Dean Graziosi

Reverse mortgages are often marketed to seniors as an excellent way of getting rid of debt and paying off medical bills. Some ads even go so far as to say that a reverse mortgage is a good way of not only getting extra income every month but also leaving your loved ones without having to worry about payig anything off after you die. While all this may sound like a fantastic idea, the fact is that a reverse mortgage is not right for everyone or for every circumstance. You need to understand exactly what a reverse mortgage is and what you can do when you have one before you decide to get a reverse mortgage.

A reverse mortgage is exactly what the name sounds like. Traditionally, you take out a mortgage from a bank and you pay on it every month until you have paid the bank back everything you owe and finally own your home. With a reverse mortgage, this process is reversed. Each month, you will get payments from the bank. Your credit score is not considered when you apply for a reverse mortgage. Neither is your income. You do not have to pay the reverse mortgage back until you no longer live in your home.

There are three kinds of reverse mortgages. The most common is a HUD program called the Home Equity Conversion Mortgage (HECM). Around 90% of all reverse mortgages are this type. The fees are regulated and counseling is required. Those who are very low income can use Single Purpose reverse mortgages to pay for things like maintenance or property taxes. Charitable groups and local governments manage these. There are also private lenders who do reverse mortgages but these are not regulated.

The more equity you have the more you can borrow but if you have a mortgage you have to be able to pay it off before you can get the reverse mortgage. Another factor is your age - the older you are the more you can borrow. You can get the funds in a lump sum, monthly payments, or as a line of credit to use when you need it. You can also combine those options so that you can take care of things such as debt and still have a line of credit that you can use to take care of emergencies such as an unexpected illness or home repair.

There are fees associated with a reverse mortgage and some risks as well. You will have to buy mortgage insurance which can be very expensive. You also should keep in mind that the loan will need to be repaired. If you move out of your home and into an assisted living facility for example, then the reverse mortgage will have to be repaid. This can easily prevent you from being able to leave your home to your children or grandchildren, as they may be unable to pay it off.  

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If you are selling a home, one of the best offers you can receive is that of cash. Any time someone makes a cash offer, you know as long as they actually have the cash, the selling process will commence immediately. Often times, sellers accept cash offers quickly and many buyers who are not offer cash lose out when their own offers are beaten.

If you are a prospective home buyer who wants to offer cash, it is a good idea to provide documentation with your offer that will prove the funds are available. A bank statement will usually work quite well in these situations.

If you don’t yet have the cash, but will very soon, other documentation will be needed. An example of this would be if you plan to liquidate stock or another type of asset. Here, you will need to provide a time table on when the asset will be converted to cash. Again, you will include this documentation with your offer.

While it is rare to pay for a new house using cash, it is possible. If you can do so, it is highly recommended. Some people are able to do this from the sale of other property. If you are able to get out the home you are selling exactly what you put into it, a cash payment may very well be possible. This is especially true if you have saved a significant amount of money to put toward the down payment of your new home.

Some home buyers expand slowly, paying cash for all their homes along the way. Many factors are involved in making this happen. Not only would you need to have the cash saved up and available, but the economy would also need to work in your favor.

If you have rental property, you may even choose to put the money you receive each month as a landlord into savings for purchasing new property on down the road.

Many sellers prefer cash offers because they re getting the money up front. Buyers prefer them because the home can be paid for very quickly, thus eliminating the need for a 30 year mortgage.

If you are the one making the offer, the key is to start by purchasing smaller homes and later working your way up to larger ones. Starter homes are a good way to begin. As you make money on each house you sell, you will be able to put it into your next purchase. Over a period of time, you will accumulate enough money to actually pay for a house in cash. This often brings peace of mind and financial security you would not have with a 30 year mortgage. Your home is paid for before you ever move in, and the seller rests easy knowing all the money has been received up front. 

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Everyone wants to get the best deal possible on their house, but in a buyers market it can be difficult to know when to stand your ground and when to give in. Especially if your house has been on the market for a long time, it can be tempting to take any offer that is put on the table. However, you don’t want to give too much, or you will come out of the deal smelling like a rotten egg instead of roses. Take these tips into consideration when examining and negotiating real estate deals in a buyers market.

1.      Be willing to give on the little things. If you were planning on taking your appliances with you or selling them separately and the buyer wants to keep them in as part of the deal, go with it. Appliances don’t cost enough to make it worth arguing over, and it certainly should not be a deal breaker.

2.      Be willing to give a little on the asking price. Your asking price is just that, a starting point that you are asking for. It should not be set in stone. If someone makes an offer within five thousand dollars of your asking price, take it. Even within ten thousand can be a good deal if your house has been sitting for a long time.

3.      Be willing to work with the buyer on down payment and closing costs. You can get a much better offer in many cases if you stick to your asking price but make a “seller’s contribution” to the down payment and agree pay the closing costs. This way the buyer has to give up less money to get into the property, which makes them more likely to buy from you.

4.      If your house has been sitting vacant for a long time, you will have a harder time selling it if you don’t budge in negotiations. The longer a house sits, the less it is worth. This is what makes today a buyers market in the first place. Keep in mind this fact, and be willing to give in on negotiations when necessary to get the house sold.

5.      Don’t think you have to give in on everything. If someone wants to pay ten grand less than your asking price, have all appliances included, go with a lower down payment and still have you pay the closing costs, they are going too far. While you should be willing to be flexible, don’t let buyers walk all over you either. Other wise you will find quickly that you have made a deal that leaves you in the hole, all in the name of selling quickly.

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