I wanted to take a moment to tell you a story of a ' reverse
mortgage '
placement
. Let's take our story's primary character, 'Mary', and look at
a circumstance that seems to fit a reverse mortgage strategy
very well. Mary is a single woman who just recently became
eligible for Medicare so you figure her age out because my Dad
always said it was not a good idea to talk about a woman's
age.
Mary is single and has no immediate family and, through no
fault of her own, not much in savings or retirement other than
the home she owns. Fortunately she has owned the home in a
Southern California beachside community for over 30 years so
even though the real estate market has declined she is
still
in the black. Mary's current mortgage is about $200,000.00
($1,100 a month payment
going out
) and her home is valued at $650,000.00. The mortgage
outstanding is an interest only (variable, not fixed) loan that
was
secured
during the 'no document loan' days of past. Being 'retired',
and having home prices depressed, Mary can no longer play the
're-finance' piggy bank game that many
enjoyed
in the past to 'finance current
life, or lifestyle
, needs' so she is faced with tough decisions about staying or
going.
Does Mary sell her home and employ that equity in another
home in a more '
cost appropriate
' region of the State or country? Does she sell and rent in the
area she lives in currently where rents are steep and
not likely
to remain at a '
fixed '
level for therest of her
life
? Would choices made move her away from friends and '
family removed
', from favorite haunts and hangouts, or from preferred doctors
and other providers? Tough choices to make but they are choices
that rational minds must confront. Better to make choices
while you still have choices
to make than to fail to act and have choices taken from
you.
The reverse mortgage option in, Mary's case, would provide
her with
- $1,122.00* of income for life, or,
- a lump sum payout of $189,000 for her to invest for
income, or,
- $2,138.00 for 120 months when the payment would
'reset'.
In the case of the home appreciating over time, remember it
is beach area property, it may be possible to '
reset
' the payout* to a higher amount at that later date. If she
decides to sell the home in three years she can do so and she
will have all the remaining equity in the home that wasn't paid
out to her through the reverse mortgage available to her just
as you would when you sell a home, pay off a regular mortgage
and walk away with the cash.
So Mary has decided to do the reverse mortgage option of
$1,122.00 a month, for life, payout to her. Her current
mortgage will be paid off and if properties in the beachside
community come back she may be able to 'reset' her payout at
that later date*. The main point is that she has given herself
options and time to stay in the home she loves and has
maintained for all these years.
A wonderful booklet on the subject of Reverse Mortgages is
put out by AARP . Take your time to read through the Reverse
Mortgages booklet before you start the process of considering a
reverse mortgage.
To be eligible for a federally insured HECM (Home Equity
Conversion Mortgage), you must discuss the loan with a
counselor employed by a nonprofit or public agency approved by
HUD (the U. S. Department of Housing and Urban Development ).
This counseling can be very helpful. So it can be a good idea
even if you are thinking about applying for some other type of
reverse mortgage. HECM counselors provide in-person counseling
in their local areas, and counseling by telephone in other
areas nationwide. For current information on requesting HECM
counseling, go to www.hecmresources.org/network.cfm
or call 1-800-209-8085. This counseling generally takes at
least one hour. When provided by telephone, it typically
requires two or more calls.
Give
your
'
Enchanted Castle
' a '
Disney
' ending by making choices
while you still have choices
to make rather than failing to act timely and having the
ability to have choices taken from you.
David Bergmann, CFP
®
, EA, CLU, ChFC
Managing Principal
The David Bergmann Group
Marina Del Ray, CA