Strong yields seen amid elevated interest rates Torsten Slok, chief economist at Apollo Global Management, emphasized the pivotal role of retail and pensions seeking higher yields and noted annuity sales are driven by more Baby Boomers retiring amid elevated interest rates. According to Deutsche Bank AG strategist Ed Reardon, funds raised through annuities typically gravitate … [Read more…]
Love is in the air, and if it’s not, you may feel compelled to find some: According to a new NerdWallet survey, 60% of Americans agree that there’s pressure on single people to have a date for Valentine’s Day.
The survey of more than 2,000 U.S. adults — among whom 1,218 plan to spend money on Valentine’s Day — conducted online by The Harris Poll, asked Americans about their planned spending on dates and gifts, as well as their thoughts on dating and finances in general.
Valentine’s Day date and gifts cost $188, on average
Americans who plan to spend money on Valentine’s Day plans or gifts this year say they’ll spend $188, on average. Women are more likely than men to say they’re spending $0 — 47% vs. 35% — suggesting that they’re opting out or that male partners are picking up the tab. And younger generations plan to spend more than their older counterparts — millennials and Generation Zers who plan to spend on Valentine’s Day say they’ll pay $274 and $197, on average, respectively. That’s compared with $144, on average, for Generation Xers and just $96, on average, for baby boomers who plan to spend on Valentine’s Day.
While there isn’t a right amount to spend on Valentine’s Day plans and gifts, you should aim to keep your spending within budget and avoid going into costly credit card debt.
“The ideal amount to spend on Valentine’s Day depends on your individual financial situation,” says Kimberly Palmer, a personal finance expert at NerdWallet. “Overspending or taking on more debt to celebrate the holiday can backfire, creating more stress and even harming your relationship. A romantic gesture that costs nothing can do far more for your relationship than a pricey gift that takes months to pay off.”
Most agree men should pay on the first date in hetero relationships
So who’s paying for the Valentine’s Day date and beyond? It depends on whom you ask.
Most Americans (72%) agree that in a heterosexual couple, the man should pay on the first date. Interestingly, men are more likely to say this than women (78% vs. 68%). Whether this is based on old-fashioned gender norms, recognition of the wage gap between men and women or something else, we can only speculate.
Some think the asker should also be the payer. According to the survey, 65% of Americans agree that if someone asked them out, they would expect that person to pay for the date. Women are more likely to say this than men (77% vs. 52%).
There’s more of a split when it comes to whether you should pay based on income. While 57% of Americans agree that the person who makes more money in a couple should pay for dates more often than the person who makes less, 43% disagree.
Of course, every couple should decide for themselves how they want to divvy up dating expenses. For relationships that go beyond a few dates, it’s probably a good idea to iron this out together to set expectations and avoid resentment.
Many agree couples should discuss money early
After figuring out who pays for what and under what circumstances, you might want to have a deeper money chat beyond the cost of dates. According to the survey, more than two-thirds of Americans (68%) agree that couples should talk about their finances within six months of dating. This discussion might include divulging credit scores, incomes, debt loads or other financial responsibilities, as well as your overall philosophies on making, spending and saving money.
“Talking about money early on in a relationship doesn’t have to be awkward and in fact can help avoid discomfort later. Broaching the topic in a casual way can lead to a meaningful conversation about finances, values and expectations,” Palmer says.
Arguably, this doesn’t sound like the most romantic conversation to have during the carefree honeymoon phase of your courtship. But if you see the relationship continuing, it’s probably a good idea to know if your financial values mesh.
“Getting on the same page financially early on can help set the tone for open and honest communication about finances throughout your relationship. Or, it could help you decide that the partnership is not a good fit. Either way, it’s information that can help you make an informed decision about where to take your relationship next,” Palmer says.
Methodology
This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from Dec. 14-18, 2023, among 2,061 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.7 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected].
Disclaimer
NerdWallet disclaims, expressly and impliedly, all warranties of any kind, including those of merchantability and fitness for a particular purpose or whether the article’s information is accurate, reliable or free of errors. Use or reliance on this information is at your own risk, and its completeness and accuracy are not guaranteed. The contents in this article should not be relied upon or associated with the future performance of NerdWallet or any of its affiliates or subsidiaries. Statements that are not historical facts are forward-looking statements that involve risks and uncertainties as indicated by words such as “believes,” “expects,” “estimates,” “may,” “will,” “should” or “anticipates” or similar expressions. These forward-looking statements may materially differ from NerdWallet’s presentation of information to analysts and its actual operational and financial results.
