Kevin's Corner

Resolutions

Happy New Year! Out with 2006 and in with 2007. Whether it is to lose weight, exercise more, start a new hobby, or get your finances in order, it is that time of the year when you make resolutions for the new year. How many of you make the same resolutions every year and start out in January with high hopes and enthusiasm but loose the spirit by March? Well this is the year to get it done. Be disciplined and be able to make different resolutions in 2008.

My favorite resolution is getting your finances in order. Paying off credit card balances, reviewing insurance, updating wills, budgeting, and reviewing investments are a few of the key tasks to be taken on. Making sure that cash in is more than cash out. Facing reality and doing something about it is a critical component of dealing with the upcoming year. Too many people ignore their real financial condition and allow themselves to either fall further into credit card debt or spend down their nest egg.

Obviously, cash flow is very important and whatever you can do to improve it makes life a little easier, particularly if you are retired. Some expenses go up and there is nothing you can do about it. Property taxes, medical insurance, utilities, and groceries are examples of expenses you cannot control. If you are on a fixed income, the inflation impact on the rising cost of these types of expenses has caused a reduction in the buying power of a fixed income retirement.

So, if you can’t control the increase in expenditures why not look at ways to increase cash flow by increasing cash in. What are the choices? Well, you could exit the retirement world and seek employment. Or, you could restructure your assets and try to maximize cash flow from them.

As usual, this is where a reverse mortgage comes in. A reverse mortgage allows you to “restructure” your primary residence into a cash-producing asset without taking on any new monthly payment. Home equity, which could be your largest single asset, is useless unless you sell your home or borrow it. What a great opportunity to improve cash flow without having to get a job or sell something! I wish I were 62; I’d get this done in a heartbeat!

A reverse mortgage is a unique financial tool that allows homeowners 62 or older to access the equity of their primary residence without being required to make monthly principal and interest payments. Repayment of the loan proceeds, interest and fees is deferred until the last borrower permanently leaves the home, thereby, allowing homeowners to live in their home for as long as they can. The amount of equity that can be accessed is calculated based upon the age of the youngest borrower, location of the home, value of the home and current interest rates. The proceeds made available through the program can be received as a lump sum payment, line of credit or in monthly installments. The proceeds can be used for any purpose. There are no changes in property ownership, a lien is placed on the home like any other standard mortgage.

Reverse mortgages have to be in first lien position which requires the first use of the loan proceeds is to pay off any current mortgages or home equity loans. They are also non-recourse loans which mean that you can never owe more than the fair market value of your home at the time the loan is repaid. You can never leave a debt to your heirs. The most popular reverse mortgage program: FHA’s Home Equity Conversion Mortgage (HECM) is insured by the US Government which allows lenders to lend high percentage of the home equity and also guarantees that the loan’s benefits will be available to the homeowner regardless of what happens to the lender or investor. You are protected for life.

The first step is call me for a free no obligation meeting to learn more about how you can put your financial house in order and scratch one resolution off the list! Make 2007 the year that you did something about making life easier.

Senior Security Capital