By Rachel Hemmingson
This season, normally one of togetherness, highlights the problem of separation exacerbated by COVID-19, but it may inspire us to find pathways to solutions.
Some older homeowners still paying on mortgages felt they couldn’t afford to relocate nearer to their children. The problem, they believed, was their sales proceeds would not be enough to pay for a new home.
However, there is an FHA-insured program, the Home Equity Conversion Mortgage (HECM)Reverse Mortgage for Purchase (RMP), for older people which can double their buying power and/or help them retain proceeds.
On top of that, there’s the end bonus of no monthly mortgage payments on the new home. Use of this program is increasing and it can be a game-changer for those using it. While it is a complex pathway, it may be worth it to older homeowners and their adult children.
For other older adults, forced early retirement, losses in the stock market and unavailable dividends, are impacts of the pandemic. Mortgage payments become a problem for some. Those not interested in moving may choose to replace mortgages they are making payments on with a mortgage featuring no payments.
This is the more familiar version of the HCEM/RMP that opens up cash flow, and often substantial cash funds as well, to make the house they are staying in work better for them.
It’s also an option for homeowners whose home is fully paid off (no mortgage) and may open access to funds in the form of a line of credit they can use as they wish. It is not taxed and doesn’t affect Medicare or Social Security.
There are a couple caveats with any version of the HECM/RMP. One is that there are loans that need to be repaid, generally through the eventual sale of the property. The other is that homeowners are still responsible for home maintenance, property taxes and insurance.
Making modifications to add sheltered outdoor spaces is another possible solution. Examples include adding a cover over a patio or deck area attached to the house, purchasing a gazebo (free-standing) to install in the yard and using strategic plantings to shelter an area from wind.
Pleasant outdoor enclaves are always a great addition to a home’s value and can be an investment in health too. Being outdoors and in the presence of nature is beneficial for us on every level and these environments are currently the safest we have.
Finding a pathway to make the best of the situation now can be a benefit well into the future.