Are Reverse Mortgages Expensive – Why FHA is important to your Reverse Mortgage

What would you say if I asked you for a loan?

Before you answer let me first warn you by telling you a few facts:

  1. I’m not planning to make any payments on the loan for as long as I have the money.
  2. The interest on the loan will be added to the principal so the balance will grow every month.
  3. I intend to keep the loan outstanding until I either move out of my house or die. Since I don’t know when that will be, I don’t know when the loan will be paid off.
  4. I want to pay interest similar to what I would expect on a traditional mortgage. (As if I was making payments every month to pay down principal….)
  5. The loan will be a mortgage against my home. If the amount owed exceeds the value of my house, too bad. You only get what the house is sold for.

I’m pretty sure your answer to this question is:

“Are you nuts? Why would anyone in their right mind agree to a deal like that?”  

Guess what, banks feel the same way you do…

They wouldn’t make a loan based on those five factors either if they have to take the risk of not receiving full payment …. and risk is the key word here because banks hate and avoid it.

Enter the FHA.

Banks can be assured that they will get paid fully no matter what happens to the value of the house.

That’s because FHA is insuring the loan. 

This insurance is backed by the full faith and credit of the United State Government. This means that means the bank literally has no risk and therefore willing to make the loan.

That’s all really nice you might say…

… but isn’t the FHA insurance premium what makes a reverse mortgage so expensive? 

The answer is absolutely not.

In fact – it’s just the opposite.

Let me explain:

FHA protects you from the Risk Premium

It’s important to understand how banks set interest rates on a loan. 

Your mortgage interest rate is less than 5% while your credit card interest rate is north of 12%. That’s due to something called a “risk premium.”

It’s much riskier to lend you money to pay for clothing on a credit card than it is to lend against a secured asset like a house. If things get tight you’ll pay the mortgage before the credit card bill.

That risk of default is reflected in the 12%+ interest on the credit card. 

Now, you should also know that there are “non FHA” loans available on the market.  These are called “proprietary loans” and don’t follow the same restrictions of the FHA HECM loan.

Here’s the Difference:

Unfortunately, because of the lack of FHA insurance they usually have a much higher interest rate. Usually the interest on a proprietary loan is 3% to 4% higher than a HECM loan.

Let me show you how much not paying the FHA insurance premium and instead opting for the higher interest rate really costs:

FHA HCEM Reverse Mortgage vs. Proprietary Reverse Mortgage:

The graphs below demonstrate two scenarios.

The 1st represents a typical FHA insured HECM loan.

This is what a reverse mortgage was designed to do – maintain your equity. 

The HECM was designed with the assumption that on average a home would appreciate at a rate of 4% per year. The second assumption is that the interest rate on the loan would not exceed 6%.

As you can see in the 1st graph we look at a home with the following attributes:

  1. A present home value of $400,000.
  2. 4% annual appreciation growing the value to $600,000 in 10 years.
  3. 6% interest rate on the HECM reverse mortgage.
  4. Taking $250,000 in cash out of the equity.
  5. Leaving a balance of $150,000 equity left in the home after extracting the loan.

In the 2nd graph we have all of the same assumptions except that since this is a proprietary loan the interest rate has climbed to 9%.

 

 

So, with a FHA reverse mortgage,  after extracting $250,000 and leaving $150,000 equity in the home, 10 years later there is still about the same amount of equity left due to that relationship between and appreciation and interest rate.

On the other hand, without FHA,  we see that the increased interest rate completely consumed all of the remaining equity within that same 10 years.

So in other words eliminating the FHA upfront fee cost this home owner an extra $150,000.

More importantly, it also consumed their remaining equity and left them with nothing to fall back on….

The FHA HECM is safer.

Another statement regarding the FHA HECM reverse mortgage is that “it is safer for seniors.”

We’ll talk more about that in the next installment….

REVERSE MORTGAGE VS. SELLING HOME: WHICH IS BETTER?

A lot of folks who are at or near retirement need to access their home equity to do so comfortably.

Here’s the first question most people ask:

“Should  I do a reverse mortgage or sell my home?”

In some cases, the answer could be….

Why not do both?

Recently I spoke with Ron in San Jose, California about a reverse mortgage.

Ron is 65, his wife is close to the same age and both are very ready to retire.

Both have good jobs that will pay a pension and Ron estimates that their total combined retirement income will be about $4,000 per month.

After congratulating him on managing to assure an annual income of $50,000 per year he said…

“but there’s a problem…”

When $50,000 a year is not enough…

Ron and his wife own a home in San Jose with a value of $630,000 and they owe $501,000.

Their mortgage is $3,000 per month. As Ron put it,

“if I retire with that house payment I’ll be housebound ….there will be no money left to do anything…”

He said “if I could just eliminate my mortgage payment I’d have enough income to live very well.”

20% Equity is a bridge too far:

Ron’s neighbor just did a reverse mortgage and that neighbor was able to eliminate his monthly mortgage payment. Ron thought the same solution might work for him.

Unfortunately the situations were very different … while it worked for Ron’s neighbor (who had sufficient equity) it didn’t work for Ron.

Based on Ron’s current mortgage balance his home’s value would have to increase to more than $817,000 for him  to qualify for a reverse mortgage.

Let’s take a look at the loan calculator numbers…  

The following is a report of Ron’s actual situation when calculated by the IBIS Reverse Mortgage online Calculator.

Notice the number ($186,494.90) in red meaning that his equity is short by that amount.

I realize the rest of the numbers can be a little confusing without an explanation but the important point is to note that in this case, for Ron, a reverse mortgage is simply not an option.

The Ibis reverse mortgage calculator is a free online service and I chose it to create this sample because unlike the others you’re not required to enter all of your contact information in order to use it.

If you would like to find out how much of a reverse mortgage that you would qualify for while being assured that no sales rep is going to pester you after you’ve given your  basic information use this link:

Reverse Mortgage Calculator

http://rmc.ibisreverse.com/

So what’s Ron’s solution?

Here’s the dilemma:

Ron can’t qualify for a reverse mortgage on his current home, so he’s locked into that $3,000 mortgage payment unless he sells the house.

But if he sold the house and rented something in the same area his rent would be equal to or greater than his current mortgage payment.

Yes it’s true that he’d have $100,000 cash in his pocket from the sale proceeds after paying off the loan but with rent of $36,000 per year he’d only have three years before all of his equity was consumed.

Then what?

Ron and his wife are not from the San Jose area originally and really have no ties to that community.

They are willing to relocate to another area if that means they could live comfortably and have enough money to actually enjoy their retirement.

Which means… Ron has some options.

The Solution Could be Reverse Mortgage for Purchase

In a previous post I talked about using the HECM (aka reverse mortgage) for Purchase (or H4P) to afford a larger or more expensive home…

…but what about using the program to downsize?

Keep in mind Ron would have about $100,000 cash from the sale of his San Jose house.

That’s a great down payment on a $200,000 home and the second $100,000 could come from a reverse mortgage for purchase.

Ron and his wife can live in the home without a mortgage payment and will have the entire $4000 monthly retirement income to pay for expense and have enough left to really enjoy their retirement years.

That sounds fantastic, right?

Why… aren’t… more… people… doing… this?

Let’s take a look at a study of home buyer’s preference in financing a home purchase:

Only 3% of Seniors Plan to Buy Homes Using Reverse Mortgages

A majority of home buyers over 62 prefer to buy their home using a traditional forward mortgage rather than a reverse mortgage, according to the results from a new survey by the National Association of Home Builders (NAHB). Of 4,326 total responses garnered by NAHB, only 3% of buyers say they would use a reverse mortgage to pay for their new home, whereas 67% would likely use a traditional mortgage, whereas 28% would pay in all cash. Only 2% of buyers said they would use “other” forms of payment.

Really? Why?

The answer is simple.

There is a perception by both baby boomers and seniors alike that reverse mortgages are inherently bad.  Why is that?

People naturally feel skeptical about anything that they don’t fully understand and very few people understand a reverse mortgage.

On the other hand what most people believe they know about a reverse mortgage is usually wrong. 

For example, the majority of seniors believe that “the bank takes your house when you die” which has never been true. These preconceived ideas are very unfortunate because they keep many people who, (like Ron) could greatly benefit from embracing this vital tool.

Ok… but how is Ron going to replace his San Jose home with something comparable that he can buy without paying a mortgage?

Well…. he can MOVE...

Here are 10 locations that work:

The 10 Best Cities to Retire in the US

  1. Prescott, Arizona – Average Home Price: $256,400

If you love the outdoors and a vibrant cultural scene, you should consider retiring in Prescott, Arizona.  Located in the north of Arizona, this old mining town experiences a cooler summer than southern Arizona, helping you steer clear of sweltering summer temperatures.  A booming economy, rich history, and low housing prices make this place a real contender for retirement.

  1. Venice, Florida – Average Home Price: $210,000

Venice is a small retirement community found on the Gulf of Mexico in Florida.  Named after Venice, Italy, this community has many canals and rivers that run through it and has been designed with architectural influence from Italian renaissance.  Calm traffic and low prices mean peaceful retirement and it’s particularly well suited to slightly older retirees.  Parks, beaches, golf, tennis, and proximity to the beach will keep you busy, and proximity to nearby Sarasota will mean you have everything you need.

  1. St. Augustine, Florida – Average Home Price: $208,000

The historic community of St. Augustine, Florida, is a perfect retirement location for history buffs.  The local economy is driven by tourism, so if you’re keen to volunteer and stay an active part of your community, this might be the city for you.  On the north east coast of Florida, this city experiences cooler temperatures than other options in the state.

  1. Beaufort, South Carolina – Average Home Price: $156,700

The quaint, charming southern community of Beaufort, South Carolina, is a prime retirement spot.  This old river town offers plenty of golfing and fishing during the mild winters and hot summers. The military installations in the city solidify the economy and diversify the population – while Beaufort is home to a growing retirement community, there are lots of families here as well.

5. Myrtle Beach, South Carolina – Average Home Price: $207,141

Whatever you are looking for in your retirement locale, from downtown living to a planned community, Myrtle Beach has what you need.  Some of the highlights are the Grand Stand – a huge stretch of pristine sandy beach, trendy shopping and restaurants, low cost of living, great theater, excellent medical care, and enough golf courses to keep things exciting. All these reasons will make you love your retirement life in sunny Myrtle Beach.

  1. Abilene, Texas – Average Home Price: $244,295

If you’re looking for an affordable retirement, head to Abilene, Texas.  With cost of living over 10% below national average, this old railroad shipping town has a growing retirement community.  Year round warm weather and excellent recreational and social opportunities for senior citizens of Abilene will keep you entertained and in good company all year round.

