Ready for today’s topic? It doesn’t take a mind-reader to know how most of you will respond when I tell you what it is. Some of you will say: “ Wait, I thought they were bad?” Others: “Thanks, but no thanks”. And still others: “Not on your life! I wouldn’t touch one if my life depended on it!!”
Our topic du jour is Reverse Mortgages. And even if some of you don’t want to hear about them because you think you already know all there is to know about them or you have it on good authority that they are a huge rip-off, maybe it’s time to revisit the subject again.
Let’s paint the big picture. Today more than 10,000 people in the US will turn 65. They’ll join millions of other aging baby-boomers out there who are wrestling with the complex and confusing questions that are part of planning for the last third of their lives. In retirement and old age. In sickness and in health.
Since generations are living so much longer these days, aging-boomers are finding themselves blessed (and cursed) with lots more opportunities to care for their aging parents and observe first-hand, the challenges of living into one’s 80s and 90s. Many of those experiences are poignant. Life-affirming and thought-provoking.
And a powerful reminder that it’s incumbent upon each of us to do the best we can to envision our own lives at 80 or 90. Caring for parents should be considered one of the last great teachings we receive from them.
Just a friendly reminder: We all exist somewhere along the great continuum of life. We are all headed towards the same place, sooner or later. It’s common to hear people say: “I don’t want to be a burden to my children.” At the same time it is disconcerting to hear how little in retirement savings, the average American has stashed away.
Which begs the question: Can we really afford to grow old these days? Are we as a culture wisely preparing to finance our own longevity? Which in turn brings us back to a more mindful consideration of any topic that has the potential to promote better quality of life in the years ahead. Including Reverse Mortgages.
What are Reverse Mortgages? In simple terms they are federally-insured loans for qualified people over the age of 62, that allow homeowners to access some of the equity in their primary residences without having to make monthly mortgage payments until they die, sell the house or move out of it. At first glance, sounds too good to be true doesn’t it? Way better than an equity line. If you can even get one of those these days.
But since everything in life has a price – most assuredly money – we’ll remind ourselves that unlike conventional mortgages where the loan balance is paid down in regular monthly installments, it’s the opposite with Reverse Mortgages: The size of the loan increases as deferred interest payments are added on to the principal amount over the life of the loan. It all gets paid at the end.
Hmm. Now that’s a trickier proposition. There are reasons why Reverse Mortgages developed such a bad rep early-on in their history. Just as there are reasons why more and more solid financial planners are beginning to view them as a valuable long-term planning tools for aging-retirees. We’ll explore more next week.