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A Good Time For Reverse Mortgages in California

The old adage “Don’t put off tomorrow what you can do today” may be especially true for anyone considering a reverse mortgage in California right now. Economists have speculated for months about a potential “double dip” in the housing market,a second drop in real estate values since the 2008 recession – and now it appears more likely to happen than ever.As reported in Yahoo Finance and CNBC home sales are continuing to drop in conjunction with stubborn unemployment rates,climbing gas prices, and few mortgage applications.And while economic conditions in other parts of the country may let the double-dip slip by largely unnoticed,California appears set for an unavoidable drop.

The California housing market is already notoriously over-supplied, with Sacramento and central California cities frequently showing on “worst market” forecasts.The already fragile condition of California’s real estate means there are no buffers against jolts to the market, and any downturn in the market will be felt by home owners immediately.Officially known as a Home Equity Conversion Mortgage,a reverse mortgage allows seniors sixty-five years of age and above, who own a home,to mortgage their home equity to a bank for cash. Reverse mortgages are insured by the U.S. Department of Housing and are not repaid during the lifetime of the borrower. When the borrower passes, the loan is repaid by sale of the mortgaged property – alternatively, the property can be retained by the estate if the borrowed amount is repaid.In the event of a decline in property value, government regulated safeguards ensure that the debt borrowed is never greater than the current value of the home, protecting heirs from any potential debt. Reverse mortgages are encouraged to be used for paying for unexpected medical bills, declines in income, and other financial shortfalls. That said, the looming housing market decline pushes a tough decision on two groups of senior citizens. Seniors already considering a reverse mortgage will need to make a decision sooner rather than later in anticipation of a housing price drop, which would reduce the amount they could borrow through the reverse mortgage.

Additionally, seniors living under a tight financial budget may also be forced to decide on a reverse mortgage now: a drop in home values could impact the overall economy in California and potentially result in a decline of income and financial stability felt across the state. Therefore, if home values and the economy recede again, then seniors that would be financially vulnerable in the future would benefit the most by filing a reverse mortgage now before property value declines. Of course, this is not a simple decision. Reverse mortgages accrue interest like any other loan and come with higher origination fees. The fees and interest are wrapped into the reverse mortgage and are not felt by the borrower, but they do affect the equity of the home that would otherwise be inherited by heirs. These seniors will have to assess their financial strengths and potential weaknesses and weigh the potential costs of the reverse mortgage in their passed inheritance versus the assurance of financial stability in a struggling economy.

About Author
Michael Fullam Founder of Trinity Reverse Mortgage. For more details on reverse mortgage and california reverse mortgage than please visit our website www.trinityreversemortgage.com

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