Americans report less money in savings, more credit card debt
Americans report less money in savings, more credit card debt
04:49
Americans are tumbling deeper into debt, with the typical household paying $1,583 a month on various loans, a recent study found.
That’s a more than $300 increase from people’s average monthly debt payment in 2020, according to LendingTree. The report, based on the anonymized credit reports of roughly 310,000 users from July 1 to Sept. 30, 2023, focuses on active debt such as mortgages, auto loans, credit cards, personal loans, student loans and other categories.
Mortgages make up the lion’s share of debt, the study found, with property owners making average monthly payments of $1,855 on their home loans. Auto loans account for the second-largest share of debt, with payments averaging $690 a month — an amount that continues to climb as interest rates on auto loans jump. The third-largest category of debt is personal loans, with payments of $517 a month on average.
Survey: Nearly half of consumers carry credit card debt from month to month
03:08
Generation Xers (ages 43 to 58) carry the most debt, with $1,974 in average monthly payments. Baby boomers (59 to 77) are No. 2 with payments of $1,529, followed closely behind by Millennials (ages 27 to 42) at $1,490. Not surprisingly, given their youth, Gen Zers (ages 18 to 26) have the lowest average monthly debt at $645.
according to the Education Data Initiative.
White House announces new wave of student loan debt cancellation
07:57
Around the U.S., Maryland residents have the highest average monthly debt payments, at $1,850, followed by New Jersey residents ($1,770) and Coloradans ($1,734). The states with the lowest average monthly debt payment Mississippi ($1,236), followed by and Missouri and Ohio ($1,288).
Roughly a third of Americans say they have higher balances on their credit cards than they do in emergency savings, according to Bankrate. Sixty-three percent of U.S. adults point to inflation as the main reason why they are unable to save for the unexpected.
Fifty-five percent of surveyed baby boomers plan to remain in their existing homes as they age, but less than a quarter of those surveyed have any plans to renovate their homes to more safely and easily accommodate natural changes that come with aging.
This is according to a new report from home improvement services company Leaf Home and market research firm Morning Consult, which enlisted responses from 1,001 baby boomer homeowners (aged 59–77) and 1,001 millennials (aged 27–42) in late December 2023 and early January 2024.
The report describes homes owned by baby boomers as “time capsules,” since most of the surveyed boomer cohort (73%) said they have lived in their homes for 11 years or more. This is combined with the finding that “over half of their homes were built in 1980 or earlier with many never investing in renovations,” according to the results.
For millennials and younger generations who could eventually purchase these homes in the future, this creates a “looming underinvestment crisis that promises a future of deferred maintenance for their millennial inheritors,” the report said.
But for those who are aging in place in these homes today, there is also a notable deficit of renovations and added safety features, which could prove problematic for those who will naturally develop vision, mobility or cognitive impairments as time progresses, the report said.
Another recent report found that the current housing inventory is ill-equipped to facilitate aging in place safely for older Americans.
Just 24% of baby boomers are preparing their homes for aging, and even fewer are adding other safety features. Roughly 75% of baby boomer respondents report that they “have never added safety or accessibility features in their homes,” while 81% of the cohort report planning to leave an inheritance of some kind when they pass away.
Roughly half of millennial respondents (51%) expect to receive no inheritance.
“The housing market is caught in a generational tug-of-war. Boomers will soon face aging-in-place hurdles, while millennials will face the surprise of homes in need of major upgrades,” said Jon Bostock, CEO of Leaf Home, in a statement accompanying the report.
“With an aging and ignored inventory of homes available in the next decade, we may see a crisis that will overwhelm the home improvement industry and strain the budgets of inheriting millennials, impacting the housing market,” Bostock added.
The city of Laguna Beach, Calif. recently offered details of its city-sponsored aging-in-place program, dubbed “Lifelong Laguna,” in a profile published by CNBC. It provides new insight into the measures cities can explore to more easily facilitate aging-in-place goals for older residents.
2021 research from AARP indicates that 77% of adults at or over the age of 50 want to stay in their homes as they get older, but the figure in Laguna Beach is much higher. There, the figure is closer to 90% according to Rickie Redman, director of Lifelong Laguna.
Originally piloted in 2017, Lifelong Laguna is a program that enlists a local area nonprofit to encourage support for aging in place.
