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Is a Reverse Mortgage Right for You?



Note: The pandemic has concerned many people, especially seniors, with finances; permanent employee Penelope S. Tzougros, PhD, ChFC, CLU, discusses an option that gets a lot of attention.

You hum along and everything is fine. Subsequently, real estate taxes rose again. Telephone and cable bills have also risen, but after a few long conversations with the companies, you've cut those costs.

How do you cover the rising costs when you retire?

In addition to lowering costs for services such as the telephone and cable, you can eliminate some niceties, postpone house maintenance, increase income by housing international students *, or restructure your investments for more income.

HUD's HECM

Despite your prudent efforts, you may find yourself attracted by a reverse mortgage if the gap between income and expenditure widens. The reverse mortgage insured only by the US federal government is called a Home Equity Conversion Mortgage (HECM). It is a program of the United States Department of Housing and Urban Development (HUD). Part of the equity in your home is paid to you. This program could close the gap between income and expenditure …

… but should be very careful.

Although you don't pay interest on the HECM as you did with your original mortgage, the loan has fees and charges. The interest is compounded and increases the size of the loan. You spend your equity. You no longer have a paid home. Wasn't mortgage-free a goal that gave you security?

The loan can now help you cover your expenses now but if inflation and spending are rising will this close the gap in the coming years?

Some Important Entry Requirements for You and Your Home

  • The home owner is age 62 or older.
  • This is the primary residence.
  • The mortgage is paid off or largely paid off. [1
    9659014] The borrower must attend home counseling.

The HUD website explains the entire program very clearly. https://www.hud.gov/program_offices/housing/sfn/hecm/hecmhome%19659018unette Things to know

  • You are responsible for your livelihood and maintenance costs your home, including property taxes, repairs and insurance.
  • If your spouse is not on loan and you, the borrower of HECM, die, or no longer live there for 12 months, the loan is due and payable. Would your spouse qualify for a bank loan to pay off the HECM? Payments would cease, but interest charges on the loan would continue to increase.
  • If your heirs inherit your home when it is secured with an HECM, they must pay the loan due by selling the property or qualify for a loan to pay off the HECM.

Other Options

If you're afraid of losing your home, consider the Making Home Affordable Strategy via HUD, which has about a dozen programs; some aimed at the unemployed or whose homes are worth less than the mortgage. (https://www.hud.gov/topics/avoiding_foreclosure). These programs can help you lower your monthly mortgage payments, reduce the amount you owe to your home, or adjust a second mortgage.

Increasing expenditure – what to do?

1. Question: if I buy this does it cause money or welfare?

2. Look for sources of income instead of taking on debt.

* www.afsusa.org

https://ca.finance.yahoo.com/blogs/pay-day-/student-boarders- provide-extra-income-exposure-cultures-184722042.html [19659010] Bio: Penelope S. Tzougros, PhD, ChFC, CLU, became a financial planner in 1986, after serving as a professor of English literature at Northeastern University and Hellenic College in Boston. Her desire to demystify money matters led to her writing for radio, television, online courses, and three books. The latest book is Your Home Sweet Home: How to Decide Whether to Stay or Retire. In all 50 states, it is registered with and offers securities and advisory services through LPL Financial, member FINRA / SIPC.

https://www.wealthychoices.com

Opinions in this material do not necessarily reflect the views of LPL Financial.


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