financial stability

Seniors Seeking Additional Money

I have been sharing different ideas in my last couple of posts about the options for a senior if they want to borrower equity out of their home and whether or not they are a good or ideal solution to solve a financial problem or simply wanting extra funds to be available to them for any use.

I’m going to continue this discussion in this post and one more that will follow it in a few days.

In the last couple of days, I talked about the traditional HELOC, the one that every Bank offers to their customers and now  let’s pick up where I left off.

The HELOC will allow interest only payments for the first 5 years, but then will adjust to a much larger payment. Plus, the lender at any time can “freeze” the account and the funds in it will not be available to the borrower.

Too often the borrower is unaware that the loan will be “reset” in the future and if they no longer have the same income as they did when they initiated the transaction, they may not be able to afford the new and higher payment.

Sometimes a senior will use one of these loans for additional income to pay on going expenses, but obviously they will eventually run out of money in the HELOC and of course, will have mortgage payments for the term of the loan.

This can be disastrous for a senior and possibly result in them losing their home through foreclosure if they are unable to afford the payments.

The next possible choice, would be to do a traditional fixed rate 2nd Trust Deed. At least you will know what the payment will be each month, but again the borrower is obligating themselves to a mortgage payment for 15 years and they may not have the income in the future to continue comfortably making the payment each month.

And if they are a senior and or hoping and or planning to retire within a few years, will they be able to afford this obligation every, single month?

So would be the next choice?

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Seniors Are Divorcing

Divorce is always an emotional and difficult experience regardless of the reason or the age of the two individuals who are experiencing this wrenching event in their lives.

Overall the national average of divorcing couples has declined over the years but what is odd, is that it has tripled for those couples over the age of 65 since the 1990’s.

The reasons for senior or “gray’ divorce vary but some of the more common ones is that after raising their children for many years, they began to see themselves as simply parents and no longer friends or lovers.

Then when the adult children leave the home and start their own lives, an older couple may discover that they no longer have any shared interests as they have grown apart over this period of time.

The financial implications of a “gray’ divorce can be quite complicated in that any assets and or retirement funds could end up being liquidated with disastrous consequences for the couple and their future financial stability and security.

I am not a financial advisor and certainly not a Divorce attorney and not qualified to provide any guidance in this matter and it’s best for couples to always seek professional advice when it comes to something as serious as a divorce and splitting up their assets.

However if there is equity in the home, it may be adequate enough to utilize a Reverse mortgage as a tool to either give half of it to one of the divorcing party’s and or buy them out in exchange for the other party receiving any investments they may have accrued together.

But a property settlement would have to be created by their mutual Divorce attorneys to make a final determination as to how all assets are to be divided.

So how would that work?

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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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Will I Outlive My Retirement Money?

Well, many Americans are very concerned about this probability because they simply don’t have a retirement plan or never bothered to set one up for themselves and now they are facing a scary future where they may not have enough money to sustain their lives.

The 2016 study that was done by the Harris Pole for Northwestern Mutual took a very serious look at the pending domestic crisis America is facing and not surprisingly, those who are approaching retirement   ( If they can retire) and those that have already retired, are worried about running out of money.

In a previous post, I shared the first part of an article that discusses this study and due to it’s length I will share part of it in this post, with the rest of it to follow.

New Study Underscores Retirees’ Need for Non-Traditional Funding Sources
Posted By Jason Oliva On June 7, 2016 @ 5:32 pm In News,Retirement,Reverse Mortgage

“Life expediencies continue to climb and that’s a good thing, however, Americans are increasingly less confident that their savings will last through retirement. Roughly two-thirds of survey respondents believe there is a chance they will outlive their savings, with 34% of this bunch saying the likelihood of this happening is 51% or better.

“The prospect of an extended retirement in an environment of diminishing safety nets makes it even more essential that your financial plan is flexible enough to stretch as long as needed,” said Rebekah Barsch, vice president of planning for Northwester Mutual, in a written statement.

The 2016 study results not only highlight the vast unpreparedness of American adults, but also underscores the need to look beyond traditional funding streams like Social Security to bolster retirement savings.”

Of course, as a Reverse Loan Consultant I know how valuable the FHA loan program is for preserving wealth and providing emotional security, but that is another topic.

People need to simply become educated about their benefits and why they should consider using them as part of a retirement plan.

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Who has $12.5 Trillion Dollars?

American seniors do and it seems to me that this figure keeps growing each month.   It wasn’t too long ago when it was at $ 5.5 trillion dollars and I thought, that was a lot of money to have in one’s home.

Reverse loans have been around for a number of years and as we head into the void of a lack of retirement funds that most people simply don’t have enough of…..there is a looming question as to how all of their needs will be managed as they age.

The Street recently published an article about this massive amount of equity that seniors have available to them to supplement their retirement, but many are still afraid of the HECM FHA loan program and do not see it as an option to extend their retirement savings.

Here is the first part of the article.

The Street: Education is Key When Discussing Reverse Mortgages

September 5th, 2016 | by Alana Stramowski Published in News, Reverse Mortgage

With the amount of equity floating around in the U.S., reverse mortgages could be a good a good financial decision in the right circumstance, explains a recent article on The Street.
There is $12.5 trillion in home equity in America and about $14 trillion in retirement assets, according to the article. Reverse mortgages could be used by homeowners 62 and older to help supplement Social Security and other existing income sources like medical expenses, long vacations or even purchase a new home.
A perk about the product that the public was often confused about in the past is that homeowners will never relinquish title to their homes. “The reverse mortgage enables seniors with insufficient income to tap their home equity without selling their domicile,” the article says. “Moreover, the income can make it possible for a retiree to deal taking Social Security payments in favor of larger payments down the road.”

I will share the remainder of this article in my next Post.

 

 

 

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