Reverse Mortgage


 

States Craft Programs for Stressed Owners
Arizona, Florida, and Michigan propose using federal funds to subsidize mortgage payments for struggling borrowers.
Read more >
Economist Says It’s Time to Raise Rates
Ken Rosen of the University of California Fisher Center for Real Estate says the financial crisis is over and that it’s time for the Fed to increase interest rates.
Read more >
Mortgage Scams Continue to Grow
According to the Mortgage Asset Research Institute, mortgage fraud is still on the rise.
Read more >
Housing Analyst says ‘Worst Is Over’
Metrostudy, a real estate research firm, says demand is up in certain cities while inventory levels decrease.
Read more >
Vacancy Rates Slip Slightly
The U.S. Commerce Department reports that vacancies have declined since 2009, a positive sign for the market.
Read more >
Reverse Mortgage Trend Line Drops
Limited by the amount they can borrow against the value of their house, fewer seniors are opting for a reverse mortgage.
Read more >

 

Top News
The tale of Goldman’s fraud charges – CNN – – In a 22-page complaint filed Friday, the Securities and Exchange Commission charged Goldman Sachs with defrauding investors on real estate securities likely to go bust. The legal document reads less like a court filing, and more like a twisted story 
U.S. shuts 8 more banks; 50 total have been closed this year – USA Today – – Regulators have shut down eight banks three in Florida, two in California, and one each in Massachusetts, Michigan and Washington
Market News
Real Estate Weekly: Home-buyer tax credit likely won’t be extended – MarketWatch – – By MarketWatch Don’t miss these top real estate stories: Those hopeful that the home-buyer tax credit will get extended may be disappointed.
U.S. housing starts rise for a third consecutive month – MarketWatch – – WASHINGTON (MarketWatch) – New construction of U.S. houses expanded for the third straight month in March, the Commerce Department estimated Friday.
Technology News
Regulators release online privacy form builder – NAFCU – – Federal regulators on Thursday released a free, online privacy form builder that credit unions, banks and thrifts can use to develop customized privacy notices that conform with the Gramm-Leach-Bliley Act. The form builder is based on the model form
Other News
Outlook for REITs Still Hazy – GlobeSt.com – – NEW YORK CITY-Although some of the highest-profile US REITs tracked by Fitch Ratings have been assessed with stable outlooks over the past three months, the sectors overall credit forecast remains negative for 2010, the agency said in a report last week.
Builders likely to offer incentives after federal tax credits expire – Los Angeles Times – – Reporting from Washington With the April 30 deadline looming, home buyers need to get a move on if they hope to qualify for the federal tax credits of $8,000 for first-timers or $6,500 for owners wishing to move up. But even if you don’t have a binding 
More Singles Buying in Suburbia – Wall Street Journal Online – – considered the bedroom count important, while 18% of men did. Males were more likely to consider foreclosures or short sales: 38 percent. Women came in at 29 percent. Coldwell Banker said it conducted a national online survey that generated 1,050 
Rebuilding Florida – one house at a time – CNN Money – – Though the state is still digging out from the overbuilding excesses of the housing boom, home builders are ramping up their operations for the first time in four years. They are buying land, hiring workers and actually selling homes. Most of the action 
Reverse Mortgages Now Look Cheaper – Wall Street Journal Online – – Reverse mortgages have long been considered one of the most expensive ways to extract cash from your house. But that is changing as some of the country’s biggest reverse-mortgage lenders are slicing closing costs helping even some affluent homeowners who

A Happy Retirement: 6 Steps That Work

Wednesday, January 13, 2010
ConsumerReports

Optimism about the nation’s economic prospects is back. That’s the most encouraging news from our latest Consumer Reports Retirement Survey of more than 24,000 of our online subscribers.

More from ConsumerReports.org:

How to Pay Down Your Credit Card Debt

The Dangers of Reverse Mortgages

The Fine Print on Job-Loss Protection

 

Among the retired, semiretired, and those still in the workforce, 60 percent of 54- to 76-year-olds polled by the Consumer Reports National Research Center this fall said that they were feeling upbeat about an economic recovery. That compares with just 34 percent who felt that way a year earlier.

