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Golden Equity Showing More Seniors Benefits of Reverse Mortgages

Seniors looking to take cash from the value of their home without actually selling it or moving out are turning to reverse mortgages in growing numbers.

A reverse mortgage is essentially a loan on a portion of all of a home’s equity.

The latest pitch by practitioners is that with falling property values, seniors can get money out of their home without selling it at a loss, and at much lower interest rates than home equity loans.

Some shady dealers have given the practice a bad name, and the AARP cautions seniors to proceed slowly and to solicit more than one opinion.

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But happy users of reverse mortgages say it helped them plan a retirement, pay bills and keep up insurance premiums.

“It gives them the ability to draw money out of an asset tax-free versus an IRA, which has tax consequences,” said Neal Melton, vice president of the reverse mortgage division of Golden Equity Mortgage Corp.

Golden Equity has added two employees to cover reverse mortgages exclusively in the past year. Previously, the company had 20 workers who covered all its divisions, including residential and commercial.

To qualify, homeowners must be 62 and have a majority of equity in their home.

“Reverse mortgages are on the rise,” said Melton, whose company does not disclose revenue figures. “People are trying to tap into the equity of their home to increase monthly income and liquidity, live a better quality of life and have the ability to maintain home and title.”

In 2004, there were 38,000 federally insured reverse mortgages. That number grew to 107,000 last year.

“That number is going up all the time,” Melton said.

Baby boomers are reaching the qualifying age of 62 at a rate of 32,000 people per month. Many are lacking the income to cover expenses, he says.

“Now with property declining 15 to 25 percent locally, seniors are looking for reverse mortgages to stay in their homes and keep their homes,” Melton said. “The option of selling and moving isn’t what it was three years ago.”

The payout can be a lump sum or structured in monthly installments.

Homeowners may also pay the loan back, but they don’t have to as long as they stay in their home. If the homeowner dies, the spouse cannot be evicted either. The heirs inherit the rest of the unmortgaged equity.

“I had a client in Carlsbad who had a $700,000 property. She still owed $160,000 and had a $1,200 mortgage payment. She earned $1,800 a month,” he said.

They put together a reverse of $285,000, which paid off her house note and structured a monthly payment of $1,100 on the remaining equity.

“Now she has $2,300 of additional cash flow,” he said.

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Summit Targets Dwindling Work Force: Woe to the real estate agent in desperate times. A conference in San Diego this week focuses on work force shortages in the commercial real estate sector. Apparently, companies cannot find and retain good talent.

The tight supply of corporate real estate professionals is being called urgent, according to CoreNet Global, which has 7,000 member companies in Asia, Australia, Europe, Latin America and North America.

CoreNet’s 2008 summit, “About Face: A New Outlook on Global Real Estate Talent,” takes place May 4-7 at the San Diego Convention Center.

It will examine how real estate jobs are changing, how competition for those jobs is intensifying, and how the industry needs to take a new outlook at its labor pool.

“Corporate real estate executives are responsible for creating an appealing work environment to attract new talent and ensure they blend with generations of more experienced workers,” said Prentice Knight, chief executive officer of CoreNet Global. “That is no mean feat.”

Send real estate news to Ned Randolph at nrandolph@sdbj.com. He may also be reached at (858) 277-6359.

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