Practical real estate financing advice that can creat wealth

link to article

http://www.post-gazette.com/pg/07284/824509-68.stm

Affluent senior citizens tapping reverse mortgages for extra cash

Thursday, October 11, 2007

By Tim Grant, Pittsburgh Post-Gazette

Daniel Marsula / Post-Gazette

Reverse mortgages have been a popular tool for cash-strapped retirees, but wealthier folks are finding ways to use them, too.

With a mansion worth $21 million, a wealthy retiree near Philadelphia decided the most logical way to access that cash and improve his standard of living was to take out a reverse mortgage on the house and invest the money for more income.

"That's obviously an exception," said Douglas Ziegler, a reverse mortgage officer with Gateway Funding in Horsham, Montgomery County, who handled the transaction for a 64-year-old man. "It's not your typical loan."

Yet deals like that are becoming more common.

Once considered the option of last resort for poor retirees struggling to keep up with the cost of living, reverse mortgages are now growing in popularity with more affluent senior citizens.

Eric Declercq, managing director of the reverse mortgage unit for Countrywide Financial Corp., said the company had recently done two reverse mortgages for about $10 million each.

"We believe the future of reverse mortgages lies in improving the quality of life, freeing up cash for travel, leisure and investments," Mr. Declercq said.

A few of my Own Comments

You will see that The affluent will take a product thats designed to help the poor and twist a little and get more of it  then the poor for whom it was originally created. Don't they have  a way with money? (refer to my previous post)

Also Note in the article and I quote "that the affluent want to improve their standard of living uh" pretty intriguing! don't they already have enough money?  the answer is  that of course they have saved up allot in tax deferred vehicle's like IRA"s and 401K and the like they are just  looking for the Best way, less taxing, a way thats more for them and not for uncle sam!

Also note the at the very last line of the article where Mr Declercq is quoted he has the following priorities

Travel

Leisure

Investments. This explains why so many people are struggling financially!

Sincerely

Joel Silberstein

Mortgage Planner

Comment on Ric Edelman: Strategies To maintain Wealth

Today while listening to the Ric Edelman's radio show a women called in. Apparently she was elderly and she owns 2 pieces of property one she currently lives in, and another an undeveloped piece of river front property and as large as 14 acres.

 Her question to Ric was that the house she lives desperately needs renovation and she is asking Ric if she can take out money from the other undeveloped property through a 1031 exchange.

Rick answered that 1031 exchange is merely a tax deferred method it takes all the money you get from the property you sell and rolls it into the new property therefore you will not have any money out of this transaction to renovate your home, therefore concluding that this strategy is not for her.

What I was starlet about was that he cut her short by answering what he did and elaborating on any other strategy therefore she might conclude from his answer that she should sell the property and incur a large capital gain and take part or the whole money (I don't know how big of a gain there is going to be) to renovate the property!

The problems I have with this is as follows

• Unnecessary tax to the government
• Taking an appreciating asset like Real estate and converting into a non appreciating asset that's analogous to buying an expensive Bentley for its stereo system that will be taken out.
• For Failing to show the client how to achieve greater financial comfort while holding onto the property and still achieve her objective of getting cash for the renovation of her other property

Now what would you professionals say about this conversation above?

I will follow up with my strategy in my next post!

Sincerely

Joel Silberstein

Mortgage planner

How the Affluent Manage Home Equity to

Safely and Conservatively Build Wealth

If you had enough money to pay off your mortgage right now, would you? Many people would. In fact, the ‘American Dream’ is to own your own home, and to own it outright, with no mortgage. If the American Dream is so wonderful, how can we explain the fact that thousands of financially successful people, who have more than enough money to pay off their mortgage, refuse to do so.

The answer? Most of what we believe about mortgages and home equity, which we learned from our parents and grandparents, is wrong. They taught us to make a big down payment, get a fixed rate mortgage, and make extra principle payments in order to pay off your loan as early as you can. Mortgages, they said, are a necessary evil at best.

The problem with this rationale is it has become outdated. The rules of money have changed. Unlike our grandparents, we will no longer have the same job for 30 years. In many cases people will switch careers five or six times. Also, unlike our grandparents, we will no longer live in the same home for 30 years. Statistics show that the average homeowner lives in their home for only seven years. And unlike our grandparents, we will no longer keep the same mortgage for 30 years. According to the Federal National Mortgage Association, or Fannie Mae, the average American mortgage lasts 4.2 years.

Given these statistics, more middle class homeowners are choosing to use their mortgage as a tool just like the wealthy -- those with the ability to pay off their mortgage but refuse to do so. Will you be one of those who create a new, liquid, financially secure dream?