Why a Reverse Mortgage?
Because Life Happens! When we retire and drop out of the 9 to 5 workforce, it’s easy to settle in and watch the world go by. But if you’re thinking that the ups and downs of the economy won’t affect your retirement, think again.
I started my career in the mortgage business in 1981 in the Phoenix Metro area. Mortgage interest rates were 18.5% and to say the economy was sluggish would be a huge understatement.
The Valley of the Sun was (and still is) a retirement destination and I was able to interact with a number of retirees. Because 401k’s and IRAs were relatively new, most of them were heavily invested in CDs. It was amazing how much time they spent shopping for the best rate when their CDs matured. The average yield was between 12-13% and their retirement strategy was working well for them.
But then LIFE HAPPENS!
President Reagan’s economic policies began to get inflation under control. As a result interest rates began to drop. By 1985 mortgage rates had declined to about 10.5%. At the same time the local retirees saw their incomes drop by 50% as CD yields plateaued at 6.5%. That was a 50% decline in their incomes!
Then LIFE HAPPENS!
Do you remember “Black Monday”? October 19, 1987?
It was the largest single day drop in the history of the Dow, 508 points (22.6%). I remember my father-in-law being in full on panic mode because he was just a couple of years short of retirement and he felt his retirement plans were going up in smoke. Not only was the stock market affected but home values decreased by about 20% over the next few years. Fortunately the economy turned quickly and my father-in-law was able to retire almost on schedule.
By 2006 our stock portfolios and home values had reached all time highs and the outlook for our retirements was bright.
Then LIFE HAPPENS!
The Great Recession which officially lasted from December of 2007 to June of 2009 (though some might argue we’re still experiencing its effects) saw the DOW drop from over 12,000 to around 6200 AND saw home values plunge by more than 40%. For many of us whose retirement plans were vested in the market and in our home’s equity, retirement plans were becoming a distant memory.
No one knows for sure what will happen with interest rates or the economy, but I can tell you for sure but they will do one of three things: Things will go up, Things will go down, or Things will stay the same.
In only one out of three of those scenarios will you get better terms on a Reverse Mortgage than you can get today. It’s your money, how much of a gambler are you?
If you’re not sure if a Reverse Mortgage is the right retirement tool for you, let’s sit down and discuss your options.