Jack and Betty own a duplex that is completely paid off. At 79, Jack is still driving truck but is seeing a downturn in his income due to the economy. Last year they made over $90,000 between driving, a couple of pensions and SSR. They haven't rented out the 2nd unit in the duplex for a few years as there isn't enough room in the driveway for more then 2 cars. Parking on the street disappeared when the city widened their street.
Jack's concern was to be able to pave over the yard and create more parking, and for Betty to have access to cash should she need it if Jack were away from town on a trip. Betty was concerned about the ability to pay their bills with Jacks reduction in work. They both wanted to access cash as they need it, rather then tap all of the equity at one time. They also would like to be able to leave some money to a niece and her husband.
We looked at taking out a traditional Equity Line of Credit. While it would have been the least expensive option up front, it would have required them to make a monthly payment. At that point, the rent from the other side of the duplex would have covered the new mortgage debt with a few hundred dollars left over.
After talking with Jack and Betty, my solution was to use a HECM 175 Reverse Mortgage with a cash draw in an amount sufficient to make the needed repairs to their property and give nice cushion for the remainder of the year. This also left them with a sizable line of credit that will continue to grow as their property appreciates
This loan is setup so that if they use their equity wisely, and if the home appreciates at 5% per year, their equity will never be exhausted. In fact, if they live to age 100, there will still be roughly $357,000 in equity after paying off the loan balance.
While Jack and Betty didn't "need" a Reverse Mortgage, they have found that it has allowed them to do some things that need to be done without selling their home or making drastic cuts to their living. It also is giving them the peace of mind in knowing that they have unlocked the equity in their home should they need it.
While this isn't sophisticated mortgage planning, it is solving a real life problem for real clients.
Call me if you would like to see if a Reverse Mortgage is right for you. 1-888-660-2842.
Also, visit my Reverse Mortgage blog at www.OregonReverseMortgageNews.com
Larry Morris is a Certified Mortgage Planning Specialist in Portland, Oregon. He specializes in USDA Guaranteed Rural Home Loans, FHA Purchase and Refinance, FHA 203k Rehab loans, FannieMae HomePath loans, Oregon VA Loans and conforming purchase and refinances in the states of Oregon, Washington and Idaho.
He can be reached at 503-421-0096.
