Reasons for Using a Reverse Loan

A Second Act

Through our youth, most of us were busy either attending college, working or doing both at the same time and thinking about how we wanted a fulfilling life and make piles of money in the process.

Or “not”, maybe you “partied” your way through this period of time.

Then you married, had a family, a mortgage and all the obligations that came with those choices.   Regrets?   Maybe, maybe not.

Once in a while you managed to afford a vacation but the dreams that you may have had when you were young, probably fell away and now are seen as unattainable.   Buried under the responsibilities of marriage, parenthood and the plethora that comes with it, you gave up on the interests you may have been passionate about.

But sometimes in those quiet vulnerable moments, they return.

Years pass quickly and you have no sooner begun your career and profession, when you find yourself on the verge of retirement and without the career you had for years that was your guiding purpose, you find yourself adrift.

Your identity you cultivated over the years, vanished and now you are unsure what the last part of life will be like because it feels empty; there is no purpose…..

And there is the distinct possibility that you won’t have enough funds to retire and will be forced to continue to work well past your retirement years, because you are burdened with a mortgage.

However, you could use the funds from a reverse loan to get out from underneath it and possibly have additional funds in a Line-of-credit and not have any mortgage payments ever, again.

And having this money available to use for any purpose, could open up possibilities to move yourself forward, towards whatever it is you are passionate about and reignite those dreams from long ago.   And begin a very rewarding and satisfying second chapter in your life as a retiree.

And possibly fulfill that dream that you had so many years ago?

Why not?

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Seniors Don’t Want to Sell Their Homes

In my previous post I shared several reasons why seniors might use a Reverse loan and without being redundant, I won’t repeat those reasons in this one.

If a senior homeowner opts to sell their home and not use a Reverse loan for whatever their goals are, here is what must be taken into consideration.

  • Preparing their home for Listing and doing any necessary repairs and or “sprucing” up the property before it goes on the market.
  • The costs for whatever those repairs and cleaning up might be.
  • Agreeing on a Sales price and Broker fee  ( typically 6%) and entering into a Contract.
  • Allowing strangers to walk through your home that can be disruptive and annoying.
  • Cleaning out years of stuff that have accumulated over time and this can be quite “daunting”.

Now, that’s just the business side of selling a home, but what about the emotional and psychological component?

  • Leaving a home that you have loved for many years and is filled with a lifetime of memories.
  • Possibly leaving behind good neighbors, friends and a community that you are comfortable with.
  • Giving up connections to your Doctors and other professionals who’s services you use to assist with your life.
  • Leaving behind a part of “you” that is ingrained in your home and leaving that part of “you” behind for the rest of your life.
  • Grieving over this experience of leaving…..
  • And the serious question;   “Where will I live and how long will the money I receive from the sale of my home, last”?

Sometimes well meaning family members, think that this is the most logical solution for their senior parents.

But is it?

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Use a Reverse Loan or Sell Your Home?

The first time I ever speak with anyone who’s seeking information about Reverse loans, I always ask them why they are looking into one and how it would improve or change their life.

Most of the common reasons are the following ones:

  • Eliminate an existing mortgage and stop having to make mortgage payments each month.
  • Increase “cash” flow.
  • Home improvements
  • Money for unexpected expenses, especially for care-giving and medical bills.
  • Avoiding withdrawals on savings and investments.
  • Traveling
  • Downsizing and buying a new residence.

If the reason to use a reverse loan is for cost of living expenses and increased cash flow, the funds from it can certainly make a difference in the quality of life for a senior, but what is the other option or options?

Sell their home?  Or possibly rent out a bedroom or two, to family members or strangers?

Most people don’t want their privacy compromised by having strangers living in their home and having to tolerate someone else’s habits and behaviors that may not be compatible to their way of doing things.

Plus, it can be dangerous or at the least a bad experience.

This leaves the other option of simply selling their home, taking whatever money they net after paying Broker fees, home inspection costs and paying off an existing mortgage.

Hopefully they will net enough money to afford rent payments and continue to live on their own until they run out of their funds from the sale of their home.

Let’s discuss this last option in my next post.   Does it make sense?   Is it a good idea?

