Being a senior myself, I seem to be working with more and more seniors regarding the planning of their estate as they begin to realize there are no certainties or guarantees in life. (Only if you know Jesus Christ as your Saviour.)
Two things that have really stood out as I have talked with these seniors. First, most have never really planned for retirement, that is, financial planning. They don’t know what their income needs will be at retirement, how much their company pension will be, only that there is Social Security. And even that is no guarantee based upon the way our government is spending money.
The other is the animosity some of them held against their children for different reasons and wasn’t really interested in leaving them anything. Being a father of five and grandfather of ten, I realized how blessed I am with my family’s relationship and my desire to leave them an inheritance, how little that may be.
Unknowingly, some people who love their children are disinheriting their children by way of a reverse mortgage. You may be asking, “What is a reverse mortgage?” A reverse mortgage is a loan against equity in your home. You borrow against this equity.
You will receive payments each month determined by your life expectancy. You continue to pay insurance and taxes, but you live rent free. The lender, not your heirs, gets your home at the death of the surviving spouse.
While this concept of a reverse has been out many years, only about 2 to 3 % of American senior homeowners have taken out a reverse mortgage. Most senior retirees do not want to move in with their children. They still want their independence. This may be indicative to the low number of existing reverse mortgages today.
The obvious advantage is that you get free money for living expenses. If you have no heirs, this may be an option for you if you need additional income to meet expenses.
As I said before, the disadvantage is that you leave nothing for your heirs. Equity in the home is the biggest asset for most senior retirees. Today, depending on where you live, home equity is fluctuating so a reverse mortgage may not be your best interest.
Senior retirees are statistically living longer, their monthly expenses are rising, they live mostly on Social Security and have a little or no pension. This is when the temptation to take out a reverse mortgage is the strongest.
Before doing this, sit down with your family and see if there are other options. They may want to pay you a monthly income rather than a lender who takes possession of the home upon the death of the surviving spouse.
If you don’t feel comfortable discussing it with them, give us a call at 252-257-4822, and we might be able to guide you in your thinking. Or if you have a home, land or farm, you would like to sell, give us a call. There is no obligation.