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Aurora Colorado Reverse Mortgage

Aurora Colorado Reverse Mortgage expert CRMP discusses…

Upcoming Social Security Benefits Adjustments in an Aurora, CO Household.

The situation…

Mace,

My mom and dad are both in their 80’s. Dad gets $1,900 a month from Social Security. Mom gets almost $1,000. So together, they receive $2,900 per month from Social Security. There’s no other income and no real savings worth mentioning. We were raised as children in the same home they live in today and will live there for the rest of their lives. It’s sad to watch, but Dad’s mental and physical health is deteriorating. However, Mom continues to be sharp and active for her age. Longevity runs through her bloodline!  I don’t want to sound gloomy, but it is a realistic assumption that Mom will outlive Dad by many years.

My brother and I are concerned that once Dad passes, Mom can’t get by on her $1,000 SS income. It is important to all of us that she continues to live in the home with all her memories.

It’s an older home worth maybe $350,000. The bones of the house are still good but it was last remodeled in the early 70’s. Owned free and clear is the home and my brother and I don’t care about inheriting it. What kind of monthly income will a Reverse Mortgage provide her?

Sincerely, Lucy A.

The Colorado Reverse Mortgage Reply…

Lucy,

You gave me a lot of good information and in return, I think I can give you quite a bit of information back.  You mentioned that your mom was in her 80’s but didn’t give me her exact date of birth. Since Reverse Mortgage proceeds are determined by a person’s date of birth, I’ll assume she’s 85 years old. That said, I may be a little high or a little low. But since we don’t have an appraisal with the exact value, we can only take an educated guess at this point anyway. I appreciate your understanding and allowing me a little flexibility on this point.

The loss of a spouse or parent is traumatic, emotional and there will certainly be many priorities after Dad’s passing. Too often, folks don’t come to me until they are in “crisis-mode”. So, I want to give you and your family a pat on the back for addressing the issue of finances head-on and not ignoring the inevitable…

To clarify…

You mentioned that Mom’s Social Security income was almost $1,000 and Dad’s was $1,900 and that once Dad passes, Mom couldn’t get by on her $1,000. Before we jump into my Reverse Mortgage analysis and opinions, I’d like to give you a bit of good news and correct your assumption.

When your father dies, your mother will stop taking her $1,000 Social Security income and will assume your father’s $1,900 monthly distribution for the remainder of her life. To be clear, Mom’s income will already be $900 higher than you mentioned in your letter!  I’m sure the folks at Social Security would have corrected you at some point in the future. It’s best you know this now if for no other reason than to allow everyone a better night’s rest.  Maybe no longer needed is the Aurora Colorado Reverse Mortgage with this new information! If that is the case, this video is over and I’m happy to have been the bearer of good news. However, I’d like to go down the path a bit further and expand on a few things to broaden your and other’s knowledge. I’d still like to answer your initial question about the Reverse Mortgage monthly income…

And now to Answer(s)…

Assuming your mother’s age is 85 and the home appraises at $350,000, the monthly “tenure income” would be $1,589. But this is a simple answer and depending on the actual monthly need, we can adjust that monthly amount higher or lower. Modifiable at any time is the Reverse Mortgage distribution (and as often as desired) after the closing date. To the best of my knowledge, no other financial product offers this flexibility.

Used less (as an example) are food items, household goods, utilities and medications after Dad’s passing. Now, your mom may only now need an extra $800 and she can turn “down the volume” on the original tenure amount of $1,589. That’s great! She doesn’t lose the $789 difference. Rather, it is then converted into a Line of Credit. This gives her access to a large chunk of money if she were to ever need it.

On the other hand, perhaps she needs to turn UP the volume on the monthly income because she now needs to hire someone to maintain the landscaping and maybe her prescription medicine became more expensive.  Let’s bump up the monthly Reverse Mortgage proceeds to $2,000. That’s fine too!  Just know that by increasing the monthly income above the “tenure” figure I gave earlier, puts a “term” or a limitation on how long the Reverse Mortgage proceeds last.

Given what you shared with me in your letter and knowing that your mom’s income is already going to be $900 higher than you expected, I don’t think I’d recommend that we set her up with ANY monthly income at this time.

A quick side story as an example…

Five or so years ago, I had a feisty and seemingly healthy client in Aurora Colorado Reverse Mortgage client share that she had terminal cancer. She wanted extra funds beyond what the tenure figure would provide. The doctor had given the client 18 months to live, so my client wanted the Reverse Mortgage funds to last those 18 months. But to be pragmatic (and perhaps optimistic), I suggested that we turn the volume down on the distribution in order to last at least 2 years. Fortunately, she saw the logic of my recommendation. Informed by a mutual friend (but not surprised) a few years later, she beat the doctor’s estimate by several months. I was sorry this spunky lady had passed but was glad she chose to be prudent with her disbursement choice. I hope she continued to live the last 22 months of her life with vigor and wonder.

Moving on!

80% of the adult population has less than $9,000 in savings.  You indicated that they had no real saving “worth mentioning”. That may mean that they have zero savings or that may mean $10,000. In either case, there isn’t much of a cushion to rely on in case of an emergency or other need occurs. Fortunately, your folks have a huge asset… their home. However, the problem with a home as the only sizable real asset is that it is not a liquid asset. The Reverse Mortgage makes liquid a portion of an otherwise non-liquid asset.

So, what I’d recommend, is establishing the Reverse Mortgage sooner rather than later but we left the amount mostly untouched in the form of a Line of Credit.  Charged is interest and mortgage insurance on the money drawn out of the Line of Credit. And, the unused Line of Credit will appreciate or grow over time. Today (as of this video and writing), the Line of Credit would be growing to your mom’s benefit at a rate greater than 4.7%.

Almost done…

What do I like about this structure? She simply is not needlessly drawing money out. However, if (or when) she has a large expense, then she’d have access to well over $200,000. And remember the guaranteed growth on the unused Line of Credit. Doing some quick math, the initial growth just during the first year is about $10,000.  Later, if the car needs a new transmission or Mom finally decides to get rid of the green shag carpet, she could draw out the proper amount at that time.

On the other hand, if she did determine that there was a need for a little extra every month, she can always request to receive an automatic deposit knowing that she can increase or decrease that amount later as her circumstances change.

At least, this is what I’d recommend if they were my mom and dad.

As always…

If I wasn’t clear on something or you want more detail, just give me a holler. I may not be much fun at a block party, but I enjoy educating folks about the finer points of what I eat and breathe.

Remember, a Reverse Mortgage is not the right solution for everyone and if I can share other options or strategies, I’ll always do so. I welcome questions and enjoy helping the senior community and their families in their efforts to understanding and moving forward in Reverse. 🙂

Colorado Reverse Mortgage 

We are more than just a Reverse Mortgage company and feel it’s important to look at and address a bigger picture. We discuss Reverse Mortgages (of course) but will be happy to share our knowledge and input on a variety of “senior-centric” topics. Mace visits about the importance of Retirement Planning, Estates and Trusts, Social Security, Home Safety, Power of Attorney documents, Senior Abuse (financial, physical and mental), and many other areas. Remember, we’re not just a reverse mortgage company, we’re your neighbors.

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Use this Reverse Mortgage calculator. This is a safe site and the calculator will give you a rough estimate. However, there are better ways than this calculator that will provide more accurate numbers. An experienced Certified Reverse Mortgage Professional will also know ways to maximize the financial benefits to a consumer.