Reverse Mortgages; Attorney General cautions seniors about using reverse mortgages

Reverse Mortgages are about to become popular with seniors as a way of funding their retirements, but are they all they are cracked up to be?

Reverse Mortgages supplement incomes

The South Dakota Attorney General's Office is reminding seniors to be cautious if considering reverse mortgage offers.

A reverse mortgage is a loan for homeowners 62 years or older that uses a portion of the home's equity as collateral. Through the terms of the agreement, eligible homeowners are usually promised an upfront cash payout with no obligation to repay the loan, and once they pass away or permanently leave their home the property then belongs to the lender.
In that scenario, the lender can reclaim the loan, fees and interest by selling the home after it is vacated.

Attorney General Marty Jackley encourages seniors to examine all requirements of the reverse mortgage and seek further assistance in making such a significant decision.

"Before entering into a reverse mortgage seniors should understand the types of reverse mortgages that are available, know the costs and fees associated with reverse mortgages, and understand any additional obligations for these mortgages," Jackley said in a news release.

The Attorney General's Office recommends the following tips to protect seniors:

• Consult with an independent financial adviser to find out what reverse mortgage package best suits your financial situation and needs.
• If you do not have a financial advisor, discuss your situation with a counselor approved by the US Department of Housing & Urban Development (HUD); HUD-approved counseling agencies are available to assist you with your reverse mortgage questions. You can call 1-800-569-4287 to find a counselor in your area.
• Make sure you understand all the costs and fees associated with the reverse mortgage.
• Find out whether the reverse mortgage you are considering is federally-insured. This will protect you when the loan comes due.
• Find out whether your repayment obligation is limited to the value of your home at the time the loan becomes due.
• Be wary of anyone who tries to pressure you into a decision that you are not completely comfortable with, such as investing the payments from your reverse mortgage into an annuity, insurance policy, or other investment product, or pressuring you into receiving a lump-sum payment over monthly payments.
• Obtain several offers from different reverse mortgage lenders in order to compare different options.
If you would like additional information about these types of offers, contact the Attorney General's Consumer Protection Division at 1-800-300-1986 or by email at comsumerhelp@state.sd.us.

Source: Mr Mortgage

New Home Buyers Grants for all, not just First Time Home Buyers

Second home buyers get a bite of the grants cherry with first home buyers 

In a new twist to stimulating the sale of new homes, the NSW Government has expanded the First home owners grant:

1. To get first time home buyers double the grant [from $7,000 to $15,000]
2. Give a new home buyers grant of $5,000 to anyone that builds or buys a new home, including second and subsequent home buyers that build or buy new housing.

This had to be good news for the home construction industry and the second home buyers, who typically could not afford new when they bought their first home. 

 The changing demographics of new home buyers

With more young people are seeking higher education and putting off making commitments with partners:

• Young adults are staying at home much longer [turning Japanese]
• or living in larger group homes [aping sit coms like Friends and New Girl?] 
• So the first home buyer is getting older, and older, and maybe a little more savvy and cautious. So the age lines between first home buyers and second home buyers is getting blurred.

After all, Blind Freddie can see that house houses are going nowhere or maybe backwards where they live, unless they are living in a mining town or close to one.

Somewhere in the last few years we hit a nexus between the lowest mortgage interest rates on record, the maximum lending multiples on record, the laxest lending policies on record, the highest immigration, and the lowest unemployment we have seen for decades. It was never going to get any better than it was in that period. And that combination is never likely to happen again in the next 30 years.

The glass is full for new home builders, but its a different type of full.

So RBA Governor Mr Glen Stevens was right when he told business people to get used to the new environment. You have to work with what you have. we should not expect the glory days to roll on for ever.
So yes I get that the glass looks "half empty" to those in the housing industry that saw the glass when it was brimming full. That brimming fullness cannot return anytime soon is all Mr Stevens was saying in my view. Turn your perspective to that the glass is half full, and you have to be the difference in making it fuller. Stop expecting Government handouts. Its been my experience that the biggest whiners about the welfare state, are the people that benefit most from the fact that we don't allow people to slip into abject poverty like some other Nations have of late, and yet these same whiners want the Government to bring the gravy train right by their front door.

What I would do if I were young?

 If I were young and unattached, [now there's a glass that's half empty] I would be thinking of how I could Get a better paying job.
Well the slow route seems to be education, and the fast track is heading for a mining job.
You see in my day there was a perception that you die before you get old, and that you only ever went to school the once. If you missed the boat you were destined for something else.
Well this never was the case, and certainly does not apply today.
Most of the young may live past 90 years of age. And they can have many careers. So go get the training to get big money early, learn how to invest the surplus. Then if you have a fancy to, go get the formal education. Don't forget one thing. That all knowledge is transferrable. What you learn doing work can apply to your higher learning, especially if its in the same area of endeavour.
The exception to this is if you have a burning desire to do something. Then do that.