“Lifelong Laguna is based on the Village movement, where aging in place is encouraged with community support,” the story reads. “The Laguna Beach program aims to fulfill a specific need for a city where approximately 28% of residents are age 65 and over, while local assisted living and memory care services are scarce.”
Much of the city’s older population has lived in Laguna Beach since they were in their 20s and 30s. Now in their 70s and 80s, they simply do not want to be displaced to live somewhere else, even if another area or dedicated facility could more easily attend to their needs as they age.
“They make this city unique,” Redman told CNBC, saying many of the older residents can trace their journey here to the city’s “artistic roots,” the story explained. “They’re the placeholders for the Laguna that we now know.”
The program currently serves about 200 older residents, and there is no direct cost to them for participating. It is entirely funded by grants and local fundraising efforts, according to Redman.
“Its services address a wide range of needs, including a home repair program the city operates in collaboration with Habitat for Humanity, nutrition counseling and end-of-life planning,” the story explained.
Other cities and communities have adopted similar systems, as aging-in-place preferences have increased dramatically since the onset of the COVID-19 coronavirus pandemic. Data from Genworth Financial indicates that roughly 70% of the 10,000 baby boomers who will turn 65 every day until 2030 will require long-term care at some point in their later lives, CNBC reported.
“There definitely is a mindset change, where people are saying, ‘I do want to stay put, I don’t necessarily want to move into a nursing home or into assisted care,’” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors (NAR) to CNBC.
One beneficiary of the Laguna Beach program told the outlet that her needs have been attended to very promptly, from assistance with yard clean-up to the organization of end-of-life services for her recently deceased husband.
“Anything that I’ve needed, I’ve gotten help,” said Sylvia Bradshaw, an 84-year old Laguna Beach resident when describing her membership in the program.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
A credit limit is the maximum amount of money a person can currently borrow from a financial institution.
Credit cards and lines of credit let us borrow funds from banks, credit unions and various companies. Credit limits determine just how much money we can borrow without incurring penalties like overdraft fees. Americans tend to gradually increase their credit limits as they age; Experian® reported that the average credit card limit for Generation Z in 2022 was $11,290, while the average credit limit for Baby Boomers was $40,318 that same year.
“What is a credit limit?” may be such a common question because multiple factors can influence a person’s limit. We’ll explore this question and discuss how to increase your credit limit.
Key takeaways:
Financial institutions largely set credit limits based on a borrower’s credit history.
Credit utilization is based on your credit limit and your available credit.
Regularly practicing good credit habits can increase your limit
Table of contents:
How are credit card limits determined?
Your credit limit is determined by the institution you borrow money from, whether they’re a bank, a credit union or a government agency. Credit limits take several factors into account, including your income and credit score. People with higher credit scores and income are normally approved for higher credit limits because lenders view them as financially responsible people.
Annual revenue
When a borrower applies for credit or asks for a credit limit increase, lenders look at annual revenue. From their perspective, a borrower with more income is more likely to make their payments on time—and vice versa.
Credit score
Credit scores help us qualify for auto loans, mortgage interest rates and credit cards—plus the limits we’ll receive when approved. If you have good credit, then you’ll likely be eligible for high-limit credit cards from the get-go.
Debt-to-income ratio
Lenders can use your debt-to-income ratio to set your credit limit by weighing your monthly debt payments against your total income. A low debt-to-income ratio can prompt lenders to offer higher credit limits since your spending habits show you regularly make responsible financial choices.
Employment status
Your employment status can also affect your credit limit largely due to timing. If you apply for a credit card or ask for a limit increase while you’re seeking a job, you’ll most likely receive a lower limit than you would as a full-time employee.
Credit limit vs. available credit
A person’s credit limit and their available credit are heavily tied together, which can cause people to confuse these two terms. To clarify, your available credit refers to the amount of money you can still borrow after calculating your debt. On the other hand, your credit limit refers to the total amount of money that your lender lets you borrow.
For example, if you have a $10,000 credit limit and spend $5,000, you’ll still have another $5,000 in available credit that you can access during this billing cycle. Your credit utilization ratio is calculated by weighing your available credit against your total credit limit. In this case, your credit utilization would be 50 percent.
How does your credit limit affect your credit score?
Whenever you ask a lender to increase your credit limit, they’ll perform a hard inquiry to review your credit history and help inform their decision. Inquiries briefly cause your score to dip, which is why conventional wisdom recommends not attempting to increase your credit limit right before applying for something vital—like a home or a new car.
