Reverse Mortgages

A few years ago, my mom and dad were in a tough spot financially. Living off of a small pension and an even smaller Social Security Check, they were having trouble keeping up with their bills.

They were still paying off their mortgage and a home equity loan they had taken out for some much-needed repairs. Faced with expensive trips to the doctor, a half dozen prescriptions between them, a rising cost of living, and outrageous New Jersey property taxes, they were deep in the red and falling deeper every month.

I wanted them to sell the house and move to a smaller condo or even a retirement community, but they refused. They'd say, "This is our house and this is where we're staying!" The problem was that there monthly expenses were more than their income, and we had already cut their expenses every way we could think of.

But then we stumbled on a program that could solve my parents' cash flow problems: a reverse mortgage.

If you've never heard of a reverse mortgage you're not alone. They are not designed for the average person. But they are perfect for people like my parents.

Basically they are designed to help older homeowners with low incomes stay in a house they have lived in for years but for which the property tax has risen more than they can afford.

A reverse mortgage allows a homeowner to cash out part of the equity in their home without having to pay it back until they sell the house, permanently move out, or die.

The amount you can borrow depends on your age, the value of your home, your current equity, and the current interest rates.

You can take the money as a lump sum payment, a monthly payment, a credit line, or any combination of the three.

My parents took a lump sum payment to pay off all of their outstanding debt and then kept a line of credit in case of emergency. Now that they are free of the old mortgage, home equity loan, and credit card debt, their modest pension and Social Security money is enough for them to live on.

Of course there is a downside. They no longer have as much equity in the house as they once did. That hurts after they spent so many years paying for it. I know they also feel bad that there will be less left for me and my sisters when they pass, but I don't care about an inheritance. I'd rather they live comfortably now than have to struggle just to get by.

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