5 common misconceptions about reverse loans that I STILL hear, almost every week:
- The bank owns the home. YOU OWN THE HOME
- When I die the bank takes over the home. YOUR HEIRS INHERIT THE PROPERTY
- Reverse loans are only for people in dire straits. FINANCIAL PLANNERS USE THEM AS A TOOL TO OFFSET DRAINING TAXABLE RETIREMENT ASSETS
- The bank will foreclose when one spouse dies. THE LOAN REMAINS IN PLACE UNTIL BOTH SPOUSES HAVE PERMANENTLY MOVED OUT.
- I will be taxed on the funds I pull out. FUNDS RECEIVED ARE TAX FREE.
It has certainly been a strange couple of months. Rates came down a bit, then bounced higher. The market continues to be extremely volatile.
Right now rates are running between 5.5% to 7% depending on program chosen and other factors such as FICO score, Loan to Value, etc. While property appreciation is decelerating, we are not seeing a drop in values, at least here in California. Builders have slowed on new construction which limits supply, and there is still a shortage of available inventory. Although affordability has removed some players from the field, for those who can qualify there is quite a bit of room for negotiation. A seller credit to buy down the interest rate is becoming quite common.
The new lender mantra is “Marry the house, but date the rate and the payment.” When rates come down, and they will, there will be time to refinance for those who buy now. And, buyers still have the upper hand towards building net worth by owning vs. renting.
The number of offers per property listed has decreased dramatically, so the buyer is definitely moving into the driver’s seat. And time on the market is increasing, while 40% of listings have reduced their price.
We just returned from a quick trip to Cabo Pulmo on the Southern East Cape of Baja. This is a protected marine park with a coral reef and lots of fish. Jacques Cousteau called it the Aquarium of the World with good reason. The sheer volume of fish is astounding. In addition to many varieties of tropical fish, we saw a large school of jacks, a white tip shark, some turtles and rays.
We traveled with a group of divers from the Dana Point Yacht Club.
As a lifelong USC fan and alum, I am happy to see our team finally consistently winning this year. I was able to attend the game vs. Washington on Saturday and had a blast with my grandkids.
As always please reach out to us with any questions and/or concerns you may have.