- "Reverse Mortgages cost too much."
- "Don't get a Reverse Mortgage because they cost too much."
That's the message the media pundits want you to believe.
So when someone says that Reverse Mortgages for seniors cost too much in Kansas City, Missouri. I ask them "compared to what?"
Let's do what the media hasn't taken the time to do, let's examine this more thoroughly. In our example a 62 year old with a $250,000 house would qualify for an $118,033 Line of Credit (LOC). Their closing costs would be about $10,180 so their available LOC is $107,853.
Let's say this person needed $100,000 for something very important. She has many other assets she could access. (I'm not a Tax advisor always consult a tax advisor). If she pulled $100,000 out of an IRA it would be taxed as ordinary income. IN 2007 a single tax payer making $100,000 would be in the 28% marginal tax bracket, so without ANY other income she would have to pull out approximately $128,369 just to cover the Federal Taxes. That's $28,369 in taxes JUST for Federal Taxes. Now according to my math $28,369 is $18,189 more than the closing costs on the Reverse Mortgage.
More importantly, they will lose the earning power on that $128,189, which at 6% in 20 years is worth $424,331.80. Compare that to the amount owed on the Reverse Mortgage with the assumptions that the interest rate would be the 20 year average rate of 6.54% and the monthly fee is $25 would make the total amount owed $418,405.
Which one cost her more?
What if that $128,189 had earned 7% over 20 years (not a crazy assumption) then it would have been worth $517,721. That's a SAVINGS of almost $100,000 from the Reverse Mortgage. Some would point out there are taxes on that money. While true, the estate could possibly use the $296,142.80 in interest/fees to offset that money when the estate is sold.
So do Reverse Mortgages cost too much in Kansas City, Missouri?
It depends on your situation and what you want to do.
Any time you hear blanket statements, especially in the media, take it with a grain of salt and seek out a true professional that can accurately answer your questions.
Consult with a Reverse Mortgage professional that will share with you all this information. For more information go to www.stayinyourhomekc.com or call Kurt Jackson at 816-415-1737.
Comments(1)