NOYB wrote:
wrote in message
...
On Mon, 19 Sep 2005 12:37:26 GMT, "NOYB" wrote:

Or they could do a reverse mortgage and retire off the 1000% increase in
equity that they accumulate over the the next 25 years.

That's not how a reverse mortgage works. The mortgage company pays a
fixed amount per month (usually based on a fraction of the current
appraised worth plotted against an optimistic guess on how long the
person wil live) and hopes to pocket the appreciation.

They only hope to pocket the appreciation beginning from the initial
starting point of the reverse mortgage. Any appreciation that occurs
between now and when the reverse mortgage starts belongs to the home owner.
The homeowner's equity in the house drops as the bank continues to make
payments. But the homeowners reaps the benefits of the appreciation that
occurred before the payments begin.


They also won't
write a reverse mortage unless the owner is pretty old.

In other words...most retirees would qualify.

It is really just a scam that the banks foist off on old folks without
anyone to look out for them.

It's not a scam. It's a process that allows the homeowner to take out the
equity of the home without having to pay monthly payments on the equity
line.

Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that home
(ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You decide
to take out $2 million of that equity, and put it in an investment that pays
a rate equal to what the monthly payment would be on the loan (ie--you end
up with a net monthly outlay of cash of zero). You can then use the $2
million to live on.

You won't live very well on that $2mm if its only worth "half a house."
First thing you know, you'll need to buy a new $250,000 car or a
$500,000 ski boat. You will think twice before taking that $40,000
vacation in Europe. Surely you didn't expect housing prices to go up in
a vaccuum, right?
Heck, you'll be paying your pool boy and gardners $100 an hour (and
getting by so cheaply only because they don't speak English and work
under the table) when houses are $4mm a throw.

You want to make some money and retire off real estate?
Here ya go. This will work for you, particularly because you're in your
early 30's.

Buy up as many rentals as you can find. Yes, they will go up in value-
but although the day will come when there are "do you want to sell
XXX Main Street" letters in the mail several times a month you'll never
consider parting
with them. Money machine. You can have a couple of dozen properties
paid down to zero by your mid 40's if you work at it. Then you can
retire, or not, but you won't ever have to worry about money as long as
people need a place to live.
Not a bad way to go. You will wind up with a lucrative annuity for your
retirement years,and when you and Mrs. NOYB have both kicked the bucket
the little NOYB's can either continue cashing rent checks
("kaching!")or sell off a few of the properties for BIG BUCKS.

If you put all your eggs in one basket, and you have to live in the
basket to boot, that's a lot more risky than owning a variety of
properties in several neighborhoods and price ranges.