Credit limits can also affect your score if you consistently have a high utilization ratio. Credit cards with high limits typically help borrowers maintain lower utilization ratios, which is beneficial for credit health.
What happens if you go over your credit limit?
Exceeding your credit limit can have negative consequences, especially if you do so repeatedly. Some of the drawbacks you might encounter include:
Account review: A lender may review your longtime credit habits, which could potentially lead to a credit limit reduction.
Credit score changes: Credit utilization makes up 30 percent of your FICO® credit score. Repeatedly going over your credit limit could significantly hurt your credit.
Increased interest rates: Depending on your lender’s policies, they may issue a penalty APR on the offending account, which can be much higher than your standard rate.
Overdraft fees: Most lenders will charge a $35 overdraft (or over-the-limit fee) after a specified time period if you don’t pay off your balance.
How to increase your credit limit
If you consistently make your monthly payments on time and keep your utilization low, the credit card issuer may approve your request to increase your limit. But remember to allow six to 12 months before asking. Your issuer probably won’t raise your limit after just one or two months of opening the account or if you’ve been making late payments.
Some credit card issuers will actively increase your limit after they review your account history. Sometimes, they’ll ask you to update your income. If you’ve earned a raise recently, you can provide that information, and the lender may increase your limit. When an issuer reviews your account like this, it does not cause a hard inquiry because you didn’t ask for them to review the account.
Work on your credit with Lexington Law Firm
Credit cards are fantastic resources that can positively impact your life when used responsibly. Even if you get approved for a high credit limit, it’s best to monitor your spending and borrowing habits. Lexington Law Firm offers great services like credit education tools and credit report analysis that may help you with your credit.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Brittany Sifontes
Attorney
Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.
Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.
Mortgage interest rates continued their decline this week and have hit the lowest level in six months since May of 2023. Mortgage interest rates are now at an average of 6.61%, easing from 6.67% last week. The typical monthly mortgage payment for a $400,000 home is now at $2,046. While NAR’s Pending Home Sales shows flat data from October to November, the recent week’s rate decline should motivate buyers who had been priced out of the market.
There are many signs of encouragement heading into 2024 in the housing market, such as more housing inventory from home builders, lower mortgage interest rates, and demographics. This year, even the youngest baby boomer (born between 1946 and 1964) turned 60 years of age. Baby boomers are the largest share of home buyers and may be looking for their retirement property. Last year, half of older boomers paid all cash for their homes and are less concerned with mortgage interest rates. Additionally, millennials (the largest adult generation) may be looking for their first property or a move-up family home. Housing demand is apparent. With added inventory and better mortgage interest rates, 2024 looks like a better year.
If you spent your teenage years waiting anxiously for one of your siblings to get out of the shower, the idea of selling your spacious, multi-bathroom home and moving into a smaller house or condo may feel like a reversal of fortune.
Yet for many retirees, downsizing makes financial and practical sense. Younger baby boomers — those currently ranging in age from 57 to 66 — made up 17% of recent home buyers, while older boomers — ages 67 to 75 — accounted for 12%, according to a 2022 report from the National Association of Realtors Research Group. Boomers’ primary reasons for buying a home were to be closer to friends and family, as well as a desire to move into a smaller home, the report said. Both younger and older boomers were more likely than others to purchase a home in a small town, and younger boomers were the most likely to buy in a rural area.
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For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.
Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips.
With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”
Challenges for downsizers
For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com.
Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers.
Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.”
Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement.
However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.
Other costs and considerations
If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect.
Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.
Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says
Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older.
If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.
At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”
Time is on your side
Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership
The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year.
In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)
Aging in place
Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home.
To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.
There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.
Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.
Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely.
Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population
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Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population
By: Rob Chrisman
Thu, Dec 28 2023, 10:54 AM
If someone reports their company for tax evasion in the U.S., he or she will receive 30 percent of the amount collected. Have you ever loaned someone money and had them not pay you back? Here’s one thing that you can do to them (IRS’ 1099-C). While we’re on the general topic, despite strong retirement savings, Fidelity Investments’ Q3 2023 analysis reveals a surge in hardship withdrawals and 401(k) loans, addressing short-term financial challenges. By the numbers: 3 percent took hardship withdrawals (up from 1.8 percent in 2022). 8 percent tapped into 401(k) loans (compared to 2.4 percent last year). The silver lining? Retirement balances are on the rise, and savings rates remain steadfast. For those planning retirement, consider suggesting reverse mortgages as a game-changer. They offer an alternative, allowing access to funds without swiftly depleting hard-earned savings. If you haven’t set up reverse division at your shop, well, 10,000 people a day turn 62. Today’s podcast can be found here, and this week’s is sponsored by Gallus Insights. Mortgage KPIs, automated at your fingertips. Gallus allows you to go from data to actionable insights. If you can use Google, you can use Gallus. Hear an Interview with attorney Brian Levy on the NAR lawsuits and the implications for housing finance moving forward.
