It's becoming more and more common... “I have no idea what my parents/grandparents' finances are like”. I hear clients say this all the time and it's becoming alarming. Not because I think we should all pry into our family's financial business, but because we should know when our families need help.
Foreclosures are on the rise, and MANY of them are because elderly residents can no longer afford to pay the mortgage payment. Their income has dropped, expenses have risen, and it's caused them to either seek employment...or give up. Even worse, many of them don't realize that there truly is an option to help protect their homes AND give them income.
A Reverse Mortgage is absolutely one of the best retirement tools available. Why? Let's put it this way... Your home has been acting as a “forced savings account” for probably more than 15 years, when retired. I call it a “forced savings account” simply because every payment made is going directly towards paying the debt off and hopefully building equity...thus increasing your assets. Then, at the right time, you have the option to either sell the home & collect the equity...or, refinance to pull the equity out. Aside from selling the home, the ONLY way to tap into the equity is to refinance. Yet, if we are talking about our family members, who are in financial distress, being the ones to refinance – often times it will not help because they likely will not qualify for a traditional refinance in today's environment.
So, what's the solution? Enter: Reverse Mortgage
When a homeowner (Grandparent, Parent, etc) turns the age of 62 they now have an option not available to the rest of America. A Reverse Mortgage. This Reverse Mortgage provides an opportunity for the homeowner to defer making physical payments on their mortgage all while retaining ownership – provided they have enough equity. No credit score required and no income qualification needed. If there is equity in the home AND the homeowner is 62 years of age or older, odds are they will qualify.
Here's an example:
Esther is a Grandparent, age 75, widowed and has a mortgage payment of $650 per month. Assuming that she has enough equity, she would likely qualify...resulting in the elimination of her monthly requirement to make a payment (saving $650 per month) AND have the option to draw additional “income” from the property.
Esther's been retired for 20 years, in order for her to supplement the $650/mo she would have to normally obtain a part-time job – probably making $8/hr. That's roughly 97 hours of work every month (after taxes). Not exactly our retirement dream. Or, she can use a Reverse Mortgage to supplement the income and continue living her life to the fullest.
Take time today – please don't look at it as prying – ask your Parents & Grandparents what their financial life is currently like. Ask them if it would help if their mortgage payment were eliminated all why keeping the property & retaining full ownership rights just as they have now.
When I reach retirement age, I can only hope that my 2 daughters will care enough to “pry” into Kellie & I's financial life... I know many Grandparents that have been forced to sell as a result of our economy, I wish we would have been able to talk sooner.
Until next time...
Roanoke, VA | Reverse Mortgage Advocate
www.joshperrington.com | 540.904.0842