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Rates Are Rising: Part II

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Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Julio,

Have you noticed that mortgage lenders always fail to mention that every time a homeowner refinances, they go back to a full 30 years of mortgage payments and have lost the months/years that they have already paid off on their current mortgage?

Their focus is on pointing out to the homeowner that they will save $zzz per month, but NEVER is it mentioned that the homeowner has already paid $XX,zzz off of their current mortgage, which will be completely lost.

Once upon a time, paying off the mortgage was every homeowner's goal.

Someone once asked me, "Why spend a dollar to save a dime?"....and I can't help but ask the same question of many who fall into this pattern of not looking at their long-term goals. Many will discover at retirement age that they still have years of mortgage payments ahead of them.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Yeah but Dee Dee, most refinances I have seen have atleast 20-25 years to go. Even the little 70 year old Walmart greeter. I have seen a couple people refinancing their old loan for a 15 year, but it is rare. Many just need the equity...... to keep their life style.

BTW, I am getting a rash of FHA reverse mortgages lately. They must be really desperate with the low rates :?: :?: Or is it slick marketing?
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Yeah but Dee Dee, most refinances I have seen have atleast 20-25 years to go. Even the little 70 year old Walmart greeter. I have seen a couple people refinancing their old loan for a 15 year, but it is rare. Many just need the equity...... to keep their life style.

BTW, I am getting a rash of FHA reverse mortgages lately. They must be really desperate with the low rates :?: :?: Or is it slick marketing?

Hi Mel,
When I'm 70, if I still have a mortgage payment, I'll be very disappointed with myself. 8O
Can't help but wonder how many job openings there will be for retirement aged people with mortgage payments to make by the time I get there, in about 25 years. It's not difficult to visualize lines of applicants in front of WalMart competing for jobs in the future.

I don't know much about reverse mortgages...would love it if someone would start a thread about them and explain how they work.

Dee Dee
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
The fresh start on a new 30-year payment cycle may not be as harmful as the insidious scheme of enticing folks to take accumulated cash-value of equity OUT of their martgage "account". It's that equity that they need to rely on in later years. Re-Finance is wonderful if one truly does score a lesser % rate and maybe it takes a few years to make up for closing cost fees. It's the Cash-Out deals that twist the knife. Of course, an over-valued appraisal helps no one in the process.....except the loan officer, who has no liability whatsoever. The gurus of economic forecasting would say that re-cycling cash through the engine of the national economy is good, which it is, as it keeps new SUV's rolling off the factory floor and big-screen TV's (made outside the US !) in all our living rooms. Adding insult to injury, think of all the spending done on credit cards.....which often is buying things you do not really need, with money you do not really have, to impress people you do not necessarily like. Conspicuous consumption can be habit-forming.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
The gurus of economic forecasting would say that re-cycling cash through the engine of the national economy is good, which it is, as it keeps new SUV's rolling off the factory floor and big-screen TV's (made outside the US !) in all our living rooms. Adding insult to injury, think of all the spending done on credit cards.....which often is buying things you do not really need, with money you do not really have, to impress people you do not necessarily like. Conspicuous consumption can be habit-forming.

Good points, Ross. Those gurus are being very short-sighted, IMO.

What might be keeping the economy plugging along today could come back to haunt us if social security ceases to exist and the senior citizens of tomorrow can no longer work to pay their mortgages.
Far too many forget that today's toys will be the substance of tomorrow's landfills.
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
I think about those that after 6 week course people were securities advisors I think the company is PrimeMerica or something like that. They'd TRY to talk people into Refinancing there home to BUY stock. Anybody else remember something to this affect?? Think about the ones that did do this. OUCH!!
 

Alan Simmons

Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I think that most Appraisers learn very quickly to avoid talking shop at social gatherings. Even the most well meaning answers to trivial questions seem to eventually result in disagreement.

There is something very similar and just as insidious for those of us with Finance degrees. We learn very quickly to avoid discussions about money.

Most people subscribe to the blind squirrel theory of investing (including their house) and heavens forbid someone not validate their thinking. Even if it was to cash out an IRA at 40% so they could greatly improve the value of their house by installing a hot tub in the kitchen (no offence to anyone who has such a kitchen).
 

liznindy

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Indiana
DeeDee,

I know a little about reverse mortgages as I have performed a number of FHA appraisals for these type of mortgages. (The appraisal process is the same as typical FHA appraisals).

A few facts:

Must be 62 years old or older (this includes spouses).

No income requirements!!!

Must have equity in your home (of course)





There are several options on how to receive the money (or a combination of these may be feasible) :

Pay off remaining mortgage (so you have no mortgage payments);

Home equity line of credit (my favorite as the used balance receives interest, like a bank account);

Lump sum...

The mortgage amount is determined from a formula which considers primarily the age of the applicant (how long will they live :wink: ) and equity in the home.


The reverse mortgage is paid when the home is sold. This may be at the occupants death or for any other reason. You can even use a reverse mortgage to purchase a home (if you have a large enough down payment).

The mortgage payoff can never be more than the value of the home.



I don't know all there is to know about reverse mortgages, but I plan to get one when I reach 62. In my experience, the mortgage broker fees are more than typical, but these can be included in the reverse mortgage as well (of course).


No out of pocket expenses....No mortgage payment....No income requirements....Live in your home payment free til death (except for taxes, maintenance)....Where's the downside???

Downside is the kids don't receive the homestead in the inheritance, BUT, they (kids) wouldn't have to worry about dear old Dad and Mom having to eat cat food to make ends meet!

With rates at current lows, the reverse mortgage is even more appealing in my opinion. Seniors are not getting much in the way of interest on savings, so the equity of the home can be tapped for living expenses.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Okay, this helps with some of my questions on the other post I started. Thanks.
 
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