  1. Austin, Texas – Average Home Price$255,000

This big city offers plenty of activities to keep the retiree busy and engaged.  Home to the University of Texas, this cultural hub boasts a terrific economy, warm weather, plenty of volunteering opportunities, open air art markets, galleries, museums, performing art theatres, low crime, and it’s the live music capital of the world.  With so much going on, this city would be best suited for energetic retirees who aren’t looking for too much peace and quiet!

  1. Boise, Idaho – Average Home Price$188,700

Boise, Idaho makes a great retirement destination for active adults.  Into biking?  This city was rated one of the best cities to live and ride.  Love the outdoors?  The mountains are at your doorstep, and the river offers whitewater adventures for the daredevil retirees out there.  In downtown Boise, there are many shopping, eating, and cultural opportunities.  Walking paths and low crime rates mean that you will feel confident stepping out into this great retirement city.

  1. Palm Springs, California – Average Home Price$337,500

Located in the Coachella Valley, Palm Springs is one of world’s most famous retirement communities.  The breath taking landscape and rich culture draw people from all around the globe to retire here.  Active retirees can enjoy the golf scene and the nearby Joshua Tree Park, and everyone can enjoy the 350 days of sunshine a year.  Watch out though – summers here are so hot you’ll have to retreat to the air conditioned indoors!

  1.  Salt Lake City, Utah – Average Home Price: $240,800

Nestled into the Wasatch Mountains of Utah and next to the Great Salt Lake, the beautiful Salt Lake City is a picturesque place to retire.  Perfect for the active adult, you can enjoy golf and winter sports galore.  Clean air, booming economy, plenty of volunteering opportunities, and an above average doctor per capita rate make this city a prime retirement spot!  Salt Lake experiences cold winters and hot, dry summers, so skip this city for retirement if you can’t take the cold!

Notice that these 10 cities represent every region of the country (other than Northeast) and provide every kind of topography, climate, and life style that you could ask for.

In other words, there is often no reason that you can’t have the kind of retirement that you’ve always dreamed of.

Right?

 

REVERSE MORTGAGE ALTERNATIVES

reverse mortgage alternatives

As I mentioned in a previous blog, today’s restrictions placed on the HECM reverse mortgage by HUD has eliminated a large number of potential borrowers from qualifying for enough proceeds to make reverse mortgage a viable option.

Reductions in the initial loan amount coupled with the newly enacted “financial assessment requirement” have leveled a one-two punch on seniors negating the program as a possible solution.

These new requirements were clearly an overreach by Congress and we can always expect Congress’s overreactions to increase restrictions on something that is beneficial to many.

The 4 Reverse Mortgage Alternatives

There are only 4 viable alternatives to a reverse mortgage

Many people look into reverse mortgages due to the fact that they cannot afford to maintain their home in addition to other living expenses (especially if they have increased exponentially due to health care needs).

If you are in a similar situation and have been denied a reverse mortgage, there are some reverse mortgage alternatives. To be exact and realistic, there are only 4 reverse mortgage options:

Ask Your Children For Help With Expenses

Should you ask your kids to help with bills?

Today, many seniors make deals with their kids to pay monthly expenses in exchange for the inheritance of the home later which can be viewed as an alternative “family financed reverse mortgage”.

Since transactions involving money and property between family can turn into a potential nightmare, there are several companies that specialize in managing the transaction so all parties are equally and legally protected.

These companies insure that family members have an unbiased third party arbiter in case one side fails to fulfill the agreement.

Sell And Move

Sell-home-and-move

Selling and moving is an option that is much easier said than done and it can actually be a very complicated process.

Some things to think about before selling and moving:

  • What if the house is not in good condition to attract a buyer?
  • What if the house needs a number of expensive repairs in order to make it ready for sale and you simply don’t have the money to bring it up to marketable standards?
  • Where do you go after you sell?

The thought of leaving the home that you’ve lived in for years along with your friends and community can be overwhelming. In fact, a survey of seniors shows that almost 90% of seniors want to stay in their homes until they die or are unable to care for themselves.

Sell The House And Move In With A Family Member

I Wish

This is usually the least desirable option as many seniors I’ve met over the years would rather live in a shelter than with their kids or other family members.

Those of us who have raised children have all used the phrase “as long as you’re under my roof you will live by my rules!” When a parent moves in with the child, that dynamic gets turned upside down and now they become subjected to the rules of the child’s home.

Leaving home and moving in with one of your children is a loss of independence and is generally not what most people want to do.

Sell Your Home And Stay With A Sale Leaseback

Stay-in-home-with-sale-leaseback

The final and often best reverse mortgage alternative is home sale leaseback. A sale leaseback allows you to liberate the equity in your home by selling it while still being able to stay in it by renting it back.

My company has created a simple program designed to help seniors stay in their homes while also providing a good business deal for our investors. You want to stay in your home and at this point it might not matter if the deed is in your name, just as long as it’s still your home!

Our investors want to invest in real estate and the best prospective property is one that already has a tenant who takes care of the property and has the means to pay rent on time. What better investment opportunity than one where the seller is also the tenant and has an emotional attachment to the property? We believe that this is the definition of a “win-win” transaction.

I’ll be discussing the details of this program in a later blog but for now if you’d like more information on home sale lease backs click the button in the picture below or call 800-407-5696 and I’ll personally discuss the details with you.

Learn about reverse mortgage options

REVERSE MORTGAGES, SALEM WITCH HUNTS, MCCARTHY HEARINGS AND THE CFPB

What do they all have in common?

  1. The Salem Witch Trials were a series of prosecutions of people accused of witchcraft.  This happened in colonial Massachusetts between February 1692 and May of that same year…
  2. In 1947, Joseph McCarthyand the UnAmerican Activities Committee held nine days of hearings.  These hearings alleged communist propaganda and influence in the Hollywood motion picture industry.
  3. In July 2010, Congress passed the  Wall Street Reform and Consumer Protection Act. President Obama signed it. The act created the Consumer Financial Protection Bureau. The CFPB consolidates most Federal consumer financial protection authority in one place.

Answers:

  1. All three resulted from hysteria within the general public. They followed some false concept that there was a clear and present danger to our way of life.
  2. All were the opportunity to gain power and prestige by a few shameless individuals.  The flames of fear associated with bad things proved too tempting to not take advantage of.

Pimps claiming to be righteous “Do-Gooders” pretend to protect us from “Evil-Doers.”

(Can you believe they actually use terms like that?)

Except for the the CFBP, (which hasn’t run its course yet but will…) all were all exposed in good time.

The general public always comes to its senses, but not until they “burn a few witches at the stake first…”

The government made the CFPB yet another watchdog agency to regulate  financial services.

 

The mission was to “protect” the general public. 

The “evil” financial institutions (including banks) will take advantage of us without them, right?

Two elected officials helped damage our banking structure. They decided that they should beat the demands for their heads on a stick by claiming to be our protectors.

Out came the widest, most costly smokescreen in the history of this country.  The CFBB was born of Dodd-Frank act.

What we need to look at right now is how the CFPB has damaged our financial institutions.

When we create a new bureaucracy it’s no small deal.

In fact since its creation in 2012 the CFPB has grown to over 1500 witch hunters.

1,500 people are looking for witches? 

They’ll find witches,  even if they don’t exist.  

In the 1600’s innocent people lived in fear of the witch hunters.  If you were under suspicion,  that made you guilty of crimes that didn’t actually exist.

In the 1950’s people shunned lifelong friends to avoid being a conspirator by association.  Today The CFPB has the mortgage banking industry in constant fear that it will turn its gun sights at them. 

Bankers are afraid of accusations of horrible acts.  The public makes assumptions based on a press release that they are under investigation.

This is what the Senate had to say about the CFPB:

CFPB: Unaccountable and Unrestrained

In May 2011 and February 2013, Senate Republicans wrote to President Obama calling for structural reforms to the CFPB. The bureau is far too insulated from congressional oversight of its actions and its budget, and its director has too few meaningful checks and balances on his power. The letters said that the Senate should not consider any nominee to be director of the CFPB until common-sense reforms are adopted:

What does all this have to do with Reverse Mortgages?

I mentioned in an earlier blog that I no longer do reverse mortgages.

I exited the business in 2008.

I could see the handwriting on the wall:

Mortgage banks were going to be set up to take the fall for the scandal which led to the “Great Recession.”

With that finger pointing there would be a truckload of extra bureaucratic nonsense. This nonsense would  burden the lending industry with extra costs.

These costs make originating loans too expensive to make a profit.

I’m not the only one to decide it wasn’t worth the hassle.

Before 2008 you could walk into any Bank of America or Wells Fargo and get a reverse mortgage.  Or you could use MetLife and get the benefit of their retirement planning advice too.

Unfortunately you didn’t have those options. These companies also decided it wasn’t worth the price to defend their intentions.

That’s a travesty.

Shame on your government. 

Their involvement brought credibility to the industry.

Instead, the CFPB says we need protection. Protection against some “unscrupulous” lenders.

Nothing could be farther from the truth!  

 I have known and worked with the companies and people in this industry since 2003. 

I’ve never met a scoundrel…

The people I know  care about doing what’s right for the client and do not need to cheat anyone.  Plenty of decent folk make a nice living helping you find the right solution.

They get a bum rap because of the witch hunters but I can assure you that you need not worry.

Any reverse mortgage company that you might choose to work with are licensed, ethical and most importantly, regulated by the institution that  counts, namely, the “FHA”.

These people are dedicate to providing a solution to your retirement challenges.

They don’t deserve the skepticism created by the CFPB. 

Don’t fall for the witch hunter’s fear tactics.

 

THE TOP 5 REVERSE MORTGAGE DISADVANTAGES

reverse-mortgage-disadvantages

Let’s look at the meaning of the word “mortgage.”

The word traces its history to old France.

The meaning of “mort” is “dead,” and the meaning of “gage” is “pledge.”

So, mortgage literally meant dead-pledge. To have a mortgage was to get a loan and promise to pay it back in within a specific period of time.

If it was paid back in full the pledge was considered dead.

dead-pledge

If it wasn’t paid back in full then the land securing the mortgage was seized and therefore the land was now dead to the borrower.

When you first took out the mortgage on your home you may remember the Truth In Lending Statement.

That statement showed that in 30 years you would pay for your home about three times over.

In other words if your beginning mortgage was $100,000 you would end up paying about $300,000 because of the interest.  You really didn’t notice this, however,  because you were making payments every month.

The loan balance was going down and would one day be zero. We call this “amortizing” or killing the loan slowly every month until it is completely dead.

Reverse Mortgage is an Oxymoron

The word mortgage literally means to kill off your pledge. The opposite of that (or reverse) would be to make your pledge more alive – which makes no sense–  but the term stuck anyway.

Since there is no payment being made, interest is being added to the loan every month and so the loan is actually growing.