But if our readers feel optimistic about the national economy, they still have grave concerns about their own financial futures. Our survey found that 70 percent of retired subscribers said they were highly satisfied in retirement, but some had fears about adequate resources and health-care coverage, some were getting the wrong information about important topics, and some were disenchanted with retirement.

Among the survey’s less sanguine findings:

• Overall, median net worth declined 18 percent. Our subscribers saw an average 11 percent drop in their retirement assets.

• Median net worth dropped 30 percent for those still working. In fact, 23 percent weren’t sure they’d be able to retire. More than half of those said they wouldn’t have enough money to live without working. Only 19 percent of workers were highly satisfied with their retirement planning.

• Retirement isn’t always voluntary. Twenty-four percent of full-time retirees told us they had stopped working because they were made to, their health declined, or they no longer had the energy to work. Those retirees were less satisfied than others. Among the semiretired, 33 percent said they had to scale back from full-time work for the same reasons.

• Some people make plans based on incorrect information. Among subscribers who expected to retire early, 17 percent didn’t realize they’d collect less than their full Social Security benefit. Nineteen percent thought they could bridge the gap between employer-sponsored health coverage and Medicare with a privately purchased health-insurance plan, an option Consumer Reports has long criticized as inadequate, restrictive, and impossible for many to obtain or afford.

The $1 Million Sweet Spot

Retired subscribers’ satisfaction with their retirement reached a plateau when their net worth was between $500,000 and $1 million. Having more didn’t make much of a difference. But notably, even among those who reported having less than $250,000 in net worth, more than half were highly satisfied with their retirement. In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income.

consumer.jpg
Survey findings reflect the experiences of Consumer Reports online subscribers and might not represent the U.S. population as a whole.

 

What Succeeds Over Time

Last year’s whipsaw stock market upended the fortunes of even the most seasoned investors. At the same time, it proved the argument for investing discipline. Our survey found that investors who didn’t much change or increased their investments after the market’s swoon in October 2008 were more highly satisfied than those who became more conservative.

That discipline bears fruit over time, our survey confirmed. Those who began saving in their 30s had gains in net worth of almost $400,000 more than those who started by their 50s or 60s. Long-range planning allows more aggressive investing, and retirees who told us they used that approach had a median net worth of more than $200,000 over those who were more conservative. Folks with family money or early career success generally had a leg up on others, no surprise. But retirees from all backgrounds credited their traditional defined-benefit pension plan — the kind that pays a set income for life, an increasingly rare benefit — among the best “steps” they took toward retirement.

For those in their 20s and 30s, the advice is clear: Choose a career that has the potential for early financial success or find a job with a secure defined-benefit pension (or both, if such a job exists); buy a home in which to build equity; and invest early and, in those early years, relatively aggressively. Even respondents who started saving in their 40s had, on average, $230,000 more than those who started saving in their 50s or later.

And if that advice seems to come too late for you, there’s still hope. Our recommendations are geared to people who are still working but are closing in on retirement, though the advice makes sense for people of all ages.

Six Steps

Live modestly: This was the top “best step” listed by retirees who said they were highly satisfied with their lives; 39 percent said they did not spend beyond their means. One way to rein in spending is to create a budget using store-bought software such as Quicken or a free online service such as Yodlee MoneyCenter (http://www.yodlee.com/). Those programs help you track your spending and your progress toward meeting saving goals by consolidating your financial data from banks, credit-card companies, and brokerages.

Maximize your savings: Even if you don’t have a defined-benefit plan, regularly contributing to a 401(k), 403(b), IRA, or other investment vehicle pays off, our satisfied retirees told us. (Saving too little was a regret of 27 percent of dissatisfied retirees.) At 50 and older, you can put as much as $22,000 into a tax-deferred, traditional 401(k) plan or after-tax Roth 401(k) or their 403(b) equivalents in 2010.

Reduce debt: Thirty-eight percent of retirees owed $25,000 or more on their mortgages. But 74 percent of retired respondents who were free of major debt reported being highly satisfied with their retirement. For greater peace of mind, pay off your debts before retiring. Even a low-rate mortgage can be a burden if other expenses rise and your income-producing assets falter. Notably, debt-free retirees had a higher median net worth than those with debt: $843,000 compared with $717,000.

