make it doubly hard for it to rebound. As for selling the home there are a couple of issues to overcome. First is that in this market, the home will most likely not sell for what the owner believes is the value AND the buyer could have issues finding sufficient financing for the property. The owner is competing with other properties where a bank is more motivated to move a similar local property than this owner is and that puts more pressure to drop the price even more to sell. Bottom line, selling is not much of an option at this point.
So if you can't pull money from your retirement portfolio or aren't able to because it's seen a decline in value and needs some time to rebound, what's your option? In addition you may not be able to sell to move somewhere else where there's no guarantee it will be any less expensive or on terms you can live with.
A reverse mortgage can provide you with the security and capability to ensure access to cash flow in an insecure and unsure time. The Beginner's Guide will show you how you can determine your own path and we'll give you the resources to empower yourself to best understand your options and instead of parts and pieces from multiple resources, we'll deliver it all in one guide, including the tools to price and budget.
The Internet is everywhere these days; it's in every home, on almost every phone, in all the coffee shops, Hotels, airports and some public settings. Google is trying to wireless web-enable entire cities and some cities have already established entire wireless network coverage. Computers have more portability than ever and almost all have wireless technology built into them. Older Americans, once thought to be behind in the Internet game are becoming quite savvy in the ways of the Internet. These same folks that never thought they would be "computer literate" are also using cells phones, IPods, laptops and can even program the DVD player. It's not a big deal anymore for your grandmother to email you with pictures of the cruise she went on with her girlfriends taken with her digital camera, and she's 75!
Senior American's have not only begun to flock to the internet, they are already there and they trust the internet for their purchases and paying bills and internet banking AND RESEARCH, yet most of them said they'd never be interested. I don't know if the research exists on what got them interested in the first place but they're definitely connected. Always the inquisitive types anyway, the Internet has finally given seniors a way to look for old classmates, track their depleted IRA, and email the pictures they took on their trip to Arizona. Seniors are the fastest growing online audience and easily the most educated and focused. They are more inclined to remain on task to find something a lot longer than GenXers would spend so content is king for them, they aren't interested in Flash or video or wild colors and graphics.
Today, that same senior may also be suffering financially in this economic storm we're facing and they are looking for advice on insurance and investments and the highest returns on CDs, other money saving tips, etc. Instead of working the phone book or driving from bank to bank for rates and returns info, they just log on to their computer. This Silver Tsunami is now a target for everything: funeral planning, 55 and over communities, credit repair, annuities, IRA rollover, life insurance settlements and reverse mortgages. The problem is that most of the sites representing these products give them but a smattering of information tempting them with just enough information but completely limiting their ability to "click to buy", then the site asks for their contact information so they can be contacted by an advisor or sales rep from the respective company. That's where the problem exists as it creates a level of mistrust for some and it's leaving a large portion of the Senior population without answers to their questions and the order isn't taken. Add the complexities of so many financial and insurance products to this mix and most likely, the customer gets just enough information to be dangerous but not complete. They get enough information to understand the concept but have trouble relating it to their real life scenario, and if they can't explain it or justify to their spouse, children or trusted advisor they end up less likely enact the transaction. If they do, they are not going to put up a stink if the product did not deliver as promised for fear of ridicule.