Here are the top 5 reverse mortgage disadvantages:

With a Reverse Mortgage, Your Equity Stops Growing

reverse mortgage means your equity stops growing

The first  disadvantage of a reverse mortgage is that any future growth in the value of your home (or additional equity) will be eaten up by the interest accruing on the loan.

That doesn’t mean the loan will consume your remaining equity.  However, you really won’t benefit from new or additional equity. 

The value of your home grows over time, but so does the balance of the reverse mortgage.

(Note, in the blog labeled why FHA is important I show an example of how the growth in home value is expected to equal the growth in the loan.)

Reverse Mortgages Eliminate Future Borrowing Capabilities

Reverse-mortgage-loans-later

Once a reverse mortgage is recorded on your home it’s impossible to get an additional loan on the property.

For example, let’s assume that you’ve taken 60% of the equity out of your house with a reverse mortgage (leaving 40% still in place).

Now assume that you have an unusual  expense (say for a plumbing repair).

Often, some people will take out a short term home equity line of credit to pay these expenses.

No lender will loan behind a reverse mortgage because of the growing loan balance.

Here’s what this means:

 Once you get a reverse mortgage, you may no longer borrow against your home. It is important to be aware of this and to make sure you will have enough cash or credit available to be able to pay for future problems.

You Can Get Foreclosed With a Reverse Mortgage
Can you get forclosed with a reverse mortgage?

Most people think of foreclosure as an event that occurs when you don’t pay your mortgage.

Foreclosures can happen for other reasons too.

For most people, if your home has no mortgage, you are not obligated to maintain anything other than property taxes.

You can choose not to have homeowner’s insurance.

Nobody can force you to have it.

If your roof starts leaking, you can live in a wet house. (It’s your house….)

If you leave the house for more than a year (say, due to health problems) no one can make you have to sell it…

 …unless you have a reverse mortgage.

Once you get a reverse mortgage, you have new rules to comply with.

Specifically, you have to:

  1. Pay property taxes
  2. Maintain homeowners insurance
  3. Keep the home repaired to FHA standards
  4. You must not leave the house for more than 365 consecutive days

Any of the above not being met can lead to foreclosure.

You May Have Costs To Comply With FHA Requirements
reverse-mortgage-fha-requirements

Consider this:

Many seniors bought a homeowner’s insurance policy on their home 20+ years ago.

Imagine that amount was $25,000.  Now moving forward 30 years, the house is now worth $250,000.

The value grew by 10 times, but the coverage was never increased. This means the insurance premium stayed the same all that time.

Now, the loan will require a new policy for the actual home market value.

Ouch…

This means paying a lot more for insurance.

This one element has caused “sticker shock” for many seniors during the underwriting process.

A similar scenario happens when a FHA mandated repair to the property is a requirement to make the loan.

This can be a real problem for some people. If your home has been poorly maintained, you may have to fix some problems before you can be approved for a reverse mortgage.

The Future Equity Gains That You’ll Give Up.

future-equity-gains

No matter what the amount of the loan or the interest rate the fact is that the money taken now is a loan.

Since there is no payment being made, interest will make the loan grow. That is a direct cost against your future equity.

If the interest rate is low hopefully the equity remaining in the home after taking the loan will remain in place.  If the interest rate is high you could be in danger of giving all of the remaining and future equity to the lender.

Conclusion:

With all of these negative, are reverse mortgages still a good product?

The truth is, a reverse mortgage isn’t the right solution for everybody.

If you are considering a reverse mortgage, you need to work with someone who will have your best interests in mind.

 In fact, while we here at It’s Still Your Home don’t even sell reverse mortgages I write about reverse mortgages as an alternative.

This is because in many cases, you’d be better served with a reverse mortgage than with the products we can offer you.

I’ve worked with the very best professionals in the reverse mortgage business. When someone is better-suited to a reverse mortgage than to our products, we will refer you to someone who will treat you honestly and fairly.

With that in mind, if you’d like to investigate a reverse mortgage, click in the picture below to gain exclusive access to my hand-picked team of seasoned reverse mortgage pros.

Reverse Mortgage vs. HELOC: Which is Better?

REVERSE MORTGAGE VS. HELOC: WHICH IS BETTER?

HECM-Reverse Mortgages and Home Equity Lines of Credit (HELOCs) are both liens against your home.

When I did reverse mortgages I can’t tell you how many times I spoke to a homeowner who told me that “their home was free and clear.” Then I’d find out that there was a $50,000 HELOC lien on it.

When asked to explain why that wasn’t disclosed the answer was usually, “I thought it was like a credit card and didn’t count against my home’s equity.”

That reduction in equity usually eliminated their ability to qualify for a reverse mortgage.

Your Friends May Have No Idea What They’re Talking About

(Even professionals like lawyers and accountants…)

 

Here’s an example:

One time a lawyer called me.

He was calling on behalf of a friend in a tight spot. He made it clear that he was not representing this friend as his attorney.

I thought that was strange…

I mean…

What difference did it make?

I finally beat the truth out of him.

Two years prior he told his friend to do a HELOC instead of a reverse mortgage.

 

That HELOC had a monthly payment. The payment was manageable at first.

However, most HELOCs have variable interest rates. That means the payment can go up.

The payment had risen in this case and was now gobbling up a large chunk of the friend’s budget.

It was so bad that the friend was now close to losing his home.

The attorney was frantic –  the action taken was on his advice so he felt deeply responsible.

There was enough equity left (luckily) that we were able to take out the HELOC with the proceeds from a reverse mortgage and eliminate the payments.

Our homeowner still lives in that home today. 

When is a HELOC better than a Reverse Mortgage Line of credit?

In total fairness…

I really don’t like HELOC’s because I think they’re dangerous.

Before I get to that however, let me first give you a list of reasons that one informative website lists for doing a HELOC rather than opting for a reverse mortgage.

Here’s the list:

  • For shorter term loans of less than 5 years, HELOCs are more simple with lower associated costs and faster turnaround times. Reverse mortgages have higher closing costs. Costs with a HELOC are low upfront and accumulate over the life of the loan.
  • As assurance against unforeseen emergencies.  While reverse mortgages can be taken as a line of credit, HELOCs are significantly less expensive to do so.
  • If the future is uncertain and the senior has possible large life changes within a few years, HELOCs can offer greater flexibility than a reverse mortgage.
  • With mixed age couples; to prevent a reverse mortgage from coming due when one spouse passes away, couples will include both partners as borrowers. This means that both borrowers must be older than 62. Married couples that have large age differences might be in a situation where one spouse is old enough and the other is not. A HELOC may provide a short term solution until the younger of the spouses reaches the age of 62.
  • The amount of money a senior can borrow in a reverse mortgage is calculated on many factors including the age of the youngest borrower. For borrowers near the minimum age of 62 or for couples with large age differences, the amount that can be borrowed may be too low due to younger age of one spouse. Therefore HELOCs may provide additional borrowing power to a couple.
  • For some tax reasons with a HELOC, monthly interest payments are tax deductible in the year they are paid. With a reverse mortgage interest is not paid until the house is sold or the owner passes away. For some seniors, usually those with higher incomes, it may be better financially to have the loan’s interest payments deducted annually.

Now, let’s look at the other side…

Bad things happen

– Remember the crash of 2008?

…or 2000?

…or 1989?

…or 1978?

… or (well, you get the idea, right?)

If you’re old enough to get a reverse mortgage, you’re old enough to know the economy seems to tank once every 10 years or so.

The truth is, most of the worst losses come from investors who don’t have the staying power (liquid funds) to last through the turnaround.

Now, imagine how things would change if those investors had a reserve line of credit so they wouldn’t have to sell at a loss.

I know what you’re thinking…

Isn’t that what a HELOC is for?

Well…

Back in 2008, many banks froze or revoked homeowner’s credit lines. Ironically, that was when they needed them the most.

Now… that wouldn’t happen with a reverse mortgage, because once the line of credit is granted it is guaranteed by the government.

A Reverse Mortgage Line of Credit Has No Payments

Now, considering 2008 again, consider being one of the “lucky ones.”

That means your HELOC stayed in place during the downturn.

It also means that drawing against that credit results in higher monthly payments.

Those payments would be against a house that is likely underwater.

Wouldn’t it be better to have a reverse mortgage line of credit (with no payments?)

 

Remember:

If you don’t pay off the HELOC or can no longer afford the monthly payments your home can be foreclosed.

Here’s the truth:

Most people use a line of credit to cover surprises. We also expect to pay it off relatively quickly.

That’s also the reason most people have credit cards.

A funny thing though…

A huge percentage of Americans end up carrying a balance on their credit cards.

If that’s sounds like you, you can probably also expect to be carrying a balance on a home equity line.

Did you know that most HELOC’s have a time limit? After that they become “fully amortizing” loans.

This means your minimum payment can skyrocket overnight.

Sounds pretty dangerous, right?

Even worse:

Most HELOCs have no interest rate cap. That means that if interest rates go up, so does your payment.

Remember, that’s not a risk with a reverse mortgage. Since reverse mortgages do not have any payment requirement, rising rates are not a problem.

Also, since reverse mortgages are regulated by HUD, even the variable programs have strict limits on how often and by how much interest rates can be adjusted.

Your Available line of credit grows each year with a HECM

One last (but huge) advantage of a HECM credit line is that your borrowing power isn’t fixed.

Your available credit rises every year automatically. The amount the credit line goes up by is about the same as the interest rate.

For example… imagine a HECM saver for $131,029. If mortgage rates plus insurance stay at today’s 4.07 percent rate, the limit would rise to $196,710 in ten years.

In fact, the higher rates go, the more you can borrow.

The whole point is that smart planning can help you weather inevitable downturns.

This is why you might consider a reverse mortgage line of credit…

…even if you’re only 62…

…and even if you don’t need the money right now.

In fact, my opinion is that you should especially consider it before you actually need the money.

Remember… interest rates will never be lower than they are right now. The lower the rates… the more you can qualify for with a reverse mortgage.

If interest rates rise… you won’t be able to borrow nearly as much.

Conclusion

A reverse mortgage line of credit is virtually always better than a home equity line of credit.

If you’re over 62 and are considering home equity options, you should strongly consider the HECM line of credit.

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME – WITHOUT EATING YOUR EQUITY

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME – WITHOUT EATING YOUR EQUITY

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME

if you were fighting a war and had a tank…

…would you use it…

…or would you keep it away from the battle? 

Maybe the rest of your arsenal would be strong enough on its own to win the war?

Now… if you would keep it in reserve for a time…

You’d be slugging out a long war.

Totally unpleasant.

Potentially fatal.

The military would call this a tactical error…

The tank is a part of the arsenal and should be deployed as a part of a larger strategy.

Why am I talking about Tanks and Battles?

 

It’s just like not using your home in your retirement strategy.

Home equity is about 2/3rds of Boomers’ assets.