In the current economic environment, accelerating payment of your mortgage can be a wise investment. Most certificates of deposit, bank accounts, and other safe savings vehicles are paying less than 2 percent, so putting your money into additional payments on a 5 percent mortgage instead offers a better return (though you’ll give up some tax deductions on mortgage interest). By making extra principal payments, you can whittle down your loan’s interest cost and term handsomely. For example, adding $100 per month to payments on a 30-year, $150,000 mortgage with a fixed rate of 5 percent reduces the total interest by almost $35,000 and cuts the loan’s term by 6 1/2 years.

Don’t invest too conservatively: Taking on even a moderate amount of risk pays off. Median net worth for retirees who said they took a middle-of-the-road approach was $836,000 vs. $671,000 for conservative investors. Notably, the difference in net worth between self-described moderate and aggressive investors was relatively small: a $57,000 advantage for the more aggressive. The lesson: You don’t have to go out on a limb to get the best return. Diversification will help reduce your risk.

Study your options: When you design your dream retirement, also devise a Plan B in case you’re forced to retire early or can’t sell your home (a predicament of 8 percent of surveyed retirees). Your alternative plan might include a more restrictive budget or a different retirement location. To determine your Social Security benefits at different ages, go to http://www.ssa.gov/.

A major issue will be health-care coverage. You can move to your spouse’s insurance plan, find a new job with health benefits, extend your own employee coverage under the COBRA law (go to http://www.dol.gov/ and type “cobra” in the search box for details), or look for private health insurance. If you go that last route, try to get group coverage through professional or other membership associations.

Take the intangibles seriously: Stress affected overall satisfaction in retirement even more directly than net worth, our survey found. A quarter of retirees cited non-monetary stresses such as family relations, poor health, a loss of identity, and boredom. So before you retire, develop hobbies and line up volunteer work, trips, or part-time jobs. Strengthen your personal connections outside the workplace. And, of course, do what you can to maintain good health.

The Case for Diversification

Diversified investments — stock and bond mutual funds and real estate, for instance — correlated with higher net worth among the retirees in our survey. Those who invested in three or fewer investment vehicles had a median net worth of $496,000 compared with $861,000 for those with four to six. Over the long haul, variety worked in our readers’ favor.

But diversification is your friend even in the short term. In recessionary times, diversifying among just four asset classes — large- and small-cap stocks, long-term Treasury bonds, and shorter-term Treasury bills — reduces the risk that everything will decline together.

Lessons From the Past

When the Consumer Reports Money Lab analyzed investment returns two years after the official ends of three past recessions (those ending in March 1975, July 1980, and March 1991), we found that conservative, moderate, and aggressive portfolios all made money. How they were allocated didn’t much matter; total returns of conservative portfolios (one-quarter in all four asset types) and aggressive ones (40 percent small-cap stocks, 35 percent large-caps, 15 percent long-term Treasuries, and 10 percent Treasury bills) varied by no more than 4.3 percentage points.

Still, it’s important that you don’t put all your eggs in one basket. In the two-year slow-growth recovery after the 1991 recession, short-term Treasury bills were up only 1.9 percent while long-term Treasury bonds gained 27.5 percent. Both are considered safe. Among stocks, large-caps rose 23.2 percent and volatile small-cap stocks were up 46.7 percent.

Erin Meredith, CMPS®

The Meredith Team
Danville, CA 94526

925-918-0585 direct
925-918-0585 alternate
925-226-3215 fax
erin@cmgmortgage.com
http://www.cmgmortgage.com

Special Tax Break for Seniors Over Age 70 1/2

In 2009, many taxpayers over age 70 1/2 are allowed to skip one year of withdrawals from their retirement accounts without penalty! Typically, you must take minimum distributions from your retirement accounts after age 70 1/2 in order to avoid paying penalties. This is known in tax lingo as a “required minimum distribution”, or “RMD.” Under normal conditions, the RMD rules would not be that big of a problem for most taxpayers because they simply require you to start drawing income from retirement funds that you’ve accumulated over the years.

