As a reverse mortgage officer, I see many heartbreaking stories every day. The sad truth is, most of us haven’t properly planned our retirement, I’m 64 and fall into that category. Most of my friends are already retired and have a fat 401k or pension to fall back on. Almost all of them worked for large companies.
I took a different path. I’ve been self-employed for most of my life. You have given me so many freedoms and the ability to control my own destiny. I was moderately successful, managing to support myself with a comfortable lifestyle, buying flashy cars and clothes and taking expensive vacations. I did not save money for my retirement and will have to retire for the fixed income provided by the Social Security Agency. If I had paid Dilly, I would have been in a much better shape and could have roughly the $1,850 Social Security would pay me if I retired now. If I wait until I’m 66 and 6 months until it’s $2,200, and if I keep working until I’m 70, I’ll get $2,600 a month. The only problem is that I haven’t paid my house rent.
At this point I would be much better off with a reverse mortgage. A reverse mortgage would cancel my house payments for the rest of my life and allow me to stay in my house forever. They can never call the loan due unless I die, move out, or sell the house.
I will be responsible for taxes and insurance which is about $300 per month. I will also have to pay my home owners association dues which is currently about $325 per month. So out of my $1,850 a month from the SSA, I had to live on $1,200 a month. It’s doable but not very convenient. Not what I’ve worked for 40 years to achieve
The reverse mortgage will also give me a line of credit that I can take advantage of at any time. If I don’t click on it, it will grow at about 3% per month. It doesn’t sound like much but keep in mind it’s more than the interest I would get in the bank. Once they determine my value, they can never cut my line or credit or call the loan due even if my home has gone down in value.
If you have a HELOC, which is a home equity line of credit, the amount of the HELOC can and has been cut off in the past due to prevailing real estate values. This happened to almost everyone in 2008 when the mortgage bubble burst. People found that when they needed money most, it wasn’t available to them. This caused many people to declare bankruptcy because they could no longer pay their bills after being laid off from their jobs.
A reverse mortgage prevents that from ever happening. They put an insurance policy in the loan called mortgage insurance which protects the bank in case the values fall again. It also protects the borrower from the negative effects of bank inactivity.
The reverse mortgage is designed for seniors who are cash poor but have accumulated a lot of equity in their home. It’s not unusual for me to find seniors trying to make less than $2,000 a month but have hundreds of thousands of dollars in their homes that are out there.
If you find yourself in this situation, look into a reverse mortgage. This will help you with your finances, save a little spendable cash each month and give you the security of being able to stay in your home for as long as you want.