Most Boomers refuse to deploy it in their retirement strategy.

Sooo…

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME

Most home equity is just “dead money” – kept to the side while we slug it out in the battle to achieve a victorious retirement.

In life I would call that a tactical error…

Common Sense:

You may be thinking:

“My home is the safety boat.

 It’s a sacred investment. Only used as a last resort.” 

You dreamt of living through old age with no mortgage payment.  Tapping the equity might jeopardize that security, right?

Here’s a wild question:

What if you could “re-deploy” some of that equity?

And do it without the fear of making a mortgage payment or reducing your current equity?

And, let’s imagine you could yield an extra 34% in income from your nest egg?

First though… I’ll tell you a secret…

Even those of us who think we have saved enough probably haven’t.

Let’s look at the numbers.

More than 50% of Boomers have Zero Nest Egg

 

A study released last year by the Government Accountability Office (GAO) gave more detail than any other source I’ve found about the financial situation of today’s retired population.

Specifically, the GAO provided details on people ages 65 to 74.

52% of households in this group have absolutely no retirement savings whatsoever.

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME
That’s not to say that they don’t have any assets or income:

  • 77% own their homes
  • 36% have paid off their mortgages
  • 49% have some sort of defined benefit (i.e.. pension plan)
  • Almost all receive some sort of Social Security payment

What about the other 48% who do have savings?

It’s a mixed bag.

The median household among this group has $148,000 saved — enough to provide about $6,000 a year in income to those following the 4% rule.

But they also have a median net worth of almost $600,000.

95% own their homes (and 51% have paid it off), and 58% have some sort of defined benefit plan. And again, the vast majority also collect Social Security.

Here’s the shocker:

Only the top 12% of all retirees in this age rangecan count on a minimum of $16,000 in income each year from their nest eggs.

Now, add in pensions, Social Security and other common sources, and their incomes could easily add up to more than $35,000 per year.

That’s an amount you could manage on if you own your home outright.

Just barely though.

After taxes, insurance, maintenance and day to day living expenses, $35k a year is far less than would make life comfortable.

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME
Let’s break down the source of income for the two groups:

The GAO offered an even clearer visualization as to how where the money’s coming from to allow these groups to afford their respective lifestyles.

The answer: It certainly isn’t coming from their nest eggs…

 

Social security provides a huge portion of retirement income.

Overall, it provides a whopping 44% of all income for those aged 65 to 74.

Even among those who have built up their nest eggs, that savings provides just 9% of their retirement income.

How to add $12,000 to your current $35,000 income:

 

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME
You might think that I’m suggesting you take out a reverse mortgage to play the stock market.

That would be stupid.

 

Playing the stocks is like going to Rick’s American Café and Casino.

While most of us are being entertained out front the real action is in the back room (and we’re not invited).

The suckers listen to the piano player pay the bills while the exclusive few in the back win in a rigged game… (think Captain Louis Renault).

I like simple solutions…

I don’t know about you…

… but whenever I listen to a certified financial planner they lose me as soon as they start talking about “investment goals”, “tolerance to risk” and returns that are calculated based on being in a “40% tax bracket.”

  1. My investment goals are to make as much money as possible (how do you like them apples?)
  2. I’m 60 years old. My risk tolerance is zero.
  3. I don’t know a single person who pays 40% on their taxes.

These questions are just lame, right?

Who’s going to say that my goal is to have an income of $10,000 per month in my retirement – so don’t show me anything that would result in $15,000???

Or that my risk tolerance is that I have no tolerance so that leaves only government bonds earning 1.2% as an option.

Real Estate was your best investment years ago and it still is:

 

 

Investing in real estate has what Warren Buffet calls “intrinsic value.” That means its value is more than just the thing that you see – it’s also what it does or what it provides.

People will always need a place to live.

For many of the younger generation buying that living space is now out of reach so they have no choice but to rent.  Providing that rental space can be a great source of passive income as long as it’s done right.

Here are several rules that I follow in my personal investment strategy:

  1. Always target the middle to lower end of the economic scale when thinking about whom to rent your property to. This group will be long term tenants since they will never save enough money to buy a house and usually pay rent on time.
  1. The rule of thumb for purchase price verses monthly rent is a 1% factor. In other words, if a 3 bedroom condo will rent for $1,700 per month you can pay $170,000.  I’ll show you why in the example below.
  1. Always pay cash. In the example below I’ll show you what my own property is making and will continue making as long as rents stay where they are now.  However, what happens if the economy tanks and I need to lower rent?  Since the property is owned no debt I could slash the rents and wait for the market to come back without the risk of losing the property to foreclosure.  That’s why a reverse mortgage is so important.  It will allow you to turn your current equity into cash without a mortgage payment.  That cash is what is used to purchase the investment property of cash.
    1. Fix everything to new condition when you buy a property and never worry about the usual ongoing service problem that we all hear about. In the example property (which was a total re-hab) everything that could break or cause a problem later was replaced before it was placed on the rental market.  I hate problem calls don’t you?

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME

  1. Hire a good real estate firm to find, screen draw up the lease for your tenant. There is a saying in the legal profession that an attorney who represents themselves in court has a fool for a client.  The same thing can be said for a property owner that leases their own property.  Having a bad tenant can be a nightmare and it’s too easy to be played by a good con artist.  People who lease properties for a living are very good at identifying and screening these cons out.  Don’t skip this step because it will cost you in the long run.

Now let’s take a look at a real example:

 

 

This is a property that I own.

As you can see, the total investment was $170,000 resulting in an income stream of just a little over $1000 per month or a 7.1% return on my investment.

I point this out just to show you that I’m not making this stuff up as a hypothetical like most of the other sites that you might look at.

Instead, I’ll show you the real deal….

So let’s tie this all together:

At the beginning of this article I suggest that your home can increase your monthly income by 34%.

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME
Since the average retirement income is about $35,000 per year if you could increase your income to $47,000 that would be a 34% increase in the cash in your pocket.  If you own a home that’s valued at between $300,000 and $350,000 and it’s paid for you could conceivably liberate $170,000 of that equity from a reverse mortgage without adding a mortgage.

But wait a minute.

How does this not reduce your equity?

Doesn’t the reverse mortgage reduce the equity in your home because the mortgage is growing?

Consider that you just added an additional property that will also grow in equity. This will offset the reduction.

The bottom line is that this scenario can put an additional $1000 per month in your pocket.

What kind of difference would that make in your retirement life?

REVERSE MORTGAGES CAN BOOST RETIREMENT INCOME

Why Donald Trump Does Not Matter

Why Donald Trump Does Not Matter

“Why my 4 year degree was a waste of time”

When I say that Donald Trump does not matter, I don’t mean that he is the main problem, but that our problems go beyond him. I am speaking specifically about the fact that our jobs are disappearing in the United States and the claim that these jobs are being taken by illegal immigrants.

The picture to my right shows an immigrant crossing over our border, but this is not the type of people that are taking our jobs. Our job is being taken by over by automated systems and computers.

Before I go into more detail about this subject, I would like to first give you a quick history lesson. Back in the 1940’s the government heavily invested in the first computer designed by the University of Pennsylvania called the ENIAC. The ENIAC was invested in because humans calculating weapon trajectories was taking too long and they needed something that could do this much quicker. The ENIAC was completed after the war, however, if it had been completed on time, this would have been the first time that over 10,000 jobs would have been displaced by a computer, something that we are all too familiar with today.

So what is the main problem? Essentially, the problem is with our education system. Around the time of the Industrial Revolution there was a great need to fill vacant positions to meet the demand needed for businesses to keep pace with the consumer demands for their products and services. So an education system was put in place which is still used today.

In the chart above you can see a visual representation of the education system that was put in place in the late 1800’s. 75% of the needs was for basic skilled workers. Employees that new basic reading, writing, and arithmetic. These employees would take raw data and hand that over to middle management whose main purpose is to compile all that data into a more readable format and then hand that over to top management. Top managent needed this information so that they could make informed decisions on how to run their businesses.

The issue is that as computers became smarter and faster all of this data could be viewed as it was happening, so essentially, there is no need for about half of the lower 75% of the workforce as well as the entire middle management segment. Donald Trump also talks about bringing back factory jobs, and if he does, this is what it will look like below!

So what’s my point?

In order to success in this new world, employees must focus on specialized skills that are resistant to jobs that can be done by computers or shipped overseas.

 

So what I would like is to hear stories from boomers & seniors who have adapted to this changing environment and have succeeded by doing so. These stories can be featured in our monthly inspiration segments. Please CLICK HERE and tell us your story!

 

Even The Rich & Famous Liberate Their Homes’ Equity!

dan-rich-and-famous

Free Strategy Call

Last year, Yahoo.com reported that Hollywood legend Burt Reynolds sold the Florida mansion he’d owned since 1980. The buyer, who paid $3.3 million, reportedly said that the sale of the house was contingent on Reynolds being able to live in the home and paying rent.

Then there’s the story of Christian de Guigne IV, heir to a fortune made in chemicals, who owned a Northern California property that has been in his family for 150 years. In 2013, Guigne sought to sell it for $100 million. He, too, had a contingency on the sale of his house: He would stay in the home until his death, whereupon the buyer could move in.

These are just two examples of the rich and famous converting their homes’ equity into cash to maintain a lifestyle they have become accustom to.

Sometimes it just makes sense to rent rather than continue to own!

Even if you have no mortgage payment, the cost of owning a home can be overwhelming. When you consider the monthly expenses related to taxes, insurance, maintenance, and in many cases, homeowner association dues, the prospect of paying simple rent can become very attractive.

Let’s look at my home state of Florida, where there is no cap on property assessment and taxes are usually about 2.5 percent of the assessed value. In Florida, homeowner’s insurance is the highest in the nation at a rate of about $1.70 per thousand dollars, and homeowner association fees are outrageous, both due to the threat of hurricanes.

Here’s an example of a simple two-bedroom condo in North Palm Beach:

Value:                                                          $250,000

Annual Taxes 2.5 percent                         $6,000

Property Insurance $1.70                         $425

HOA – Maintenance                                   $7,200

Total Annual Expense                              $ 13,625

Total Monty Expense                                $1,135

Now let’s assume that there is also a $100,000 mortgage on the property, which requires a monthly payment of $600. The total monthly expense to live in the house is now $1,735, and there is $150,000 of tied up, illiquid equity that’s not doing you any good.

What if you could sell the home, rent it back for $1,875 per month so you remain in your home and never worry about mortgage payments, taxes, or maintenance again? And you’d have all that equity in your pocket where you can use it for whatever you like.

Would liberating all of your equity while you remain in your home make living your life a little easier?

Sell and lease back was the right solution for Burt Reynolds.