So I would be making that my wealth decision, not buying or building a home. The other problem is that the stimulus concessions are revenue neutral for the NSW Government. In other words, the cost is the same to buy a home, its just that they have made it appear cheaper. Are home buyers that dumb? Maybe not. 

The Sydney property boom may have peaked nearly a decade ago, but has it bottomed yet? Too many things say it hasn't.

• The Greeks are caught in the revolving door. Was it their fault that their Politicians lied, or that the Euro club wanted to believe those lies that got them cheap money?
• The Spanish property market is going even lower, 
• The Chinese and Indian housing markets are going south, and 
• The US has the lowest interest rates ever, people living in Tent cities, and buying a home is still on the nose even after property fell 40% in value. 

Clearly the "101 monkeys" communication are operating here. And "monkey see, monkey do" is what is effecting our homebuyers, even if we have a different environment.

The real problem for new home buyers and why it can't be fixed easily

The real problem is that land prices in Australia are too high. They need to be half what they are to make building a new home make sense.
It can't be fixed because that price is mostly because Local and State Governments are addicted to the revenues they get from home sales and residential land development.
So besides developers paying too much for the land in the first place, big chunks of the cost of land development and building a new home are direct Government and council gouging. And home buyers are beginning to realise it. Would you want part the mortgage on your home to pay for the future infrastructure of the State. I thought that that was State Governments expense, but no, its new home buyers that pay.
If we can fix that problem we will be OK.

Source: Mr Mortgage

Mortgage Interest rates: RBA lowers rates .5%, but banks drag heels on delivering lower rates

More for me. The Banks get stingy with mortgage interest rate drops.

Yesterday, the Bank of Queensland (BOQ) was the first Australian bank to announce it will cut its standard variable home loan rate and its variable business loan rates by only 0.35 percent, when the Reserve Bank had earlier reduced the official cash rate by 0.50%. I call that stingy, if not greedy.

The BOQ has been financially troubled in recent times.

Its rare in Australia for banks to make loses, and that is what the BOQ has done in recent times. Not because of home loans or mortgage interest rates cuts, but their other risky lending policies.

Mr Stuart Grimshaw the Managing Director of the Bank of Queensland said that "continued economic uncertainty" had influenced their decision to hold back 15 basis points this month. Hope this does not mean "continued flawed lending practices." Because the bank has under performed in recent times they have suffered from “Increased competition" in retail term deposits continues to put upward pressure on the Bank’s cost of funds." More like the BOQ is out of favour with fund-raisers? My question is, did anyone at the bank get sacked for their poor lending judgements? If not, maybe its time to sack the board?

The BOQ was the bank that sacked mortgage brokers

If you are a mortgage broker who were duped by the BOQ when they closed the mortgage brokers channel, you might be guilty of rejoicing every time the BOQ hits bad times.

Shareholders will always come before mortgage customers with the bank

If you need proof of this, here is what Mr Grimshaw said. “When making decisions on rates we consider the needs of our customers and those of our shareholders. It is a difficult balancing act, but we believe passing on a 35 basis point cut is the responsible course of action this month,” he said. The treasurer's plea to pass on interest rate cuts goes unheard. The announcement follows federal treasurer Wayne Swan announcing his expectation that banks will pass on the cut. Mr Wayne Swan, the Federal Treasurer said, "The banks have the capacity to pass through, "given the fact that" they are very profitable, [The BOQ is the exception here.] "Their customers will be very, very angry with them if they do not pass through this rate cut." Well that is true of most banks, but the BOQ is the exception here I'm afraid. Money talks, but will interest rate jilted mortgage holders walk? "If Australians are unhappy with the approach of their bank in these circumstances, they should walk down the road and get a better deal." This is the storyline that the Treasurer has been giving to encourage Australians to switch banks to save money on mortgage interest rates.

The Bank of Queensland to hang on to the rate cute for now

Not only is the BOQ stingy, its also tardy, and will hang on to the rate cut all to itself for as long as they can.The BOQ will cut its standard variable rate by 35 basis points as of 11 May 2012, bringing its standard variable rate home loan to 7.11 per cent.

My recommendations. Give the Bank of Queensland a wide berth.

Don't even think about using the BOQ for a loan till 2015. They made many blunders with business loans and they might try to touch you for the shortfall. I recommend that you move to a non bank mortgage lender, and they have better interest rates than the BOQ and will pass on all or most of the rate reductions. If you are with the BOQ, or any other bank, [except for maybe the NAB], I would switch banks, or switch to a non bank lender. You will save heaps. Hope this helps you save big on mortgage interest rates. Rick Adlam: Mr Mortgage

Interest rates: Which way for RBA to go on interest rates.

