It seems to be easy for folks to learn through stories, so I thought I'd post about a client in Redlands, California who just closed on her reverse mortgage.
A younger senior, in her late 60's, Ms. B husband passed away almost 10 years ago and it's been a struggle to make it on one income. When her husband was alive, they refinanced the home to take advantage of lower rates so she was still making those mortgage payments.
She is very frugal and creative, and has come up with a good retirement strategy for her situation. Here's what she's done:
- Rents Out 2 Bedrooms - A smart woman she rents out the extra two bedrooms to other single seniors. This brings her in just over $1,000 a month. (Kind of reminds me of college roomies the way they look out for each other, yet mind their own business.)
- Reverse Mortgage - Used the reverse mortgage to pay off the existing mortgage, saving her $600 a month in payments and setting up a growing line of credit (hey! you never know, one of the renters might move out - gotta be prepared)
- Works Part Time - Supplementing her savings for when she's a "real" senior, and needs extra help.
Between working part-time, eliminating her mortgage payment, and renting out a couple of rooms she has boosted her net income by $2,200 per month! Pretty cool!
Things to know - yes you can rent out a room if you have a reverse mortgage, but remember the home must remain YOUR primary residence too, and you must have full use of the living quarters in the home. In other words, you can't rent out the house and just live in your bedroom.
You do not have to make payments on a reverse mortgage, the interest just accrues to the balance. The loan and all accrued interest becomes due and payable when you permanently leave the home. (Due to death, sale or illness) If a reverse mortgage causes the home to be underwater, you or your heirs are not personally responsible for the balance. The lender's ONLY recourse is to the home - this is called a "non-recourse" loan.
I hope you enjoyed this post and learned a bit more about ways to use a reverse mortgage to help you structure a safe, secure retirement. I hope you will post comments and questions.
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