By Alain Valles
CRMP, MBA, CSA
The prospect of living out one’s life in the “golden years” has lost its glow.
Wild stock market swings and a near zero rate of return on savings accounts are causing financial uncertainty and stress for many retirees and those hoping to retire in the near future.
A little discussed fact is the health impact of such financial stress. In a research paper on “Financial Stress and its Physical Effects on Individuals and Communities,” Laura Choi of the Federal Reserve Bank of San Francisco writes that “extended periods of stress can take their toll on physical, mental, and emotional health…” and commented that “the recession has led to headaches, backaches, ulcers, increased blood pressure, depression and anxiety.”
Last year the Harvard Joint Center for Housing Studies and the AARP Foundation reported findings that seniors will have difficulty affording their homes and may be forced to cut back on food and health care. Home repair costs and in-home care will also have a substantial financial impact.
Why a reverse mortgage may be a solution
The same Harvard/AARP study reported that, “Reverse mortgages can be particularly helpful to lower-income households holding most of their wealth in home equity.” Instead of resigning oneself to continuing to work, drastically cutting one’s lifestyle, or being economically forced to downsize, move in with family or become a renter, more and more seniors are taking proactive action to enjoy their retirement by examining other financial options, including a reverse mortgage.
A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a federally insured loan program that allows qualifying seniors 62 years of age or older to access the equity in their homes in the form of cash, a monthly check or a line of credit that is available for as long as one lives in the home, with the significant advantage of not being required to make a monthly mortgage payment.
Reverse mortgages have been the solution to needing additional monthly cash flow, paying off debt, funding home repairs, allowing people to stop working, affording healthcare, and gaining the peace of mind that money is available if needed.
Reverse mortgages are complex
Television commercials, Internet ads posing as articles, and junk mail pieces stressing the ease of getting a reverse mortgage and how the senior will be financially “all set” fail to give the whole picture. There are many required steps and regulatory safeguards including mandatory counseling and a financial assessment review before you can be approved for a reverse mortgage.
If you are a homeowner age 62 or older, it is worth your while to learn the facts about how a reverse mortgage might fit into your retirement plan. The official federally approved consumer booklet published by the National Council on Aging called “Use Your Home to Stay at Home” is an excellent start to learning how one may remain independent in their home. Their website is www.ncoa.org or feel free to call or email me and I’ll be happy to forward a copy or answer all your questions about reverse mortgages.
Alain Valles, CRMP and president of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional in New England and is the leading licensed loan officer in Massachusetts. He can be reached at 781-724-6221 or by email at [email protected]. Archives of articles from previous issues can be read at www.fiftyplusadvocate.com.