Could it be the right solution for you, too? Free Strategy Call

 

Before You Accept A Cash Offer On Your Home, Read This!

cash sale for home tips

If you’ve decided that selling your home fast to a cash buyer is the right way to go, you probably have a few questions:

  • “How do I decide which buyer is the right one to work with?”
  • “Are they all the same?”
  • “Do they all offer the same purchase price or does that vary from buyer to buyer?”
  • If it varies, how do I know who’s going to give me the most money?”
  • “Can they really close in just 7 days?”
  • “ Are there any ‘gotchas’ to look out for?”

These are just some of the questions that you should be asking about when you talk to a potential fast-cash buyer.

If you are taking this route rather than listing with a real estate agent, it’s probably safe to assume you’re home needs some rehab work done to bring it up to full market value. That means you will most likely sell your home to someone who rehabs houses.

Unfortunately, not all of the people claiming to be cash buyers are really able to actually complete the transaction. Many have very little cash themselves and are simply “acquisition agents.” While they claim to want to purchase the property, what they really want to do is to attempt to place the property under contract so they can they quickly shop for another wholesale buyer who will purchase the contract from them before closing the transaction with you.

The acquisition agent, a.k.a., the second buyer, is who actually buys the home. The hope of the acquisition agent is to buy your home at such a deep discount that even after adding profit for himself, he can sell to a true rehabber at a low enough price that the deal still makes economic sense to the rehabber.

Free Strategy Call

You can usually identify who these people are by the terms in their purchase contract. It will have a large number of contingencies built that they call “due diligence.” These are designed to give them an “out” should they be unable to find a second buyer before you’re scheduled to close. These are the people who will offer you the least amount of money for your home because they need to create a profit for both the second buyer and themselves.

Before you take action, pause and ask any potential buyer to bring along “proof of funds” with any offer. Even if they plan to borrow the purchase money from a lender that they have a business relationship with, they should be able to show proof that they have the funds available and can close the deal.

There are several types of buyers who will offer to purchase your home. The next type of buyer is an investor who does intend to close on the transaction and then hire a contractor to complete the necessary repairs before putting it back on the market.

This buyer is planning to make a profit, even after paying the contractor. He will need to buy at a deep enough discount to accomplish that goal, and the amount he offers will be pretty close to the amount the acquisition agent will offer. The main difference here is that this guy can actually close the transaction.

The third type of buyer is one with a general contractor’s license who plans to use his own crew to repair the property before he puts it back on the market. This is typically the person who will offer the highest purchase price because his costs are lower for the rehab work. But that’s not always the case.

Don’t take for granted that the buyer with the contactors license will offer the highest price for your home. The acquisition agent has a list of contractors to assign the sales contract to, and some of them may actually offer a better price. The same is true for the buyer who will close on the home then hire contractor. He may have a relationship that gives him costs at about the same level.

The bottom line is that the best way to assure the highest price possible for your home is to get three bids. Make sure that all three know that they are competing against each other so you can get their highest, best offer.

Any fast-cash buyer with proof of funds can close the transaction in as little as 7 days, but I don’t recommend you count on it. Typically, the contract will be written with an “inspection clause,” which allows the investor to enter into the sales contract now under the terms and conditions that you’ve agreed to, while also allowing time to bring in experts to confirm his estimations of costs to rehab.

It also gives you the chance to put together all of the documentation that might be needed from you to facilitate the transaction. Count on something being uncovered during this part of the transaction that might require a modification to the original offer. For example if during the inspection process the inspector determines that the home has foundation problems that were not noticed before, expect the buyer to offer a reduced price before completing the transaction.

Real investors know how to inspect a property and chow to determine accurately what will be needed to repair the property. They will also have a good idea how much it will cost. With that in mind, it’s not necessary to make the contract contingent on an inspection. Therefore, I suggest either striking that clause from the contract completely or requiring the forfeiture to you of some part of the earnest money deposit if the clause is exercised. This will separate the real investors from the pretenders.

A well-drawn purchase agreement will clearly spell out what each party is responsible to do and when they are expected to do it. There should be no “gotcha moments” during the transaction.

In most cases, fast-cash investors who buy homes are reputable business people with no intention of cheating you. They simply want to buy your home at deep of discount so they can make a profit.

If you have still have questions about fast-cash sale of your home, you should seek council from a real estate attorney in your area before moving forward with a transaction.

I guarantee you that it will be worth the fee in worth your piece of mind.

Download a free copy of my ebook 5 Savvy Ways to Boost Boomers Income. Click the image below.

seniors income ideas

Follow me on Facebook!

Reverse Mortgage Qualifications: How the New Rules Make It Harder

dan_-rev-mtg-harder

Last year, new rules for reverse mortgages came out that changed the way the program works.

Changes to the HECM reverse mortgage program may seem a little bit confusing.

Here’s the Deal: Reverse mortgage qualifications changed, and so has the amount of money you can receive.

Is A Reverse Mortgage Right For You?

The truth is that reverse mortgages are now harder qualify for; however, when you can qualify, they are still usually the best option available.

Before 2008, when my mother took out her reverse mortgage loan, the process was really pretty simple and easy. There were no income or credit requirements. In fact, pretty much anyone 62 or over with sufficient equity could get a loan.

However, when the “financial assessment” requirements went into effect, everything changed.

The new reverse mortgage rules require you to prove sufficient income to pay all home expenses, such as property taxes, homeowners insurance, and other living expenses, while still having a certain amount of “free cash” left over at month end.

Basically, you have to prove you don’t actually need the money. That sounds ridiculous, right?

Free Strategy Call

Here’s how new rules for reverse mortgages work:

If your income doesn’t meet the requirements, the lender will withhold enough money from the loan to pay those home-owning expenses for the rest of the your projected life.

That cost, which is called a “set-aside,” can be tens of thousands of dollars withheld from the loan distribution.

In some cases, the set-aside is large enough that the funds you receive from a reverse mortgage are so low that the loan is no longer practical. For example, if you’re found to be short by $200 monthly and have an expected longevity of 10 years, you’ll now get $25,000 less than you would have before.

Now, if you need cash, getting $100,000 rather than $125,000 is not a bad compromise. In that case, the reverse mortgage still makes sense. However, if you were planning to receive $60,000 and the set-aside reduced that amount to $35,000, in many cases that would make the reverse mortgage impractical, particularly with the fees involved in accessing the product.

In 2008, the amount of money that you could expect from a HECM loan was based on your age, the value of the home, and the current interest rate.

The rule of thumb was to subtract 10 from the your age, and that number was pretty close to the percentage you could expect. For example, a 70-year-old person with a $200,000 home could expect or 60 percent of the value of the home, which is $120,000 in loan distribution. (age 70-10= 60 percent)

The rules for calculating how much money you can expect from a reverse mortgage are now more convoluted. The best way to determine this is to start a conversation with some professionals that work in your area.

What do the New Reverse Mortgage Rules Mean for You?

 You still might qualify for a reverse mortgage, in principal. In some cases though, the following factors might reduce your cash available to a level where the loan simply doesn’t make sense:

  • Limited initial distribution amount
  • The new financial assessment/set aside
  • The need to bring the home up to FHA standards

More importantly, if you currently have an existing loan on the home and hoped to use the reverse mortgage to eliminate those monthly payments, you might not have enough equity left to do so.

The first step in figuring out if a reverse mortgage is a viable option for you is to connect reverse mortgage companies to get an analysis of your situation.

To find out more, click here to set up a risk free, no-strings-attached consultation with me. We’ll discuss your specific situation and I’ll recommend a course of action you can take to reach your goal.

Free Strategy Call

2 Unconventional Ideas For Boomers to Boost Their Income

Looking for unconventional ideas to bring in more income in retirement? Dan Farnsworth shares two unique ideas for boomers to boost their income in retirement.

Hi and welcome back to this installment of boomerincomeideas.apps-1and1.com.

Today I want to talk about something that I think is a dilemma for a lot of baby boomers.

I don’t know about you, but when I was very young, I had a dream or goal of what I wanted I believed I wanted to do later on in life.

I wanted to work hard at a young age, make as much money as I could so I could be comfortable in retirement.

When it came time to retire, I really didn’t want to retire, I wanted to become a history teacher. That was the goal that I worked toward. The interesting thing was that the closer that I got to that time to actually make that transition and get my teaching credentials, I realized that dream was not anything in relationship to what I really wanted to do.

I mean, the idea was very attractive to me when I imagined myself as a know-all teacher whom everyone would be enthralled with. I imagined the students would be held captive by my every word as I was teaching them about the history of the United States.

In reality what I realized is that dream was not going to be the case. A career as a history teacher would be a complete frustration for me.

I started to look around for alternative careers, and quite honestly, I had no clue what I really wanted to do. I think a lot of baby boomers and seniors are facing that dilemma. We get to retirement age and ask, “OK, now what? What do I really want to do?”

Fortunately there are some tools out there that boomers can examine to work through that process and figure out what we are good at, what we are interested in, and maybe what we are passionate about.

There is a website that is administered by AARP called Life Reimagined. It’s an interesting exercise because it really has a number of tools that actually help you through the discovery process.

What I discovered that I found especially interesting was that in reality, at some age, all of us simply decide to no longer do the things we don’t want to do anymore. And that’s really the biggest challenge.

Two categories stand out as the most informative to me in this exercise: The first is the exercises that help you uncover your dream job. If you go to the website, you’ll notice that 25,597 people signed up to go through the exercise. Yet only 13,014 actually completed it.

The second category is how to get an edge on job search. The last time I checked, 39,826 had signed up for the exercise. Yet, only 16,015 actually completed it.

What that tells me is that the boomers who signed up believed they were going to get through this exercise, but they got bored with it and quit. I can definitely understand that because I was probably one of those 39,826.

The reality is that at a certain age, we just want to do what we want to do and the things that we don’t need to do or have to do we just put off.

It was probably different when we were younger because we were forming families, making house payments, car payments, putting our kids through school, and other responsibilities.

Now, we no longer have those same responsibilities for others, and all we really have to take care of is just ourselves, and maybe a spouse.

Things changed and we came to a point when we really need to decide if we were going to pursue something we could be passionate about. Otherwise, we weren’t going to do it.

Or if we would generate passive income we’re not passionate about.

I’ve taken a couple of income ideas that I thought might be of interest to you because a lot of people don’t know that these things are available.

Example 1: Did you know you can actually own a cash machine?

It’s true. Private ATM machines are available and they generate cash flow for their owners.

Private ATM machines have a market value. You can get them already installed and in place. They regenerate cash they already have. (That’s some kind of return on that particular investment!). You simply buy them, make sure they are stashed with cash, and generate an income from them.

Other things might be important to you. Maybe you don’t like being in one place all day long; maybe you’ve spent 30 or 40 years in an office and that’s driving you crazy, and you really would like to get out on the open road, visit places, and talk to people. In that case, owning a Fed Ex route might be the perfect solution for you.

