As a reverse mortgage loan officer, I see many heartbreaking stories every day. The sad truth is that most of us have not adequately planned for our retirement. I myself am 64 years old and I belong to this category. Most of my friends are already retired and have big 401Ks or pensions to draw on. Almost all of them worked for large companies.
I took a different path. I was self-employed for most of my life. It gave me many freedoms and the ability to control my own destiny. I had a bit of success, being able to maintain a comfortable lifestyle, buy flashy cars and clothes, and take expensive vacations. I did not save money for my retirement and will have to retire on the fixed income provided by the Social Security Agency. If I had paid for my house, I would be in much better shape and could almost get by on the $ 1850 Social Security would pay me if I retired now. If I wait until 66 years and 6 months, that shoots up to $ 2200 and if I continue to work until 70, I will get a whopping $ 2600 per month. The only problem is, I haven’t paid for my house.
At this point, you would be much better off on a reverse mortgage. A reverse mortgage would eliminate my house payment for the rest of my life and allow me to stay in my house forever. They can never pay off the loan unless I pass away, move, or sell the house.
I would be responsible for taxes and insurance which amounts to about $ 300 per month. You would also have to pay Homeowners Association dues, which are currently about $ 325 per month. So out of my $ 1850 a month from SSA, I would have to live on $ 1200 a month. It is doable but not very comfortable. It’s not what I’ve worked for 40 years to achieve
A reverse mortgage will also give me a line of credit that I can take advantage of at any time. If I don’t touch it, it will grow about 3% per month. It doesn’t sound like much, but keep in mind that it is more than the interest you would get in a bank. Once my value is established, they will never be able to reduce the amount of my line or credit or cancel the maturity of the loan, even if the value of my house decreases.
If you had a HELOC, a home equity line of credit, the HELOC amount can and has been cut in the past due to prevailing real estate values. This happened to almost everyone in 2008 when the subprime bubble burst. People found that when they needed money most, it was not available to them. This caused many people to file for bankruptcy because they could no longer pay their bills after being laid off from their jobs.
The reverse mortgage prevents this from happening. They put an insurance policy on the loan called Mortgage Insurance that protects the bank in case the values fall again. It also protects the borrower from the adverse effects of his bank failure.
A reverse mortgage was designed for seniors who were short on cash but had accumulated a large amount of equity in their homes. It is not unusual for me to find seniors who are trying to survive on less than $ 2000 per month but have several hundred thousand dollars in their homes that are there.
If you are in this situation, look for a reverse mortgage. It will help you with your finances, give you a little more money to spend each month, and give you the security of being able to stay at home for as long as you want.