However, in light of the most recent turmoil in the financial markets, now is really not a good time for most people to be selling investments at depressed market prices in order to draw income from their retirement accounts and meet the RMD rules. That is why Congress and the President agreed to waive the RMD rules for one year — 2009 — and allow many seniors age 70 1/2 and older to leave their money in their retirement accounts. If you meet the requirements for this new law and decide to leave your funds in your retirement accounts, you could potentially achieve two enormous benefits:

  1. You could avoid depleting your investment accounts after they have declined in value due to adverse market conditions
  2. Your retirement accounts could be better prepared to participate in potential investment gains if the financial markets recover in 2009

Interestingly, since 1926, we have had 13 bear markets total, 9 of which (including the current bear market) were combined with a recession. In the 8 prior bear market-recessions, the average decline on the S&P 500 was -39%. The average 1 year return on the S&P 500 after the lowest point of the bear market was +46%. In other words, if history is any guide, the markets could recover quite nicely once this bear market is over. If you keep your funds invested in 2009 instead of taking minimum distributions, this could pay off well for you.

Of course, it is important to note that I am providing this information to you as your mortgage planner, in order to make you aware of some of interesting ideas that may benefit you. I am not an investment, tax, or legal advisor, and this information does not constitute legal, tax or investment advice. I definitely recommend that you consult with properly licensed legal, tax and investment advisors for specific advice pertaining to your individual situation.

SHOPPING AROUND FOR A MORTGAGE
Here’s the inside scoop on how to do it right.
 

Erin Meredith, CMPS®

The Meredith Team
Danville, CA 94526

925-918-0585 direct
925-918-0585 alternate
925-226-3215 fax
erin@cmgmortgage.com
http://www.cmgmortgage.com

 

Always make sure you are working with an experienced, professional lender. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are four simple questions your lender absolutely must be able to answer correctly. If they do not know the answers immediately leave and go to a lender that does.

  1. What are mortgage interest rates based on? The only correct answer is Mortgage Backed Securities or Mortgage Bonds, not the Fed or the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. Do not work with a lender who has their eyes on the wrong indicators.
  2. What is the next Economic Report or event that could cause interest rate movement? A professional lender will have this at their fingertips. To receive an up-to-date weekly calendar of weekly economic reports and events that may cause rates to fluctuate, contact a Certified Mortgage Planning Specialist professional today.
  3. When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? The answer may surprise you. When the Fed makes a move, they are changing a rate called the “Fed Funds Rate”. This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. For more information and explanation, contact a CMPS professional today.
  4. What is happening in the market today and what do you see in the near future? If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.

Be smart… Ask questions… Get answers!

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life but CMPS professionals do this every single day. It’s your home and your future. It’s our profession and our passion. We’re ready to work for your best interest.

 

fast facts
  • What are mortgage rates
    based on?
  • What is the next Economic
    Report or event that could
    cause interest rate movement?
  • When Bernanke and the
    Fed “changes rates”, what
    does that mean?
  • What is happening in the
    market today and what do
    you see in the near future?

Refinance your investment property to lower your monthly mortgage payment and increase your rental income.

  • Use the equity in your rental property to buy an additional property and expand your investment portfolio. This allows you to invest in properties with up to four units.
  • You could also use the extra money to fund additional investment opportunities, such as starting up a new company or buying high-return stocks or bonds.

Maximize Your Return on Investment

  • By increasing your cash flow, you’ll have money to make repairs or home improvements and increase the value of your investment property.
  • Allows you to refinance your mortgage at any time with absolutely no pre-payment penalties.

Popular Home Loans for People Buying Investment Homes

  • A 30 Year Fixed: Avoid surprises and know your payment is fixed.
  • A 15 Year Fixed:  Get the cash you need now and pay your investment off quickly.

FotoFlexer_Photo

Thursday, November 05, 2009

Top 6 Things to Know When Investing in Real Estate in Retirement

                  
 
 
FOXBusiness
 With the real estate market seemingly ripe for the buyer, many investors are turning to property as a long-term asset. For those nearing retirement, owning a home can provide an extra layer of security, but it’s not without its own share of headaches. We checked in with experts to find the top six things to consider when investing in real estate later in life.

1.) Ask first: Does this make sense financially?

