Is now a good time to tap into home equity?
Questions one should ask before getting a reverse mortgage Older homeowners aged 62 and older are sitting on a mountain of equity. Over $11 trillion dollars according to the National Reverse Mortgage Lenders Association’s Risk-Span Reverse Mortgage Market Index. With seniors awash in home equity is this a good time for older homeowners to tap into their home’s value? With home prices on average up 42% since the pandemic and the housing market showing signs of a reset or even a crash, the use of equity is a decision that should be approached with full consideration of the risks and benefits. What considerations should be weighed before tapping into one’s home with a reverse mortgage? Here are just a few, and as always, homeowners should seek the advice of a trusted professional and work with an experienced and skilled originator. Questions to ask before getting a reverse mortgage Will there be a future need for equity at the end of the reverse mortgage? If equity is needed to move into another home or obtain long-term care and that equity is the only means of paying those expenses, then a reverse mortgage may not be right the best choice. With most reverse mortgage borrowers not opting to make voluntary payments the loan’s balance increases each month with interest charged and insurance being added to each month’s balance. Is a move likely in the next 5 years? If a move is in the works or highly likely, then the costs of the reverse mortgage should be closely examined. The longer a homeowner lives with their reverse mortgage the lower their loan’s total annual costs would be since closing costs, upfront FHA insurance, and other fees are financed into the loan. 10 times when it may be a good time to get a reverse mortgage With home values at record highs and interest rates still below market norms, older homeowners should at least consider the benefits of a reverse mortgage before higher interest rates and lower home values may prevent them from qualifying for the loan. by Shannon Hicks August 22, 2022
Social Security Benefits Lose 36 Percent of Buying Power
An analysis of Social Security “cost of living adjustments” (COLAs) compared to the actual costs of goods and services purchased by older Americans found that Social Security benefits have lost 36 percent of their buying power since 2000. That’s according to a study released this month by The Senior Citizens League (TSCL). To put it in perspective, for every $100 a retired household spent on groceries in 2000, that household can only buy about $64 worth today. While this is an improvement from one year ago – when TSCL estimated that Social Security benefits had lost 40 percent of buying power over the same period – it’s still a significant number. Between January 2000 and February 2023, Social Security COLAs increased benefits by 78 percent, averaging 3.4 percent annually. But the cost of goods and services purchased by typical retirees rose by 141.4 percent, averaging about 6.2 percent annually. The TSCL is projecting the 2024 COLA to be around 3.1 percent. Below is a chart that shows the ten fastest-growing costs for items/services incurred by older Americans. by Darryl Hicks | May 11, 2023