Well, I don’t think I have to announce it at the top of my lungs, the stock market is down a ton since this time last year.
My money is in real estate. Doesn’t that make me smart? That’s sarcasm, case you are wondering.
With the stock market down as far as it is I’m getting a ton of calls lately from seniors desirous of getting a reverse mortgage.
I am by no means a financial genius, but I have to wonder what the reverse mortgage can do to help these folks?
Well, the first thing I need to do is step back and understand the stress they are under.
But the question of using a reverse mortgage as some sort of damn to the financial mess or financial safety net doesn’t make sense. Not at this point, at least for the reasons at hand.
Most tell me they want it for security purposes. What does that mean? They’ve lost a bunch of money in the market. Is having a bunch of money in a line of credit really going to help them?
I don’t think so. Some are telling me they want to invest the line of credit back in the market. They are citing the Warren Buffet line, “When people get greedy I get scared. When people get scared, I get greedy.”
I don’t really agree with this person either. They, more than likely will be charged 6% on the money the take out (plus closing costs). And the average can’t be higher than 10%.
I’m not a calculus major, but I can do some basic subtraction. If they are lucky they would get a 4% net return.
Look, the reverse mortgage is not the best investment strategy. Now, if you have a sure fire winner, I’d say go ahead and do it. But who has that. Last person I knew who had a sure fire winner went to jail for insider trading.
The best thing to do is to have glass of milk and cookie right now. Take a deep breath thereafter and sleep on it. Tomorrow, if you still want to get a reverse mortgage, call me.
Tags: Finance, finance for the elderly, Finance:Mortgage, home mortgage, home mortgage for the elderly, Mortgage, real estate, reverse mortgage, senior issues