Again, many people don’t know that you can actually buy a FED Ex route. Certain routes and certain operations within the FED Ex organization are company owned; however, other routes such as FED Ex ground and FED Ex home delivery are run by independent contractors. They are private individuals who own the trucks and run the routes. In many cases, a lot of them have a number of routes. In fact, most of them get up to about 5 or 6 routes and have enough volume that they can hire a manager to run the operations and control the drivers. Many also hire drivers.

These are just a couple of the passive operations to generate income. If you want to drive the truck yourself, then your income would become non-passive.

These are the type of opportunities that are available to retirees. In my case, I kind of did a full 180. I went and looked at a lot of different types of situations, and what I realized was that the teaching situation was attractive to me. I like to talk and I like to try to educate people about things that might be available. So that’s exactly why I did this website.

I want to talk to other people just like you, just like me about opportunities. I’m trying to educate you about the things that are available to you and could possibly change your life.

So, that’s all what I wanted to talk about today. Hopefully you found this somewhat interesting. Next week, we are going to start some additional interview processes with some people who I think you are going to find very interesting. I will see you next week.

Please make sure that you check the note session below, we’ll have additional links available, as well as access to information that we think that you’ll also find informative.

If you liked what you’ve seen, please make sure that you sign up for my weekly newsletter so you are up to date every week on what we are talking about. Lastly, like us on Facebook. I look forward to seeing you on the next episode next week. Thanks again!

seniors income ideas

Uncover Your Dream Job Link
https://lifereimagined.aarp.org/challenge/23191-reimagine-your-career

Get An Edge In Your Job Search
https://lifereimagined.aarp.org/challenge/18461-Get-an-Edge-in-Your-Job-Search

Reverse Mortgages Could Boost Boomers’ Income – Without Eating Up Equity!

Reverse Mortgages Could Boost Boomers’ Income Without Eating Up Equity. 

More than 50% of Boomers have Zero Nest Egg

That’s not to say that they don’t have any assets or income:

  • 77% own their homes
  • 36% have paid off their mortgages
  • 49% have some sort of defined benefit (i.e.. pension plan)
  • Almost all receive some sort of Social Security payment
  • What about the other 48% who do have savings?
  • It’s a mixed bag.
  • The median household among this group has $148,000 saved — enough to provide about $6,000 a year in income to those following the 4% rule.

 Social security provides a huge portion of retirement income.

Overall, it provides a whopping 44% of all income for those aged 65 to 74.

capture

Even among those who have built up their nest eggs, that savings provides just 9% of their retirement income.

Now I want to show you how a reverse mortgage can Increase your income by $1000 per month without reducing your equity:

Lets say you own a home that’s valued at between $300,000 and $350,000 and it’s paid for you could conceivably liberate $170,000 of that equity from a reverse mortgage.

Now lets say you use that equity to by an income property like this one:

riverwalk-property

 

This is a property that I own.

As you can see, the total investment was $170,000 resulting in an income stream of just a little over $1000 per month or a 7.1% return on my investment.

riverwalk-data

I point this out just to show you that I’m not making this stuff up as a hypothetical like most of the other sites that you might look at.

Instead, I’ll show you the real deal….

So let’s tie this all together:

At the beginning of this article I suggest that your home can increase your monthly income by

Since the average retirement income is about $35,000 per year if you could increase your income to $47,000 that would be a 34% increase in the cash in your pocket.  But wait a minute.

How does this not reduce your equity?

Doesn’t the reverse mortgage reduce the equity in your home because the mortgage is growing?

Consider that you just added an additional property that will also grow in equity. This will offset the reduction.

The bottom line is that this scenario can put an additional $1000 per month in your pocket.

What kind of difference would that make in your retirement life?

Are Financial Pressures Threatening An American Tradition?

dan-american-dream

I’d like to talk to you frankly about a threat that millions of senior Americans and their families are facing today.

It’s a conundrum that threatens to disrupt our American way of life, and dismantle the customs and traditions that weave together the fabric of an American family.

You see, for millions of families, quality time together centers on Sunday dinners and holiday gatherings at Grandma’s house.

For thousands of seniors, providing their families with a home base for family gatherings being jeopardized by lack of finances. Twenty years of economic turmoil—beginning with two stock market collapses, followed by a great recession, and years of close to zero interest earned on savings accounts—has robbed seniors of the golden years they had planned for.

There is help out there!

Free Strategy Call

If you are a senior and find yourself struggling to maintain your way of life, I have some good news. You might be living inside the very thing that could help solve your financial issues.

You see, liberating some of the equity in your home and turning it into cash could provide you the ability to maintain a life that you love.

How you can liberate the equity in my home

Sometimes, the government gets it right. Almost 30 years ago a government-insured program was created to help seniors pull out some of the built up equity in their homes through a loan without having to make monthly payments.

The program is called a “Home Equity Conversion Mortgage” (commonly referred to as a “reverse mortgage”).  Ever since its inception, millions of seniors have used the FHA guaranteed reverse mortgage to maintain their standard of living. If you’re able to qualify for a reverse mortgage then it should be your first option.

But what if a Reverse Mortgage won’t work for you?

If you applied for a reverse mortgage and didn’t qualify, chances are you were given the recommendation that you should sell the house and move. I saw this happen over and over during my time in the reverse mortgage industry. Then one day I thought, Why should seniors have to move out of their homes? If the only option available is to sell the house, then why not sell it to an investor and simply rent it back from the investor?

Why not continue to live in the home you love, rather than renting a house?

Sure, the title will no longer in your name but it will still be your home. And isn’t the main goal to remain in your home by any means possible?

With that idea in mind, I started to put together the basis for a plan I call “It’s Still Your Home.”

How “It’s Still Your Home” works:

It’s actually pretty simple. I buy your house for an agreed upon price and then rent it back to you for as long as you’d like to remain in the home. That’s it, no hidden agenda, no empty promises, and no scams.

My company has an entire program in place to help seniors like you who want to stay in the homes they love, the home they built their lives in; the home they raised their children in; the home where the family gathers for Sunday dinner at Grandma’s house.

I’d like to tell you more about how It’s Still Your Home works. I invite you to schedule a time to talk with me at your convenience so you can learn more. We’ll have a 10-minute conversation, and I can tell you right then if the program will work for you.

If you are an ideal candidate for the program, I’ll do everything in my power to help you maintain your American life style by keeping you in your home.

Click here to set up a telephone appointment with me.

seniors income ideas

Download your FREE workbook by clicking the image above!!!!

What To Do When You Need To Sell Your Home Fast

dan-sell-home-fast

“Mom’s going into senior care and I need to sell the house fast to pay for it!”

What if staying in the home is no longer an option and you need a fast sell to pay for managed care?

You have two options when it comes to selling the house and cashing out.

If the house is in great condition, shows well, needs no maintenance or renovations, and can command full market value, your best option is to find a realtor in your area who will tell you the truth about what the property is worth. Then, you list it and sell it through the normal real estate channels.

I emphasize finding a realtor who will tell you the truth because many will tell you what you want to hear to get the listing and then the house will linger on the market while you suffer through a series of markdowns until it gets to market value. No one needs that frustration! Any house (and I mean any house) in great condition and priced right should sell within 30 days.

On the other hand, if your house has years of deferred maintenance, needs a new roof, or still has pink appliances and pink bathroom tile, it needs an investment of cash to make it marketable. Unless you’re prepared to invest the time, money, and effort yourself to bring the home up to top dollar standards, your best option is to sell to a “fast-cash offer” real estate investor.

Real estate investors make a living by finding houses in distressed condition, buying them for cash at a discount, investing the cash to renovate them, and then putting them back on the market to sell at a higher value.

Be Realistic:

If you choose to sell to a real estate investor, it’s important to be realistic in your expectation of value. By that what I mean you need to understand that both sides need to get something out of the deal. You need to get as much money you can, while the investor needs to make a profit.

Thinking you’re going to discount your home by 10 percent compared to the other homes in the area is not realistic. You trade a discount for the convenience of simply collecting your check at the closing table and walking away. This saves you the pain of dealing with cleaning the house out and preparing if for sale, choosing a realtor and listing it on the MLS, making the house available to a parade of showings, facing the anguish of meeting contingencies demanded from a potential buyer, and most importantly, having the selling process simply consume your life for the next 120 days.

How much of a discount is that worth? I’m going to tell you.

Anatomy of a Fast Cash Deal: 

Let’s assume that homes similar to yours in perfect condition are selling for $350,000. When I say “perfect” condition, I mean they’ve been updated with a new kitchens including new granite counter tops, new bathrooms with modern fixtures, new flooring with the latest in hardwood, new heating and air-conditioning units, new double-pane windows throughout, and new paint both inside and out.

Let’s also assume that your home needs all of that renovation to match the same value. Lastly, let’s assume that all of that renovation could be done for $50,000. Your “as-is” value is $350,000, (less $50,000). However, that’s not the purchase value for an investor.  Remember, he has to by the house (and in most cases, pay all of the closing costs including title, transfer tax, and other costs usually assigned to you the seller.)

Additionally he will invest money to renovate the property, pay the costs of holding it during that process, place it back on the market, pay a realtor fee when it sells, as well as all the normal sellers closing costs. And after all of that, he hopes to make a profit. How much is all of that worth? That’s the discount. Typically you can expect that discount to be about 25 percent.

Below is what the offer will look like:

Maximum selling price after renovation: $350,000
Less discount of 25%:                               <$87,500>
Less cost of renovation:                           <$50,000>
Cash in your hand at closing:                   $212,000

Now before you make the judgment that number is not acceptable let me show you a side-by-side comparison of what you can expect if you do it all yourself. Would you be surprised to see that the difference between selling the house yourself versus simply selling to an investor with no further obligation is about $20,000?

needtosellfastchart-copy

As you can see the difference in net proceeds between doing everything yourself ($231,935) or simply selling to an investor and walking away ($212,000) in this example is about $20,000. Now the question to ask your self is, would you pay someone $20,000 to do the job for you?

If the answer is yes, I can put you in touch with the best investor in your area. Click here to set up a consultation call with me to discuss your options.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

Scam or Solution? 5 Questions to Ask About Reverse Mortgages

Should I get a reverse mortgage

Should I get a reverse mortgage? Is a reverse mortgage a solution that’s right for you?

It seems as if every article on the web about reverse mortgages responds to that question with the non-committal response of, “It depends.”  

Personally, I’m tired of that answer.

And I know when I see that prelude to the answer it tells me that the author doesn’t have a clue. They’re simply covering their backsides and writing an article about something they haven’t bothered to really research.  

How would you like someone to finally answer the question?

From 2005 and 2008, I personally originated reverse mortgages, so I have intimate knowledge of the program. In 2008, I decided to exit the origination business because it had become overly burdensome and costly due to changes the federal government imposed on the program.

