It is true that a reverse mortgage might be the perfect choice for you, if you are over 62 yrs. old, and seeking a way to possibly enhance your cash flow. At Palm State Mortgage, we know there are other possibilities to consider. Last week, in Part II of our articles on reverse mortgages, we promised to review some of them in this blog. You might want to re-visit that blog, before continuing your reading of this one.

So, let’s take a look at a few mini-case studies of the alternatives to the reverse mortgage loan.

Stories From The Reverse Mortgage Files

1. Obtain Regular Old Fashioned Refinancing: Mr. and Mrs. Kaminski are retired school teachers, but they both add to their retirement income by happily teaching part-time at a college a few blocks away from their home. They bought their home in 1990 at 7 per cent interest.

This year, when they began to research a reverse mortgage, they discovered that it was a better choice to simple refinance their current mortgage. Today’s interest rates allowed them to significantly lower their monthly payments. The key to this option is that Mr. and Mrs. K continued to work and they could show enough income to qualify for the re-finance loan.

2. Sell Other Resources: Mr. and Mrs. Robinson discovered they were hanging onto some items that could help them increase some cash flow as well as make their golden years less complicated. They decided they would sell two of the four houses they had owned for fifteen years, as well as the giant Winnebago RV and a bass fishing boat, they no longer took out of the driveway more once a year.

In the words of the experts, they learned that “You can obtain needed cash if you have other assets that can be converted to cash (without a cost prohibitive penalty). Examples are investments, other real estate holdings, life insurance policies with a cash value or other items that could be sold.”

3. Take A Downsizing Cue From Big Business: After a great deal of soul-searching, Theo and Helena Cicerones figured out, they no longer needed a five bedroom house with two living areas and a quarter acre front yard. When they faced reality, they realized it was time to downsize the nest, as well as the utility bills. A good real estate agent and a great mortgage broker found them the perfect sized place for two and the perfect sized mortgage to go with it. (Theo is relieved to no longer have that yard to mow.)

4. Adapt An Intra-family loan, also called a Private Reverse Mortgage or Equity Sharing: Mr. and Mrs. Peterson found this  idea to be complex, but it was actually cheaper than the option of a reverse loan. One of their three children who was extremely well off financially gave Mom and Pop Peterson, the parents, money in exchange for equity in the house. (He could have even borrowed it for them as a personal loan.)

Likewise, “Equity Sharing” provides “a parent with cash and an adult child with an ownership interest in the home during the parent’s lifetime.” This worked for the Petersons only because the family members are extremely cooperative and the three children are in total agreement with each other in terms of the equity arrangement.

5. Create A Life Estate: Maria and Juan Vargas considered this very seriously. Basically, a life estate is like a lifetime lease. Juan and Maria could sell the future rights to the property to one of their sons, Alejandro, but the parents would be allowed to remain living in the house until the ends of their lives.

In the final analysis, the Vargas family preferred a reverse mortgage, because both Juan and Maria adamantly cherished the idea of exclusive ownership of their own home, and preferred not to feel obligated to any one of their five children.

Again, these are just a few stories based on the choices for creating retiree revenue through the use of a reverse mortgage. (Check at this AARP source for more information in detail.)

Every case, and every financial situation is different, and these examples, although fictitious, provide typical illustrations of alternatives to the reverse mortgage.

Palm State Mortgage thanks you for visiting our blog today. Again, we stress that each of the above stories are fictitious, designed to illustrate a concept. We would never reveal actual case histories. If you want to know more about the reverse mortgage, both pro and con, we invite you to visit Part I of this series.