August 2009

Credit Card Debt

I recently completed a Reverse loan for a couple who were overly in debt by living off of their credit cards.   Unfortunately with seniors, this isn’t unusual because they quite often don’t have enough money to pay for their bills each month and when there is an emergency, they have to use a credit card to pay for it.

My clients had been doing this for quite some time and finally ended up having $150,000 in debt.   Yeah, that’s a huge number.   Needless to say, they were having difficulties paying each card every month and only sent in the minimum payment, while they continued to use the cards because they had no other sources of money.  

They consulted a Bankruptcy attorney who told them they couldn’t do a B.K. because of the value of their home and he suggested (I’m completely surprised by this), that they do a Reverse loan instead; that it would be the wisest decision they could make for their financial future.

They had looked into using a Reverse loan a year ago but had never moved forward because they were scared about what they had heard regarding the loan.   Far too frequently, the fear of losing their house to a lender or not having anything left of their estate to pass to their heirs, prevents seniors from making any effort to investigate how the loan works.

(Which is a shame, considering that everything they have heard is simply not true.   The bank never takes over the ownership of the property and the heirs will  still inherit it at the end and may do whatever they please with it.   Plus its insured by the federal government as well as being highly regulated by various laws to protect the senior).

Typically they will ask their friends for advice or sometimes their attorney or other professional.   The response they generally receive is not to do the loan because they bank will take the property at the end of it and it’s too expensive.  In other words, these professionals are just as ignorant about it as the seniors are.

And then I like to respond with “Expensive?  Compared to what”?   But I’m digressing here, so I will return to my original topic.

My clients with the huge amount of debt, finally completed their loan.   It wasn’t without a number of delays caused by their own “foot-dragging” (They still weren’t convinced that doing a Reverse loan was a good decision) but when the loan closed and funded, they were enormously relieved and very, very happy.

I advised them not to use the funds to pay off the credit cards but just to continue making payments as they had been attempting to do.  But they were going to use some of the money for home repairs and other things that would improve the value of the home.   And fortunately, they did not have an existing mortgage that would have to have been paid off with the funds from a Reverse loan, which in the end…gave them a very large line of credit.

$450,000….That certainly can make a difference in a person’s life, wouldn’t you agree?

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Reverse Loans in the News

Initially when I became a Reverse loan consultant, I thought that representing the federal program would be easy since it offered so many benefits to the senior community.   I was naive.   I did not know that many people felt negative about them and were unwilling to even investigate how they worked and what they could offer a senior.

I’m a nice person, ethical and honest to my core.   But now I felt like the enemy.   I was out to get a senior’s home.   My feelings were hurt and I was frustrated by this attitude.

In the last few months, I’ve noticed that it seems we are finally rounding the curve on the myths and negative attitudes towards the loan, as the public in general is becoming more educated and informed about how it works and how it can make a huge difference between staying in your home or moving in with your adult children or possibly an assisted living facility (If you can afford it and don’t run out of money in the process).

More people are asking questions about a Reverse loan than previously and are considering using it to supplement their retirement income.   With the extreme issues in the financial markets, many seniors are now applying for a Reverse loan in order to have a safety net of income well into the future.

There have been several positive articles recently written in the media and even Fox News presented a story about them that was quite upbeat.   The Connecticut Post and Newsday.com featured articles within the last week that were not only informative and correct but also very positive.

Reverse loans are being used to prevent foreclosures and keeping seniors in their homes and they are very fortunate to have this federal loan program that is insured by the government.   

Good news in the media is what is needed to help promote the advantages of Reverse loans.   They will be part of everyone’s financial plan in the future and the need for them will only grow.

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Seniors Want to Stay in Their Homes

It should not come as any surprise, but seniors do not want to leave their homes and live in a “retirement” community or assisted living.   Think about it for a moment.   What would you want to do?   You have a home, one that you’ve probably enjoyed for many years, it’s familiar to you and filled with memories, plus you’re attached to the area and you don’t want to move into a single room when you have an entire house that is yours and you probably don’t want to be living with strangers.

Continuing to live in their own home has become more of a viable option for seniors than it was in the past, due to funds from Reverse loans and the many services that are now offered to the senior community which enable them to maintain their independence and stay at home. 

In the past services that were available to seniors still living in their homes was limited. But now there are many choices to help them with whatever they may need to make life more comfortable and allow them the ability to remain in their home if that is their wish without resorting to giving up and moving out.

A recent survey that was conducted by Home Safety Council, found that the majority of older people wanted to remain in their homes.   With the average cost of an assisted living facility at $34,000 annually but more realistically topping out at $70,000, it becomes obvious that remaining in place, aging in place and not moving is the best choice.

The costs of these communities are so expensive that unless the senior has an enormous pocket and I hate to say this, doesn’t outlive their funds, then remaining in their own home is the more intelligent choice when managing the costs of aging.

With the funds from a Reverse loan it now makes it possible for a senior to manage their life on their terms and live independently and enjoy their familiar surroundings and not be a burden to their adult children. 

The funds can be used for any purpose and aren’t restricted by any guidelines, so the homeowner can use their money freely in whatever fashion they may choose, such a care giving services or medical expenses.

The best environment to live and age in, is the one that you are most familiar with and unless a senior has severe dementia, and needs constant care, then remaining at home is in most cases is the best choice.

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