But, I took what I learned with me, and now, I share it with seniors who are looking for innovative ways to liberate the equity they’ve accumulated in their homes.

One thing my experience has taught me is that every one of us has unique challenges and considerations when it comes to our retirement incomes and our personal financial situations.

There is no one-size-fits-all answer. And anyone who tries to tell you otherwise does not have your best interest in mind.

That’s why I want to share with you 5 important questions you should to ask before you consider moving forward with a reverse mortgage.   

5 Considerations To Determine if Reverse Mortgages are a Scam Or A Solution:

  1. Are Reverse Mortgages a loan from the US Government?

The U.S. Government does not make any mortgage loans.

HECM loans (commonly known as reverse mortgages) are mortgages that are insured by the government to be repaid by the borrower to the lender.  

If the loan is not repaid in full, the government (through its FHA branch) is on the hook for the balance. That’s why reverse mortgages have such a huge number of restrictions and regulations.  

Note: Most loans are paid in full, so they cost the government nothing. In fact Uncle Sam typically makes a profit via the insurance premium.  

  1. Is the Reverse Mortgage program a scam?

Absolutely not.

Few consumer-based programs are as heavily regulated, scrutinized, or policed, or have more borrower protection than an HECM loan.  

Over 30 years ago, the senior advocate association AARP realized that the majority of seniors had the majority of their net worth tied up in the “illiquid equity” in their homes.  

So, AARP lobbied Congress to find a way to help seniors liberate some of that equity without the need to sell their homes.   

The result was the reverse mortgage, i.e., a loan against your home with no monthly payments and no repayment until you no longer live in your home.  

To make that possible the loan is insured and administered by HUD.  

Because of this connection, the loan falls under government regulation. This means that the originators authorized to provide the loan are under constant scrutiny by the government.  

Most of these originators are good, honest people who would not think of doing anything that might jeopardize their license to do business. Unfortunately, less than scrupulous people try to game the system, and they’re the ones who make headlines in the 24-hour news cycle.   Should I get a reverse mortgage…

  1. Are reverse mortgages expensive?  

Yes, but the truth is they’re no more expensive than any other government-backed loan.

In addition to loan origination fees and other closing costs such as title, escrow, stamp tax, etc., insurance must be paid to the FHA (both at origination and as a monthly fee).

On the closing statement, the FHA adds these fees together, and the resulting high figure can be a real turn off for some.

But here’s the real story:

A reverse mortgage has an artificially low-interest rate because of the FHA insurance.  

Because the lender has literally no risk, a “risk premium” is not added to the loan’s interest rate. This is why some lenders do not even ask the question Should I get a reverse mortgage. If not for the FHA involvement, the risk premium would typically add between 3 to 5 percent to the base interest rate. Trust me when I tell you: That will have a huge impact on reducing the equity left in the home.

  1. The balance on the loan grows every month, so will the loan eventually eat up any equity left in the home?

Here’s an example based on my personal past experience: Before I tell you my “real” experience with my Mother’s home, let me say that the government designed the program to ensure the appreciation of the house would equal the increasing loan amount.

In other words, if the loan is growing by $6,000 per year, the value of the home should also be appreciating by at least that same amount (if not more), so the remaining  equity stays constant throughout the life of the loan.  

Now, let me tell you about my mother’s house.

In 2008, my mom had suffered large losses in the two recent stock market crashes. She worried that the economic events related to the subprime debacle would reduce her liquidity and might wipe out a large amount of equity in her home.

As a hedge against these calamities, I encouraged her to obtain a reverse mortgage.  

Her house appraised at about $450,000 and at her age she was able to get $225,000 in cash out.  

After closing costs the loan started at about $235,000. This meant that there was still $215,000 in equity left in the house before the loan started to grow.  

Six years later, my Mother moved into a senior-care facility and my siblings and I sold the house for $650,000.

After all expenses, including paying off the reverse mortgage, my Mother received net proceeds of $325,000. The loan maintained its original equity, and gained about $100,000.  

  1.  Is a reverse mortgage right for me?

It’s really simple. If you don’t need the cash or want to take the money to invest in something else, the answer is absolutely not.  

Nothing that you could invest in with “low risk” would offset the cost of interest on the loan. Using a reverse mortgage to fund an investment would be a terrible decision for you.  

In fact, a reputable reverse mortgage originator would refuse to write the loan under this circumstance.  Should I get a reverse mortgage

On the other hand, if you:

  • Plan to stay in your home for longer than two years;
  • Need access to supplemental cash to enhance your living standards;
  • Need to pay for necessities, such as in-home assistance

Then my answer to should I get a reverse mortgage is a resounding YES!  A reverse mortgage is the right decision for you.   

Nothing else (other selling your house) allows you to take the equity out of your home with less risk.  

More importantly, this loan is the ultimate “pick a payment” program.  

Did you know that you can make payments on the reverse mortgage?  

If the additional monthly payment to the loan balance concerns you, and you have the capability to make a payment, go ahead and do that.

If you want to pay interest only, do that.

The choice is yours. Reverse mortgages offer features that they give you choices at a time when you might think that your options are limited.

If this article as piqued your interest about the question Should I get a reverse mortgage, you’re in luck. I can help you by get in touch with an originator in your area. Simply click here to schedule a call with me. We’ll talk about your unique situations and how a reverse mortgage might be the answer you’ve been looking for.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

5 Savvy Tips To Help Boomers Supplement or Replace Their Income

income ideas seniors

Today’s boomers live healthier, longer lives. And like you, they dream of doing more than merely surviving in their golden years. Today’s seniors want to thrive.

But, the world has changed and the ways we used to earn income are quickly becoming obsolete. To bridge the gap, most retirees are looking for new ways to bring in more money and supplement their income.

Below, I’ve listed 5 innovative income ideas to boost your retirement budget:

 1. Use A Reverse Mortgage to Tap Into The Equity From Your Home

A reverse mortgage allows you to take some of the growth in equity out of your home so you can pay for future home costs.

2. Take Your Social Security Benefit Early

Most of us have been led to believe that waiting to withdraw our Social Security benefits is best. But the truth is, that’s not always the case.

Yes, it’s true that waiting to draw on your Social Security benefits will increase the size of your monthly check, but you might be surprised at how little the total benefits differ, especially if you live the normal life span.

3. Sell your life insurance policy

Did you know that you could sell your life insurance policy for cash in a process called “Life Settlement?”

Often, a life insurance policy that is no longer needed but paid for over a long period of time is considered abandoned. Did you know that insurance companies often plan a huge rate increase right at the 20-year renewal point to encourage that?

4. Buy Rental Property

Rental property is an effective way to make passive income. People will always need a place to live and for many of the younger generation, buying a home is out of reach. That means most of them will be forced to rent.

5. Make A Difference With A Part-time Encore Career

An encore career is work you do after you retire that adds income and purpose to your life. Encore careers are paid positions in fields that support the greater good. Examples include work in education, the environment, health, the government sector, social services, and other nonprofits.

These are just some of the ways you can bring in more income. Are you interested in diving deeper and finding out more how to supplement your income in retirement? The first step is to download a FREE e-book.

Click the image below to give me your email address and I’ll send it to you ASAP.

senior income ideas

Inside the workbook, you’ll find a series of question for you to consider before you take the next step. When you finish the workbook, I encourage you to set up a FREE strategy call with me to discuss your unique situation and resources you’ll find helpful. Click here.

Your Reverse Mortgage Didn’t Work! Now What?

Reverse Mortgage didn't work

Restrictions placed on today’s HCEM reverse mortgage by HUD have made it almost impossible for many potential borrowers to qualify for enough proceeds to make the reverse mortgage a viable option.

Reductions in the initial loan amount—coupled with the newly enacted “financial assessment requirement”—have leveled a one-two punch to seniors and have knocked the program out of contention as a possible solution.

If you looked into a reverse mortgage because you can no longer afford the cost of maintaining your home and pay for your living expenses, you have 4 options to consider:

Tap your kids to pay your expenses.

Seriously, many seniors today make a deal with their kids to pay monthly expenses in exchange for the inheritance of the house later. It’s a type of “family-financed reverse mortgage.” Since transactions involving money and property between family members can turn into a nightmare down the road, several companies specialize in managing the transaction to ensure all parties are equally and legally protected. These companies insure that family members have an unbiased third-party arbiter, in case one side doesn’t perform as agreed.

Sell the house and move in with a family member.

This is usually the least desirable option. Most seniors would rather live in a shelter than move in with their kids. Nothing robs them of their independence and self-respect faster than leaving their home to live under one of their children’s roofs. Those of us who have raised children have all used the phrase “as long as you’re under my roof you will live by my rules!” When a parent moves in with the child, that dynamic gets turned upside down. There is certainly a risk of losing control over you environment because you no longer have your own environment.

Sell your home and move.

A third option is to simply sell the house and move. Sounds easy, right? It’s actually more complicated than it sounds.

What if …

… the house is not in condition to attract a buyer?

… the house needs a number of expensive repairs to make it marketable?

… you simply don’t have the money to bring it up to marketable standards?

Or, more importantly, where do you go after you sell? The thought of leaving the home you’ve lived in for years or the community you are a part of can be overwhelming. A survey of seniors showed that almost 90 percent wanted to stay in their homes until they either die or are unable to care for themselves.

Sell your home, but continue to live in it.

You can liberate the equity in your home by selling it, then renting from the buyer.  My company has created a program designed to help seniors stay in their homes, while also providing a good business deal for our investors.

Here’s what I mean: You want to remain in your home, and you’re no longer concerned if the deed to the home is in your name. Our investors want to invest in real estate, and they know the best prospective property is one that already has a tenant who takes care of the property and has the means to pay rent on time. What better investment opportunity than one where the seller is also the tenant and has an emotional attachment to the property? We believe this is the definition of a win-win transaction.

Each of us has unique situations and challenges to overcome when a reverse mortgage doesn’t go through as planned. And unfortunately, there are never cut and dry answers that fit every circumstance. That’s why I encourage you to set up a call time with me so I can help you determine your next best steps.

Click here to set up a risk-free strategy call with me. You pay me nothing; it’s a free call. During our conversation, we will talk about your unique situation. I’ll point you to resources that can help. I look forward to hearing from you.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

Why Seniors Are Deciding to Start Encore Careers

Dan - Encore Careers

What I dreamed of doing in my 20s

The year was 1969. I was 13 years old and the movie Easy Rider had just opened at the theater. It was the “rebel-without-a-cause” type genre with the added effect of a cross-country journey on the open road. I was hooked, and immediately began planning a similar journey in 5 years, immediately following my high school graduation. 