The RBA meets tomorrow to decide on interest rate levels in Australia

In the twelve months to March 2012 inflation has fallen below 2%, and this is seen by many to be a good indicator that the RBA will reduce interest rates by .25%

Australia has the luxury of the ability to reduce rates at least two percent if the need arose to kick-start the economy, and some are saying that the time to act is now.

The "Goldilocks inflation rate band" in Australia is 2.0% to 2.8%. Last month recorded it fell to just 0.1% [for February].

The RBA would be reluctant to move on interest rates anytime inflation is in the Goldilocks band, Between 25% and 2.8%. Now that the inflation rate has moved below that hopes are rising in the mortgage belts of Australia that the rate will be reduced, at least to compensate for the big bank rate hikes in recent weeks to fill the profit gap squeezed by Government Policies that banned many bank fees and charges.

The inflation rate was just .1% for February and that may be a trigger to get the PBA to take action.

Market view is a hold on Interest rates

On the other-hand the market view is that the RBA is more likely to stay put on interest rates, and leave the cash rate at 4.25 per cent when it meets tomorrow.
With unemployment low at at steady 5.2%, and many believing that the RBA views house prices as needing to fall further to make housing more affordable, a hold on rates is the most likely income.

So the pinch on mortgage repayments looks to continue.

If you are feeling the pinch, maybe you should look at the great mortgage rates on offer at non bank lenders. That way you will get a reduction in home loan repayments regardless on what the Reverse bank decides.
Some lenders are offering rates near 1.0% below the banks, and they don't have shareholders to satisfy

Australian Mortgages in 2011 review & 2012 prediction

Mr Mortgage's take on 2010, and predictions for 2012.

Home loans are becoming more affordable as mortgage rates ease, and home prices fall.

The fact that Australian mortgage delinquencies have declined in the third quarter in Australia points to the fact that the worst of mortgage stress may be over. We might see a return to a stronger mortgage market in 2012.

The return of the saver, and the virtue of saving

2011 has seen more Australian households reining in their expenditures, and the biggest fatality of all this is the credit card. Australians seem to be shunning credit card debt like the plague as well as to a lesser extent mortgage debt. This year has been credit card debt reduction as the biggest shift to saving has occurred.

That has to be a good thing for everyone, except retailers who have been riding on the back of credit card debt.

Australia's banks are a multi-channel money machine
The banks however have done well in 2011, despite the loss of credit card revenues, and slower mortgage applications, and that is due to business loans growing to replace the shrinkage in credit card debt and home mortgage loans applications, which continue to fall away.

With customers wanting better mortgage deals and with lower revenues the banks may shed employees.

So mortgage delinquencies may have fallen, which is good for the banks, but that does not mean that home buyers are now queueing to for a home loan, so we are seeing a fall in housing prices in all capital cities, as interest rates fall and wages rise. This is a new set of circumstances that we have not seen in decades.

Did Real Estate become over priced?
The combination of rising wages, full employment, lowering mortgage rates and falling house prices tells me that Australians have learnt the lesson from the US finance collapse of 2008. That Real estate prices can and do get ahead of themselves and must eventually fall when they grow out of kilter with the wages and supply and the desire to own.

US real estate gurus don't understand the differences between the US and Australian Home buyers, so their predictions have been largely unrealised in 2010, 2011. So new predictions of dramatic house price shrinkage are more of the same. 

Australia's house prices has deflated slowly in Australia in 2011, unlike what has occured in the US, the UK and Europe. I believe we may see a similar softening of house prices in 2012 as we saw in 2011.

Buying a home has returned to being a way of securing the roof over your head for the long term. Isn't that what home-ownership should be about?

What's ahead for Mortgages in 2012?

What's ahead in 2012?

1. A flat housing market and steady house prices. Maybe a little more price easing. Hopefully a big fall in land prices that is the real problem in new home prices.
2. Expect to see house price inflation in country areas where the mining boom is happening. Other country areas will see falls in house prices I feel. 
3. House price falls in residential land prices in the country towns across Australia. If I were buying a home in a country town, may sure you know what the true value is. 

Mortgage rates will fall.
The banks are trying to warn people that rate decreases by the RBA may not be fully passed on in coming months. They want to protect their profits even when credit is slow.
However new competition from non bank mortgage lenders and the prospect of Japanese Mega Banks entering the Australia mortgage lending market in 2012 will certainly help to lower mortgage rates.
The Euro crisis could mean a credit crunch, lower RBA cash rates, with not all interest rate reductions passed on by the banks to mortgage holders, because the cost of their borrowing may zoom up.

Actions you need to take in 2012?

1. Be a good Saver. Don't throw money around like a drunken sailor.
2. Keep your mortgage on variable rates, as interest rates may be lower in 2012.
3. Credit may become hard to get. Get in now if you have a strong source of income.
4. Refinance into a 100% offset account. This will allow you to have all your savings offset against your mortgage interest, with no income tax liability on that interest saving.

Author: Rick Adlam, Mr Mortgage