“At any age, especially nearing retirement, you never want to be ‘house poor’,” said Kathy Braddock, a partner at Charles Rutenberg Realty, one of the top 10 real estate firms in New York.

Whatever a person might be spending on a house, he or she should make sure there is enough money left over to enjoy the other things they want to experience in retirement. There is always a danger of not leaving enough liquid assets after the purchase of a home, and most people get prequalified from a mortgage broker or bank for the amount they can afford, not the amount they should be spending.

“Because a bank isn’t going to factor in the $5,000 European vacation that you and your family might want to take, it’s important to put in writing all the additional expenses you might incur in a year and compare that against the monthly mortgage payment you might take on,” said Braddock.

2.) Pick an area you’re familiar with.

Though that condo in Florida might look enticing, you’ll be better off sticking with an investment in an area you already know, according to Braddock.

“It’s very much like dating. You can meet someone online and they might seem great, but until you go face-to-face with them, you are never really sure,” Braddock said. “Just like with a person, there needs to be a unique chemistry with property. If it feels good to you, it will feel good to others when the time comes to sell it.”

If buyers invest in an area they already know, they’ll be aware of any problems in the neighborhood and able to feel that instant “chemistry” so desirable with property, Braddock said.

3.) Interview your broker.

Before you purchase a home, you’ll need a broker, and that broker is going to be working for you.  As the boss, you’ll need to interview your prospective employee.

“Absolutely interview them, because brokers are not all created equally. Some of them are simply fabulous, and others are a nightmare,” said Braddock.

Choosing the broker should be given as much thought as choosing a doctor or a lawyer, said Braddock, because they’re going to be helping you with the single-largest financial investment you may make in your life.

“You would never choose your surgeon based on whether or not they were someone’s cousin or friend who needed the business, and you shouldn’t choose your broker that way, either,” said Braddock. “It’s critical you are in the hands of the right person, because they can make or break the transaction.”

4.) Watch the cycles.

Although the real estate you buy today might be value-priced, you have to consider how much it will sell for when the time comes to put it back on the market.

Over the last 35 years, real estate prices have fluctuated up and down in eight to 12-year cycles, according to William Bronchick, Founder of the College of American Real Estate Investors based in Denver, Colorado.

 “If you’re planning to sell the property one day, you have to ask if the investment is going to be appropriate at the time you sell it as much as you have to ask if it’s appropriate now,” said Bronchick. “Ideally, you would time it so that you’re buying when prices are low, and selling when prices are high.”

Identifying the cycles can be tricky, but a good real estate broker can help you with your decision by analyzing housing sales and inventory of the market in which you’re investing, said Bronchick. Studying these patterns can give you enough of a general idea where there’s money to be made.

5.) Consider the cost of management if buying a rental property.

Many retirees invest in rental properties as a steady source of income in their retirement, but the costs of management and upkeep should not be overlooked.

“If you’re planning on keeping rentals as a retirement investment, who is going to manage it? If you’re not physically able to do it, or if you don’t have the time, that’s going to be an added expense,” said Bronchick.

Typically, a management company charges 7%-10% of the gross monthly rent for property upkeep.

“Keep in mind that if you have five rentals and each one brings in $1,000 a month, it’s not a $5,000 profit — it will be closer to $4,500 or the added cost of your own time if you do it yourself,” said Bronchick. 

6.) Tax deductions on primary residence vs. secondary homes

Primary residences and secondary homes are alike in that a homeowner can deduct the property taxes and the interest on their mortgage from both properties.

However, when a homeowner sells a secondary home, the property is treated no differently than any other investment like stocks or bonds, and capital gains taxes on that home would weigh in at 15%, according to Jay Butler, associate professor of real estate at the W. P. Carey School of Business at Arizona State University.

“If a home is not your primary residence, you need an accountant,” said Butler. “There are so many ‘ifs’ ‘ands’ and ‘buts,’ it’s unbelievable.” 

Unlike a secondary home, when a primary residence is sold, the owners can collect up to $500,000 in profit tax-free. A trick for homeowners looking to avoid capital gains on that secondary home? If you live in a home for two consecutive years in a five year period, it automatically becomes a primary residence.

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