The Reverse Mortgage... A Lifeline for Seniors During Recession

Regardless of which economist you listen to, no one disagrees with the fact that we are in a recession.  It seems that the only argument now is how long it will last and what is the best way to get out of it.  Millions of American families faced with the uncertainty of the economy and the steps being taken to stimulate it, coupled with the falling stock market, are left drowning in a sea of doubt.  Even those who saved their whole lives and thought they were in a good position for retirement are watching their 401K’s and their stock portfolios disappear before their very eyes. 

This is troubling enough to young families, but is especially difficult for seniors who do not have time to go back out and earn another retirement or may not be able to re-enter the job market.  And those who are physically able to re-enter the job market find themselves in a market with skyrocketing unemployment so they are forced to compete with younger employees for jobs that they once would not have had any problem obtaining…assuming they ever wanted to go back to work at a time in their lives when they should have been able to enjoy the fruits of their labors anyway.

Many senior homeowners find that even the smaller mortgages that they once had no problems paying the monthly payments are becoming burdensome with their portfolios losing so much value in this economy.  Some find that they have to use far more of the principal than ever before, shrinking their accounts at a far too rapid rate monthly just to live. 

Those who felt they planned so well are now wondering how this could have possibly happened to them.  But there is hope.  The federally-insured Reverse Mortgage (HECM or “Heck-um”) is available to borrowers age 62 and over which never requires a monthly payment.  And since the signing of the Economic Stimulus Bill of 2009, the limit has been temporarily increased to $625,500 so that owners of higher priced homes have access to more of their equity than ever before under the HECM program.

What this does for seniors is give them an opportunity to stay in their home and gives them time… time to wait for a healthier economy to sell their home if that is their goal; time to live payment free or with additional income during a very trying time in this economy without fear of losing their home; time to retire a mortgage that may have been above the old Reverse Mortgage limits so that they can live payment free for life; or as we’ve even seen in some cases, time to help less fortunate family members to whom they intended to leave their home anyway but who needed their help now due to their own struggles with the economy. 

Many borrowers who just didn’t think they were “reverse mortgage material” are finding that the benefits of the reverse mortgage are exactly what they need and without them, their time in their home may be limited!

With the purchase reverse mortgage now is also an excellent time to buy a new home and downsize or relocate to the property seniors have been dreaming about.  We had a couple come in and look at the purchase program and decided they didn’t want to sell because they felt they would lose too much by selling in this market. They were back very enthusiastically within a short time ready to do their reverse mortgage purchase. 

When asked why the sudden change of heart, the couple explained to us that at first they were afraid of what they would lose by selling in this market…until they went out to the area in which they wanted to buy and realized what they were going to gain.  You need to talk to your financial adviser and you local tax professional, but in this case, based on where the couple was selling and buying, they could not transfer their tax base on the properties and were going to have to pay property taxes based on the new purchase price (sometimes seniors can get special tax considerations and you should always consult a knowledgeable tax advisor). 

By purchasing while values were down, they borrowers were going to save on the taxes of their new home.  But their biggest and best surprise was the prices of the homes.  The borrowers existing residence’s value was hard-hit, but the home they wanted to purchase and move to full-time is in a resort area and has been even harder hit.  The values have dropped an additional 15 – 20% in that market and they are now able to buy even more home on the senior golf course than they could before with no mortgage payment ever.

Reverse mortgages have been a viable retirement tool for senior homeowners for many years.  Now, more than ever, reverse mortgages are also the lifeline which enables even more senior homeowners to remain in their homes during these uncertain economic times.

If you or a family member would like a complete, no-obligation personal analysis including amortization schedules and costs associated please call Toll Free (888) 801-2762 Ext. 1 or request reverse mortgage analysis

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• Economic Stimulus Help Seniors with Reverse Mortgages
• Appraised Value for Purchase Reverse Mortgages...HUD Answers