Broker and Lender Software, Products, and Programs
Are you a compliance nerd? A group of mortgage industry veterans has launched a software company for loan servicing that is getting a lot of attention. Keep your eyes and ears open for MESH software (Mortgage Enterprise Servicing Hub), which is their brand name for a series of software products aimed at loan servicers. The first product runs hundreds of compliance rules on loan portfolios daily, so servicers have a daily review of all loans against everything the CFPB, Agencies and States can throw at them. Look up “MESH Auditor”.
It’s time to start planning for the year ahead! Join the Computershare Loan Services (CLS) team from January 22 – 24 in The Big Easy for MBA’s Independent Mortgage Bankers Conference. With CLS’ originations fulfillment, co-issue MSR acquisition, subservicing, and mortgage cooperative, IMBs can streamline their operations, minimize expenses, and maximize profits. Contact the CLS team today to schedule a meeting in New Orleans.
Ring in the new year with a kinder outlook by joining us for the highly anticipated “Kind Mindset” event presented by Kind Lending. Taking place on January 16th, 2024, at The Buckhead Club in Atlanta, GA, this immersive event is designed to empower attendees with valuable insights on growth, success, and mindset. With an impressive lineup of speakers, including Kind Lending’s CEO/Founder, Glenn Stearns, and special guest Captain Charlie Plumb, 6-year Prisoner of War and former Fighter Pilot, this event promises to be a transformative and inspirational experience. Get ready to cultivate a “Kind Mindset” and embark on a journey of transformation and success. Register today.
Aging, Down Payments, and Housing Demographics
Do you think getting old is hard? The U.S. Census Bureau released a report showing that about 4 million U.S. households with an adult age 65 or older had difficulty living in or using some features of their home. About 50 million, or 40 percent, of U.S. homes had what were considered to be the most basic, aging-ready features: a step-free entryway into the home and a bedroom and full bathroom on the first floor. About 4 million or 11 percent of older households reported difficulty living in or using their home. The share increased to nearly 25 percent among households with a resident age 85 or older. Over half (about 57 percent) of older households reported their home met their accessibility needs very well, but only 6 percent of older households had plans to renovate their home in the near future to improve accessibility.
In general, Zillow expects home prices to remain roughly flat in 2024, with only a 0.2% increase in its housing market index. Existing home sales are expected to fall further to 3.74 million. Zillow does mention that this forecast does not take into account the latest forecast from the Fed, and the expectation for big rate cuts in 2024.
Falling mortgage rates have put some spring in the step of the homebuilders, according to the latest NAHB / Wells Fargo Housing Market Index. As one would expect, with mortgage rates down roughly 50 basis points over the past month or two, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look. With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory and lower inflation. But builders have lagged production for so many years…
Non-builder loan officers find the builder world a tough nut to crack. Many, if not most, big builders are dealing with the mortgage rate issue by subsidizing buy-downs. Builders generally build free upgrades into their models, and these funds are being used to buy down the rate. The builder gets full price for the house, loses a few points on the mortgage, which might have instead gone to upgraded countertops or something else.
Even if one can get approved for a loan, buying can still be prohibitively expensive. Receiving help from family and friends for that crucial down payment can be a major turning point for many consumers. In fact, nearly 2 in 5 homeowners (39 percent) have received down payment assistance, according to LendingTree’s Mortgage Down Payment Help Survey, of nearly 2,000 U.S. consumers. 78 percent of Gen Z homeowners reported some financial support for a down payment, mostly from their parents. 54 percent of millennials have received down payment help, followed by 33 percent of Gen Xers.
Almost a third (31 percent) of Americans think putting down 20 percent for a down payment is obligatory. However, 59 percent of current homeowners say their down payments were less than 20 percent of the home’s purchase price, and just 29 percent put down 20 percent or more. One in 10 Americans never took out a mortgage, while 15 percent had a mortgage but have since paid it off. Baby boomers are the most likely to have paid off their mortgages, at 29 percent.