What I actually did in my 20s

By the time I reached my high school graduation, my dream of the open road faded quickly. By age 20, it was replaced with a different life path. I married my high school sweetheart, had 2 kids, bought a home, and settled on a career that would provide sufficient income to support what was supposed to be the “American Dream.”  At the time I believed the key to happiness could be found by replacing the open road for a back yard, a barbeque for a campfire, and a John Deer riding mower for a Harley Davidson Motorcycle.

Even though I did all the things I was “supposed” to do, the truth is I was unsatisfied in my career. While a career in sales was economically rewarding, it was otherwise very unfulfilling.

Gallup Poll finds 70 percent hate their job

It turns out I wasn’t the only one who had given up on their dreams to pursue an unrewarding career. A Gallup Poll from 2014 found that, of the more than 80,000 American adults surveyed, nearly 70 percent hated their jobs. That’s a staggering statistic.

The study also reported that what dissatisfied workers felt their jobs lacked were feelings of having a purpose, meaning, and the satisfaction of knowing their skills were being used in a positive way.

The reason so many people dream of the day that they can retire is because that’s the day they believe they can finally stop doing something they hate and start doing something they want to do.

But do retirees really want to stop working so they can play golf for the rest of their lives? The answer — at least for me— is a resounding NO! What seniors really want is to finally do something we enjoy doing, instead of something we feel we have to do.

But, let’s be honest here: In today’s economic environment, most Baby Boomers need to keep working past retirement. That’s why many of us seek out Encore Careers.

What is an Encore Career?

An encore career is work you choose to do in the second half of life that combines continued income, greater personal meaning, and social impact. These jobs are paid positions often in public interest fields, such as education, the environment, healthcare, the government sector, social services, and other nonprofits. Encore Fellowships, created in 2009 by the nonprofit Encore.org, are designed to transition highly experienced professionals from the corporate sector into encore careers in the social sector.

What if I don’t know what I want to do as an Encore career?

Good question, I asked exactly that same thing. I found the AARP’s Life Reimagined Tool, which helps users discover (or uncover) the career path that would lead them to happiness and fulfillment in the third chapter of life.

Now, for the bad news

Financially, more than two in three respondents who are already in encore careers experienced gaps in personal income during the transition process. One quarter said they earned no money and 43 percent said they earned significantly less than they had at their previous jobs.

Of those who experienced time with little to no income, nearly four out of five respondents experienced a gap of six months or more; 36 percent said their income gap lasted more than two years.

The reality is, most Boomers will face financial challenges that come with launching a career in an entirely new direction. Whether it’s the cost of going back to school, the cost of living with a reduced income while you train, or simply doing something that has low economic benefit in exchange for high psychobiological benefit, Boomers will likely need to draw on their current assets to support themselves through the transition.

Your home’s equity might be the most valuable resource you have in your arsenal. Liberating your home’s equity could be the catalyst to launching what I call “Boomer Life 3.0,” and finally living the life that you dreamed about before you decided to chase the American Dream.     

Curious about how liberating your home’s equity can give you the resources you need to launch an encore career?

Let’s set up a free call to discuss your unique situation and how you may be able to access to your home’s equity. There’s absolutely nothing to lose because you don’t pay me anything. We will simply discuss your unique situation, and how I can connect you to resources that can help. This one call could be the game changer you’ve been looking for.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

4 Reasons Reverse Mortgages Can Be A Sound Solution People Over 50

Dan - Rev Mortgage 1

I’m often asked why more boomers don’t consider taking out reverse mortgages to liberate the equity in their homes.

From the beginning, Home Equity Conversion Mortgages (a.k.a., reverse mortgages) were based on the premise that most seniors have a majority of their net worth tied up in the equity in their homes. What they needed was a way to liquefy their equity, while remaining in their homes. The reverse mortgage was created to solve that need.

From 1989 to 2009, HECMs were considered a needs-based product. They were the answer for people older than 62 who were considered “house rich but cash poor.”

Until 2009, if liberating some of the equity in your home would enable you to improve your living standards, this product was tailor-made for you.

Unfortunately, during the crash of 2008 when house prices were low, the liabilities of the insurance on FHA homes became greater than the total market value of the homes. On paper it appeared the program was underwater.

As a result, in 2010 the rules changed and it became harder to qualify for these types of loans.  

Harder, but not impossible. For people who qualify, a reverse mortgage can still be a viable option to consider.

Below are 4 situations where a reverse mortgage might be the best solution for baby boomers:

  1. When you need a line of credit to pay housing expenses

Let me tell you about my personal situation: Like many seniors, I’ve paid off my home and set up investments to generate a comfortable income in retirement. 

Still, even with no mortgage my home expenses, which include taxes, insurance, HOA, maintenance, and utilities, still cost about $2,000 per month. 

I have no intention of taking that $2,000 from my monthly retirement income to support my home. Instead I intend to let the home pay for itself by taking a HECM line of credit and using it to pay the expenses. That frees up an extra $24,000 per year that I can spend enjoying my retirement. I can’t think of a better use of my home’s equity.

  1. When you want to give your home’s equity to your grandkids before you die.

I have a friend who planned to leave her grandkids the equity in her home as an inheritance to pay for part of their college expenses.

But, there was one problem: They were ready to go to college long before she was ready to die. The solution was to take out a reverse mortgage and grant gifts while she was still alive. The reverse mortgage enabled her to see how her financial gifts enhanced her grandkids’ lives.

  1. When you want to avoid drawing down your principal at the wrong time.

The fastest way to deplete a nest egg is to draw out principal when the market is not performing well. Market downturns usually lead to lower dividends or interest paid, which can lead to a withdrawal of principal to make up for the shortfall.

One solution is to use a reverse mortgage line of credit to make up the short fall during the downturns, and paying it off during the corrections. A great advantage of the reverse mortgage is that if the correction takes longer than expected, you’re still covered with no monthly payment to further deplete your cash.

  1. When your monthly expenses are greater than your monthly income.

The most obvious use of a reverse mortgage for boomers is to make up the difference between expenses and income. In many cases the difference can be as simple as just eliminating a monthly mortgage payment. 

Back when I originated reverse mortgages, I saw countless instances where eliminating a $500 monthly mortgage payment meant the difference between buying groceries for the month or skipping meals. The program was originally designed to deal with situations like this. 

If you struggle every month because there’s more month left than money,  I encourage you to consider how a reverse mortgage might help you.

**Contact me for a free, no-risk, no-strings-attached evaluation to determine if a reverse mortgage is the right solution for you. During our call, we will discuss your situation and I will put you in touch the right people to guide you on whether a HECM is the right solution for you.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

Why Seniors Are Renting In Record Numbers

Dan - Seniors Renting

Why are seniors choosing to rent in record numbers?

Because it’s just easier than owning a home.

Not convinced? Consider this: Renters don’t pay property taxes; they don’t have to worry about lawn maintenance; and they don’t have to do expensive home repairs, such as fixing plumbing, roofing, or electrical problems.

These are just a few of the obvious reasons seniors are opting to rent, rather than own the home they live in. Even those who can easily afford to purchase or maintain their homes are deciding to rent instead.

In spite of the convenience of renting, the truth is, it’s not for everyone. In fact, some baby boomers want to remain homeowners and liberate the equity in their homes.

Back in 2008, I helped my mother obtain a reverse mortgage. At the time she wasn’t short on cash, but there was a collapse in housing prices and we believed a further decline was possible. So as a precaution, we wanted to ensure we got equity out of her home and turned it into cash. 

She was able to get a reverse mortgage because there was no Financial Assessment litmus back then. Unfortunately, a lot has changed since 2008. In fact, my mother would not qualify for that same loan today. In today’s economic environment, I would advise my mother to sell her house and rent rather than to seek out a reverse mortgage.

Now don’t get me wrong. I’m pro homeownership in the long term. I believe history has shown it to be a good investment over time — even when you consider the boom and bust periods.

The truth is, there is no right choice. It depends on your unique situation and what you feel is most important. Emotions can be tied to home ownership and for some, they carry more weight than financial concerns.

I’ve created a FREE download that offers links to other perspectives and opinions about baby boomers who choose renting over home ownership. Click here to access the download.

senior income ideas

Download your FREE workbook by clicking the image above!!!!

Boomers Can Add $12,000 To Their Annual Income. Here’s How!

Dan - Add 12000 to income

I don’t know about you, but I practically fall asleep when a certified financial planner starts talking about investment goals, tolerance to risk, and tax brackets!

My financial goals are simple: I want to make as much money as possible on my investments, and I have zero tolerance to risk.

That’s why I believe rental property is the best investment option for baby boomers looking to supplement their incomes.

Investing in real estate has what Warren Buffet calls “intrinsic value.” That means its value is based on more than just what you see; it’s also based on what it does or what it provides. People will always need a place to live and for many of the younger generation, buying a home is out of reach. That means most of them will be forced to rent.

Providing rental space can be a great source of passive income for boomers, provided it’s done right.

Free Strategy Call

Below are 5 rules to keep in mind before buy a rental property:

Always target the middle-to-lower end of the economic scale when you consider who rent your property to. This group will be long-term tenants because they will not likely have the means to save enough money to buy a house.

Use the 1 percent factor before you decide to purchase a rental property. My rule of thumb for purchase price vs. monthly rent is a 1 percent factor. In other words, if a 3-bedroom condo can rent for $1,700 per month, I am willing to pay as much as $170,000 for the property. (See example below).

Always pay cash for rental property. That way, if the economy takes a dive I can reduce the rent. Because I own the property, I could easily cut the rent dramatically and wait for the market to come back without the risk of losing the property to foreclosure. That’s why reverse mortgages are so important. They allow homeowners to turn their equity into cash without a mortgage payment.

Fix everything in the property to like-new condition. If you want to avoid ongoing complaints from tenants about repairs, start with a full rehab before you rent. This investment upfront will save you time and hassle down the road. 

Hire a good real estate firm to find and screen tenants, and to draw up rental agreements. There is a saying in the legal profession that attorneys who represent themselves in court have fools for clients. The same thing can be said for property owners who lease their own properties. A bad tenant can be a nightmare and it’s too easy to be played by a good con artist. Property managers are usually good at identifying and screening out potentially problem tenants. Skipping this step will cost you in the long run.

Below is a real-world example of one of my rental properties:

Dan -Add 12000 to income 2.-2

   

This rental property cost me $170,000, however, it gives me an income stream of just over $1,000 per month. That’s a 7.1 percent return on my investment.

There’s no such thing as easy money, but this comes close. So ask yourself: What difference would an extra $1,000 a month make in your retirement life?

If you’d like to hear more of my fact-based examples of how I use real estate property to supplement my income — or if you’d like to ask me questions about other innovative ways to bring in more money every month — Simply click here to schedule a FREE Strategy call with me. You have nothing to lose. We’ll discuss different options you might consider, and I’ll recommend resources to help you move toward your goals.

seniors income ideas

Download your FREE workbook by clicking the image above!!!!

Top