October 9, 2008 Newsletter
Strategies for the current market:
If you are 62 or over and have some equity in your home, consider a reverse mortgage NOW. Why? Because reverse mortgages are based on the property values at the time the lender appraises the property. While we have seen property values slip, and we hope they don’t go any further, to get your property appraised while its value is still up would be smart. Here is how a reverse mortgage works. The lender bases the loan on two main factors, how much is the property worth and how old is the borrower. The rate is also considered, but given the fact that it’s based on the LIBOR or T-Bills, it’s still very low. The lender then uses a formula to determine the maximum they can lend, figuring on the value and its anticipated increase in value over time versus how long the borrower is likely to stay in the house. Once they fix a value, they determine a maximum amount you can borrow. When you settle they pay off the existing loan and the closing costs. You can take the additional the additional amount in a lump sum, receive monthly payments or just leave it there as an equity line. You don’t make any payments on a reverse mortgage; the lender looks to the property for repayment when you move or when your estate liquidates the property. If your real estate is your largest asset, think about securing its value at current numbers so you can utilize the equity when you need it. We can recommend lenders who do reverse mortgages every day.
Equity lines of credit. Under the same thought process, now is a good time to look at your credit line. If you don’t have one, and you have equity, now is a good time to secure one, even if you have no current need. You want to be able to tap into that equity when you need it.
If you have an equity line and you anticipate needing it soon and you haven’t used it, check with your lender. Some lenders have frozen equity lines if they think the loan to value is too close.
Refinance. The next six months will be extremely interesting in the mortgage market.
The Fed rate went down yet mortgage rates went up as much as 3/8s. With the stock market in flux, look for more money to flow into bonds. When that happens, rates should drop. Last week we went to 5 7/8 for a couple days and then back over six. Keep in contact with us; we can let you know when the timing is right. If you can get 5 7/8 to 5.5 take it, it’s unlikely to go below that.
Estate planning. Now is the time to re evaluate your will and retirement savings. Your accountant is your best bet to look at retirement savings. We handle wills, trusts and powers of attorney. Call or email for a will questionnaire. It will help you organize your thoughts about planning for your future.
As always, we want to be your law firm and title company. Call or email with questions. My email address is firstname.lastname@example.org.