As anyone shopping for a home can tell you, it’s slim pickings out there. For many years we have been seeing the biggest squeeze in the starter home category. It appears that for years part of the problem is a lack of confidence to move up to the next category. People in starter homes are staying put, which is keeping homes off the market.
Capital Markets
It was another slow news day yesterday without any meaningful economic data or news to move sentiment. However, investors are laden with optimism as a soft-landing for the economy comes into view and seem to be throwing caution to the wind with over 150 basis points of Fed Funds easing fully priced in for next year. In accordance with that, benchmark bonds rallied to fresh highs yesterday after the U.S. Treasury sold $58 billion in 5-year notes to excellent demand. The strong auction exposed some short positioning, and it invited additional late buying. That followed Tuesday’s $57 billion 2-year Treasury auction that attracted a record number of indirect buyers to snap up high yields before the Fed’s anticipated rate cuts, which are fully priced in to begin at the March meeting in just over 80 days. Yields on benchmark treasuries have dropped to levels not seen since the summer.
Today has a fuller calendar than the past two sessions in regard to economic news. We are under way with initial jobless claims (+12k to 218k, a little higher than expected), continuing claims, advanced economic indicators for November (goods trade balance, retail inventories, and wholesale inventories), none of which moved rates. Later today brings the NAR’s Pending Home Sales Index for November, Freddie Mac’s Primary Mortgage Market Survey, and another large amount of supply from the Treasury, headlined by $40 billion 7-year notes. We begin the day with Agency MBS prices worse a few ticks (32nds), the 10-year yielding 3.81 after closing yesterday at 3.79 percent, and the 2-year is down to 4.25.
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Knightvest, a real estate investment and management company, has published its inaugural annual Multifamily Renter Sentiment Report findings. The survey offers insights into the decision between renting and buying, the consequences of high mortgage interest rates, and variations in rental preferences across different generations.
Most renters (59%) choose to rent rather than feel forced to rent.
Among the respondents, 51% of Millennials and 54% of Gen Z individuals have actively chosen to rent.
A surprisingly high number of renters (31%) feel ambivalent or uninterested in home ownership.
74% of renters report that their timeline to purchase a home has significantly lengthened due to increased mortgage rates
Older Americans are selling homes to live in apartments.
73% of people say that social interaction is essential in an apartment community
Baby Boomers value social interaction more than Millennials (78% versus 71%)
On the whole, Gen Z respondents are slightly more enthusiastic about the idea of owning a home compared to Millennials (29% vs. 25%).
The rent-versus-buy decision is increasingly nuanced given this dynamic macroeconomic environment, and it’s interesting to see the data support what we’re hearing anecdotally from residents: if you create communities built on quality, service and care, then apartments can become sought-after destinations where residents thrive through multiple seasons of their lives.
David Moore, Knightvest Founder and CEO
Top Reasons Why People Rent
The high cost of owning a home is a concern for 62% of people.
The reduced responsibility for maintenance and repairs is a factor for 51% of individuals.
35% of renters cite the increased flexibility to relocate as a reason they choose renting instead of buying.
Also, it is interesting to note that:
29% of renters have previously owned a home.
71% of Baby Boomer renters have owned a home before, and their primary reason for renting is to have fewer maintenance and repair responsibilities.
Finally, The surge in mortgage rates has caused a significant delay in decision-making for those looking to buy a home.
An overwhelming 74% of survey participants have indicated that the timeline for their home purchase consideration has been prolonged due to the substantial increase in mortgage rates.
Within this group, a staggering 79% have reported that this extension ranges from a few years to indefinite.
Millennials and Gen Z individuals have expressed similar salary expectations required to afford a home.
On average, Millennials have stated a need for a salary of $139,000 to purchase their desired home, while Gen Z has mentioned a requirement of $137,000.
As we head into 2024, this data underscores the enduring demand for apartments and reveals insights that will continue to shape the real estate landscape for years to come. At Knightvest, we remain focused on executing our strategy to renovate and reposition apartment communities to create compelling, modern living environments at an extraordinary value. With people staying in apartments longer, this work has never been more important than it is today.
David Moore, Knightvest Founder and CEO.
Knightvest conducted the survey in the Multifamily Renter Sentiment Report from November 20 to November 30, 2023, on an online platform. 4,100 U.S. apartment renters participated voluntarily and did not receive payment for their opinions.
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Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.