maintaining your lifestyle

Sandra and Ken are in their mid-60s and just easing into their retirement routine. They always felt they had planned well for their “golden years,” with expected income from investment properties, modest stock market exposure, and their social security – all while carrying a small mortgage balance relative to their home’s value.

In the year or so since retirement, they’ve enjoyed the new pace: socializing, managing the rental properties, and spending more time with Sandra’s dad in his assisted living community. One thing they didn’t anticipate though was difficulty consistently staying within their monthly budget. You can map out budgets, but holidays, along with birthdays, and unplanned spending all seem to add up. Sandra was particularly bothered by their overspending. Initially, they considered selling one of the rental properties, but it seemed counter-productive to eliminate a solid source of income. Also, they had always planned to pass the properties down to their two daughters.

Sandra heard about reverse mortgages from a television commercial and, because all their properties were in a trust, they contacted their estate planning attorney who referred them to me.

During our first meeting, Sandra and Ken learned that with their home worth upwards of $1 million, they would qualify for about 55% of the $636,150 maximum allowed property value, or roughly $350,000. With 60% of that available to them immediately, their existing $200,000 mortgage could be paid off right away and there would be another $150,000 available in a credit line (after the one-year waiting period) to provide a cushion should they need it down the road.

The couple also learned that with a reverse mortgage they would not be required to make any repayments. They can choose to pay down their balance, but they don’t have to until they permanently vacate their home – either by selling or when they both pass away. Being in their mid-60s, they could potentially use this mortgage for 20 or 30 years, or even longer.

They just need to keep current on property taxes, home insurance, and home maintenance: all the basic responsibilities of home ownership. And their out-of-pocket costs to do this would be quite low as most of the closing costs for the reverse mortgage are rolled into the loan balance.

The reverse mortgage was a great solution for Sandra and Ken.

While reverse mortgages are not for everyone, a licensed and trustworthy HECM loan specialist can help guide your decision-making process if you are looking for solutions to help fund supplemental retirement income, a renovation, long-term care, business cash flow, college expenses, or purchase a smaller second home.

**This is the second in a series of articles about real life homeowners who are using federally-regulated home equity conversion mortgages as part of their financial plans.

Alice Tseng

Alice Tseng

Alice Tseng is a licensed HECM specialist with American Advisors Group. She can be reached at 914-488-9262 or at
Alice Tseng

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