Scenario Examples
REVERSE MORTGAGE SCENARIO, EXAMPLE #1
- Richard W, age 75
- Barbara W, age 75
Home value: $636,150
Mortgage Balance: $76,000
Both Richard and Barbara had enjoyable careers and had recently retired. Though they each received Social Service benefits, the combined amount of money they received monthly was not sufficient to maintain their standard of living. They did not want to liquidate their assets, due to the depressed market at the time. They were also concerned about having a cash reserve fund immediately available to them in case of an unanticipated health emergency.
The Solution:
They chose a reverse mortgage, which provided a monthly payment TO THEM of $3,000 for the next 13 years. The funds were maintained in a Line of Credit, which grew compounded, was insured by FHA and upon which they could draw at will. Looking forward, at age 88, when all funds would be expended, their options would be to either refinance the reverse mortgage (if their home went up in value) or liquidate other financial assets.
REVERSE MORTGAGE SCENARIO, EXAMPLE #2
- Gil A, Age 67
- Karen A, Age 64
Home Value: $625,500
Mortgage Balance: -$0-
Gil and Karen own their home outright, and wish to retire; neither had invested in long-term-care insurance, and their funds for the future were limited. They were concerned they might not qualify for homeowner’s insurance – and about the cost of a policy and the financial strength of any company that would offer coverage.
The Solution:
They took out a reverse mortgage with the Line of Credit option. The loan provided an initial credit line of $323,000. It was insured by FHA and would grow, compounded monthly, at the same rate as the rate of interest on the loan. They now have a source of money that could continue to grow over time that they can use if either faces a long-term-care issue or unexpected emergency.
REVERSE MORTGAGE SCENARIO, EXAMPLE #3
- Linda C, Age 74
Home Value: $630,000
Mortgage Balance: $377,000
Linda, had been recently widowed and wanted a home that was more suited to her needs. Her current home was too expensive for her financial situation and too difficult for her to maintain; in addition, it had too many stairs for her physical limitations.
The Solution:
Linda used a reverse mortgage to purchase a new home that better met her needs and budget. The Reverse Mortgage provided 50% of the $600,000 purchase price of the new home. As a result, Linda had the option to save for unexpected future events or invest the $300,000 of the equity she earned from selling her existing home. With a reverse mortgage on the new home Linda had no monthly mortgage payments. Two years later, Linda refinanced the reverse mortgage (since there are NO PREPAYMENT PENALTIES with a new reverse mortgage) and accessed additional tax-free cash.
