Sunday, November 16, 2008

Reverse Mortgage

A new financial vehicle available is a "reverse mortgage". This type of product goes against everything we want to teach our kids about wealth creation and being financially savvy. With all of the real-estate, passive income, stock, option and wealth building advice out there, I find it hard to accept the fact that elderly parents find it necessary to consume their kids' inheritance while they are still living.

Whatever happened to the notion of leaving a legacy for your
children and grandchildren? The website defines a reverse mortgage as "a loan against your home that you do not have to pay back for as long as you live there. You pay the money back plus interest when you die, sell your home, or permanently move out of your home."

There are certain requirements that must be met before you can qualify for this loan. The website states that the borrower must be at least 62 years of age, own their home outright or have only a small mortgage that can be paid off at closing with the proceeds of the reverse loan and you must live in the home as the primary resident (you cannot rent your home to tenants and move somewhere else).

No minimum income is required to obtain the money. The borrower doesn't have to pay back the loan until they sell the house or die. However, reverse mortgages tap into your net worth by sapping the equity value out of your home. The more your borrow, the less you have in your estate to pass on to your heirs.

There are several options for being paid the cash from the loan. You can be paid the entire amount all at once, take a monthly loan advance or establish a "credit line", which is essentially taking out the money from your equity as you need it. How these loans are bad for society is that they are an easy way for people approaching
senior citizen status to avoid having to get their financial future in order. It's another reason to avoid living below your means and run up debt.

Many people aged 60 and over already own their own homes. However, we hear every day on the internet and in the newspapers that many people don't have a sufficient amount of money funded in IRA's, 401K's and other investment funds to get them through retirement. Now, with reverse mortgages being marketed on
television and radio by celebrities like James Garner and the fact that they are readily available through lending companies, it's just another reason to live for the moment and procrastinate saving for retirement.

I hope the 30 and 40-something generations are more financially savvy when it comes to saving for retirement. I would like to see the reverse mortgage receive bad press and be viewed upon the same way we now view adjustable rate mortgages.

Hope = Obama?

The US election is a fantastic example of masses of people in euphoric mood. It's like a happy strong America facing side by side with a gloomy economic future that is showing a full force of power coming this 2009. Throngs of Barack Obama supporters cheered on him and enjoy the night away. People from all walks of life enjoyed the scene while Red Republicans sported a frowned face from Arizona to the whole wide spectrum of McCain supporters either living in Mainland America or overseas.

The whole world especially from Kenya were celebrating with joy, even from a small city in Japan named Obama City had been ecstatic about the Obama win, and the rest of the world were so happy because a new change has come for the betterment of America.

World leaders are congratulating the new Commander in Chief and were hoping that America will cease its arrogance on world affairs. The euphoria had done a good thing. It simply showed that people can work hand in hand regardless of skin color, racial ethnicity, political affiliations, and etc.

Rewarding the highest office of the land to minorities such as African Americans is a leap forward for a change in perception on people with color. The black pride is no longer confined to Sports, Entertainment, and Films. The man who John McCain tagged as "That One" had the penchant to be a cool headed leader, a catalyst for a change, and a team player among the rest of the nation's leaders. Moreover, America is back on track that anyone and everyone can reach its dreams on the condition that they work hard enough, that they truthfully serve without stepping anyone's shadows, and living a dignified life.

Let us see how President elect Obama will bring forth the change on his tenure as President. He inspires many people from all walks of life to live and hope. The "Hope" that rough times will turn to joy, the hope that the Wall Street will gain momentum, the hope that health care will be fixed, the hope that the nation will once again will earn the respect of the World Community after making a solo fight in fighting wars in Iraq and Afghanistan.

The monumental win of the nation's first black leader is a big home run to all Americans, even all the Joes of all trades had earned their winnings because they had shown it to the world that America had moved forward to embrace Hope against any racial profiling. That very moment is now in history. This is now the envy of other world's political strata that America is back to business.

8 years of Bush administration is unveiling the final curtain. The popular rhetoric of war mongering "It's either you with the terrorist or against us" is a closed book. Let's join in one voice that the new mantra is about change and we all say "Yes, We Can".