Friday, March 30, 2007

Violin maker strikes good with reverse mortgage

A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM) is a relatively new product.

A reverse mortgage provides unique benefits for its target market: someone over 62 who lives in his/her primary residence, who has substantial equity in his/her home, and who has little or no income.

Australian violin maker Robinson, 70, and his partner,66, needed some extra money to ride through a lean period. Robinson was able to get a reverse mortgage against his property for $100,000.

He decided to take $60,000 immediately - via a fixed-rate mortgage over 20 years.

They intend to pay it off sooner, but first they want to do some extensive work around the property and buy a second car.

It will also allow them to take a holiday without unnecessary pressure.

"Instruments are starting to sell again and we are going to reduce the loan," Robinson says.

The idea of having $40,000 in reserve appeals to Robinson, who is always on the lookout for an undiscovered bargain.

"Supposing a great violin appears at an auction room and it costs $10,000 to buy but may be worth $2 million? It has happened before.

"If something like that were to come up I can draw down."

Robinson has struck the right chord and it is excellent business.

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