Ryan’s Mortgage Blog:
I am hoping to get some feedback from readers today on a new program. Our company was asked to help promote a new product which is supposed to be the answer to a Reverse Mortgage. I will present it to you like it was presented to me and please let me know what you think about it. This new program gives approved candidates 15% of the current value of their home in debt free cash, in return for half of the future equity in the property. There are no closing costs, just a small application fee. Approved candidates must be over the age of 65 and meet certain heath guidelines. Primary, secondary, commercial or investment properties are all ok. The property can still go to your heirs. Here is an example: 70 year old Mary owns a home valued at $1 million. With this program she will be given $150,000 cash (no interest) all at once. 10 years later she decides to sell her home and it is now valued at $1.5 million dollars. Mary will be able to sell her home and keep $1.25 million, but she will have to give $250,000 back to the mortgage company. The $250,000 is half of the equity built up during that 10 years after she made the deal with the mortgage company. The numbers are very optimistic in this scenario, but it makes it easy to see where the money goes. If Mary happens to pass away, her heirs would still get the property but would have to give 50% of the equity built up after her deal. What do you guys think of this? Basically the lender is banking on home values going up over the next 10-15 years and will give you money up front in return for the future profits of the house. This way you still keep the equity you have built up prior to this date. Another scenario would be to take this 15% and invest it else where if you know a thing or two about investing. This may make you more money in the long run versus the appreciation on your house.
Feel free to ask any specific questions, but I was just hoping to see if you thought this was something that could be a better alternative to a reverse mortgage. RBaker@PeregrineLending.com or 805-540-0866.