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Reverse Loans Improve Lives

I mentioned in my last post that quite often I am asked why people apply for a reverse loan and what are the most common reasons.

In my previous post I spoke about a client who had been using her credit cards to pay for her “cost of living” expenses, because her Social Security income was too low to get her through each month.

However, the downside to using credit cards, is eventually you use all of the credit available on them, but still have an ongoing payment that now cannot be met.

You can read about Sylvia and how we managed to eliminate that debt and give her additional money each month from a reverse mortgage in the previous post.

My next example is Bonnie and Jim   ( No last name for privacy reasons) who had had a major medical disaster destroy their lives.  Medical emergencies are probably the number one reason for causing personal financial collapse as no one is prepared for the medical expenses that come with aging.

He had a great career in the movie studios as a transportation driver and life was quite good for them until he developed diabetes.

Unfortunately like so many men, Jim ignored it and continued to eat and drink whatever he wanted and did not take care of his health.   Needless to say he became very ill and almost died resulting in the loss of both of his legs and kidneys to the disease.

He was no longer able to work and they quickly ran out of their savings to pay medical bills and their regular ongoing monthly expenses and used up all of the funds that were available on their credit cards leaving them in a terrible, crushing financial situation.

They owed the IRS money, all the credit cards and ended up doing a Chapter 13 Bankruptcy but somehow managed to continue to make their mortgage payments and ultimately repaid the money they owed to the IRS

I was referred to them by a CPA and in spite of the ugliness of their credit and the bankruptcy, I managed to get them approved for their reverse loan, relieving them of the burden of mortgage payments, plus additional funds that they were able to receive at the close of Escrow.

Making their life just a little bit better.

Jim and Bonnie are doing very well as of this writing and even though their credit had been ruined, I was still able to get them approved for their reverse loan and help them move forward and into better circumstances.

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Reverse Mortgage Consultation and Meeting Sylvia

In my last post I mentioned that I would start to share some of my clients’ reasons for applying for a Reverse loan and I think I will start out with one of my earliest clients, Sylvia K.

Needless to say, I will not be sharing their actual names due their right to privacy.

Sylvia was in her early 80’s and a widow for a number of years, but did not have enough income from her Social Security to meet her monthly expenses and she had run up large balances on her credit cards to pay them and now found herself without funds to make the payments and still have money for her utilities and food.

I remember meeting her on a very hot summer day in her home and all the windows where covered up in heavy drapes and it was dark inside and she didn’t have any air conditioning and sweat was running down my spine.

Oh yes….it was “hot” in her home.

A trusted friend and neighbor  ( Brenda) was also there, much to my relief because Sylvia was a tough New Yorker and she of course didn’t trust me.

Why should she?   She didn’t know me and I was to be treated with great suspicion.

Anyway, it was hotter then Hell in her living room as she “grilled’ me about Reverse loans and made sure that I knew she was one, smart gal and had been in the clothing industry in New York, a “professional” and couldn’t be taken advantage of.

And she was scared as well.   Here she was, in her 80’s and out of money.  And I really liked her feisty attitude and her three cats, too.

( After she passed away about two years later, I found out about the feral cat colony she was feeding in her back yard).

Brenda asked me questions about the FHA loan, gently encouraged Sylvia to be “nice” to me.   ( And here’s the interesting part.  Sylvia and I became friends and she used to send me cute note cards to my home address, telling me how she was doing and included the names of her three cats in her signature).

And “yes” she did her Reverse mortgage.

She received a Line-of-Credit, paid off the credit cards and had a comfortable amount of money leftover to use whenever she needed it for anything.

She called me one year after she had celebrated her birthday in Hawaii, just to chat with me and tell me all about the two Birthday parties she had, had  and mentioned she wasn’t feeling too well.   I said that she probably had “partied’ too much.

But as it turned out, I was the last person she spoke to as she quietly died later that morning at home in her bed and her neighbor Brenda  ( Who checked up on Sylvia every day) called me and let me know that Sylvia had passed away.

And as I like to say “she lived life on her terms”and I was the last person she spoke to and I like to think that in the “end” she trusted me.

 

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