"But it's barely $100!"

Yes, you've heard that interest rates are at historic lows and everyone should look into refinancing right now.  Some of our clients are saving dramatic sums of money in interest payments each month and year.  Some of our clients are not only saving on interest, but they are also reducing the term of their loan.  I have to tell you that it does my heart good when I see a client save $250 each month, money that they can redirect to debt elimination or retirement savings.  For one of our clients recently, this savings meant the difference between sending her son to college and not.  Now, how's that for dramatic?!  By doing something as simple as refinancing their mortgage to a lower rate, we are seeing dreams come true.  Yep, I love my job.

For some of our clients, the savings is not that noticeable.  There have been a few clients I talked with this week that might only save $10 to $20 per month by refinancing.  With savings this low, it's hard to justify spending $425 on an appraisal.  I have recommended for many of these folks that they stay put in the mortgage they currently have.  When you already have a fixed interest rate of 4.25%, that's not a bad place to be.

But consider one of my clients I spoke with this week.  By refinancing, she will save nearly $100 per month.  For some of us, we might have a hard time moving forward with a decision when the savings is not as high as others are seeing.  I've talked with a few homeowners this week that would simply shrug off $100 a month as insignificant.  While some might say that $100 is a drop in the bucket, it is not so for this gal.

For her, a $100 lower house payment means she can get better coverage on her health insurance.  It means she can finally get serious about saving for retirement.  It means she can buy the better quality pet food for her beloved beagle.  It means that she doesn't have to go back to rework her budget just because she needs to replace her sneakers.  You see, for her, $100 per month means that we have cut her housing expense by more than 10% every month.  Now that's the kind of life-changing results that gets me excited.

What's in it for you?  Should you or someone you know take advantage of these historic low rates or is this just hype?  I don't know, but I wonder what you could do if your house payment were 10% lower each month.  I'd love to see what better uses you could put this money to.  All you have to do is grab a recent mortgage statement and spend about 10 minutes on the phone with me.  I can give you a quick analysis to see how much you could reduce your house payment.

At your service,

Christine Jensen

Reverse Mortgage - where's the catch?

My dear husband has always been a proponent of critical thinking.  Being around him I've learned to systematically evaluate claims so that I can carefully separate fact from fiction.  And of course, growing up around my father I learned that good things come to those that work hard and you don't get something good for free.  Thus, when something looks too good to be true, I certainly know that it likely is - too good to be true.  Or is it?

This week, I had the privilege of sitting with one of my clients to evaluate whether a Reverse Mortgage would be the right tool for him and his wife to consider.  This nice man that has worked very hard all his life reminded me of a phrase that so many of us have engrained in our psyche - there is no free lunch.  So you can imagine his skepticism (and my own!) when we discussed a feature of the Reverse Mortgage: No Recourse. 

What exactly does that mean, no recourse?  It means that when the senior borrower is done living in the home as their primary residence they simply sell the home, payoff the mortgage balance with proceeds of the sale (as they would with a traditional forward mortgage) and put the check in their pocket as they move to their next home. But in the rare and unlikely event that there may not be enough value in the home to payoff the balance remaining on the Reverse Mortgage then there is no obligation on the part of the senior or their heirs to make up the difference on the amount owed.  The mortgage company will not ask the senior nor their heirs to liquidate other assets to satisfy the balance.  There is no obligation to the borrower nor their heirs to make up any amount still due after the home is sold.  There is no recourse to other assets the estate may have.  The other assets remain intact.

How is this possible?  It is a function of the FHA mortgage insurance premium (yes, the same type of FHA MIP that we see on traditional forward mortgages)  that is part of a Reverse Mortgage.  If an insufficient amount of equity remains to pay off the loan balance then a claim is made on the FHA Mortgage Insurance Premium to satisfy the difference.  It is with this insurance policy that the No Recourse feature is made possible.

There is no other loan type that we have that offers this safety feature to the client.  But truly, it is available to our senior borrowers with a Reverse Mortgage