Jim (74) and Gina (78) (not their real names), were pretty well off. Between the two of them their retirement income was a little over $5,000 a month. They had some savings, but no real liquid retirement accounts. They were significantly better off financially than most of the clients I work with. They didn’t have to get a reverse mortgage, but they got one anyway.
So why did they do it? They wanted to get all of their debts, including their forward mortgage, paid off and travel across the nation in their 5th wheel. Getting the debts paid off increased their monthly cash flow almost $1500 and they didn’t need to worry about making payments. They could just go, have fun and not worry about bills. Not to mention that $1500 buys a lot of gas and some of the RV parks they stay at can be $200+ a night. Yes, $200+ a night for an RV park, I was just as shocked you are right now.
Makes sense right? It did to me too. But I pressed a little harder. They felt that it just made sense to do it. They had worked hard all their lives and they wanted to enjoy their retirement to the fullest, an extra $1500 a month meant more they could do and more places they could see. They also shared that neither of their parents left them anything and didn’t feel obligated to leave their kids anything either. “Our kids are doing just fine financially and don’t need anything from us” they said.
Some of you reading this are conservatives and are thinking it is irresponsible to use a reverse mortgage this way and that they should have just paid down the debts and the home loan so that they could have equity in the future, “just in case”. Conservatives have the attitude of wanting to play it safe, you earned it and you have to protect it, because you never know what is going to happen.
Some of you reading this are free spirits and are thinking “heck yeah baby!” that’s the way you do it. And have the attitude of you worked hard, you earned it, you can’t take it with you and spend ‘em if you got ‘em, because you never know what is going to happen.
The reality is that both the conservatives and the free spirits are right. There is really no wrong or right decision to this month’s scenario. It all boils down to what people want to do and what makes sense to them. If it was me and my wife in the above scenario, I could see a major battle breaking out since my wife is the conservative and I am the free spirit.
Good To Know: This month’s good to know has nothing to do with the above scenario but thought I would share as I just ran into this scenario. Tax liens can be paid off through proceeds of the loan. Judgements can be paid off through proceeds of the home if there is a lien against the property, but must be paid off prior to close of escrow if there is not a lien against the property. Gotta love government underwriting guidelines, LOL.
Do you know someone that can’t make up their mind on whether they should get a reverse mortgage or not? The proposals I provide to potential clients are awesome. They include FAQ’s, charts, comparisons, explanations of fees, amortization tables and more. They have everything the conservative or free spirit wants and needs to know to make a decision.
Need a Speaker or Want a Class? I love teaching and speaking. I can present for as little as 10 minutes all the way up to 2 hours about reverse mortgages. I can offer CE credit for real estate or insurance agents as long as the class is through an association or non-profit. If you need a speaker or a class, just give me a call.
Don’t Forget! Check out my column in the “Oregon Senior News” paper. You can find the paper online or at local restaurants and grocery stores.