Reverse Mortgage - Think Twice - in High Interest & High Inflation скачать в хорошем качестве

Reverse Mortgage - Think Twice - in High Interest & High Inflation

Retirement Planning Course for Canadians: OnDemand/Online https://businessin10.thinkific.com/co... Retirement Planning Courses for Federal Government Employees: OnDemand/Online https://businessin10.thinkific.com/co... Live Webinar https://businessin10.com/retirement-p... Public Service Pension Plan Courses: OnDemand/Online https://businessin10.thinkific.com/co... Live Webinar https://businessin10.com/public-servi... Businessin10 website: https://businessin10.com/ In this video we discuss we'll explore seven reasons why you might want to think twice before taking a reverse mortgage in a high interest and high inflation environment. Let's dive right in! Reverse mortgages can be a tempting option for seniors seeking financial security, but they may not be the best choice in every economic climate. Here are seven reasons to be cautious about reverse mortgages when interest rates and inflation are high. Reason 1: Higher interest rates. In a high interest rate environment, the cost of borrowing increases, causing the loan balance on your reverse mortgage to grow faster. This can result in a larger debt and less equity remaining in your home over time. As an example let’s say you have a house that is valued at $300,000 and you decided to take a reverse mortgage of $150,000, and according to some reverse mortgage intuitions, the interest rate for a 5 years fixed reverse mortgage is approximately 7%. The way a reverse mortgage is intended to work, you take the full $150,000 loan and you don’t have to pay this money, until you sell the house, you move into a retirement home or you pass away. So the interest on the $150,000 is accumulated and compounded, meaning the interest is added to the principal and you pay interest on the full amount, meaning you pay interest on interest. Let me explain, the $150,000 loan after 1 year when you add 7% interest, it becomes 160,500 loan, and now you have to pay 7% interest on the $160,500, so after 2 years with 7% interest the loan becomes $171,735 and so on, after 10 years the initial $150,000 loan becomes approximately $300,000 which is equivalent to the original value of your house. Now the value of your house will increase over time. The question that you need to think about is, will it increase by 7% per year? Either way the compounding interest will result in a larger debt that you have to pay eventually, and less equity remaining in your home. Reason 2: Decreased purchasing power. High inflation can erode the purchasing power of the funds you receive from a reverse mortgage. As the cost of living rises, the fixed income you receive might not be sufficient to cover your expenses. Let’s say the annual inflation rate is approximately 5%, the 150,000 loan will be equivalent to $143,000 after 1 year, and depending on the rate of inflation over time your purchasing power of the $150,000 loan decreases. So here you have 2 things working against you, the compounding interest which increases your debt over time and the inflation which decreases your purchasing power over time. Reason 3: Reduced inheritance. As your reverse mortgage balance grows, the amount of equity left in your home decreases, potentially leaving less for your heirs when the time comes to sell the property. Reason 4: Limited financial flexibility. Once you've committed to a reverse mortgage, you may find it difficult to access additional funds from other sources, such as a home equity line of credit, due to the outstanding loan on your property. Reason 5: High fees and closing costs. Reverse mortgages often come with substantial fees and closing costs, which can be even more significant in a high interest rate environment. These costs can eat into the proceeds you receive from the loan. Reason 6: Mandatory occupancy requirements. Reverse mortgage borrowers must maintain their home as their primary residence. In a high inflation environment, you may want the flexibility to downsize or relocate, but doing so would require paying off the reverse mortgage, potentially at a substantial cost. Reason 7: Missed opportunities for better financial solutions. By choosing a reverse mortgage, you may overlook other financial options that could provide better benefits in a high interest and high inflation environment, such as buying an annuity, or downsizing to a more affordable home.