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Using The Reverse Mortgage As A Tool To Strategically Manage One’s Assets

June 6, 2010

Reverse Mortgage Works Wonders for MN womanDorothy closed on her Home Equity Conversion Mortgage (HECM) reverse mortgage in 2006.  Now four years later during a presentation where she joined me at a Minnesota senior resource fair workshop , she shared how the reverse mortgage has been a tool to strategically manage her assets and the benefits she has received from her reverse mortgage.  Here’s what she had to say.

“I have a single family residence and have lived there for many years and working and wasn’t looking too much to the future.  I ‘knew’ Social Security was going to take care of me… my mother had gotten by on it and I figured I would too.

“I had worked part time as a travel escort and the travel bug had bitten me through the years.  I retired at 65.  While the career line I had allowed me to take extra vacation time to escort tours what it didn’t do was provide a pension.  So I had no hospitalization or a pension when I retired.  I didn’t face those facts right away.  I had invested and purchased stocks over the years in modest amounts.  I figured that would be my answer to any and everything.  When I wanted to travel I just cashed in part of a stock and I took off and did some great fun things.

“However we know the stock market took a plunge a couple of times and what I had was back down to half or less than what I had built up.  Also I was having to use this in addition to my Social Security income.  Fortunately I was able to have paid off my mortgage by the time I retired so I didn’t have those payments.  I thought it would be easy street.

“I had a house paid for and was able to get a line of credit from the bank.  Anything I wanted to do I would I just borrow the money on the line of credit.  After that climbed I would cash some stock in to pay the line of credit.

“Pretty soon I needed a car.  I took out a loan on the car.  Those payments got kind of high.  Pretty soon I’m paying the line of credit and the car payment.  And I was using up my stock portfolio.  I was owing more to the bank than I had stock to pay off all this line of credit.  The stock broker I was talking with said, you have your house paid for, the best thing I could do would be to get a reverse mortgage.

“Luckily I was able to meet up with Beth Paterson.  We talked so I would understand the program.  The man I had worked for was a very astute business man and had run a mortgage company.  So I took the information to him and asked if there was anything that looked doubtful to him; is there anything that I don’t see or is this something I should do?  He said, ‘It’s the best thing in the world for you.  I can’t advise you to do anything better for you.’

“I have my reverse mortgage.  I decided that as long as I was getting my Social Security and didn’t have to touch my stock, I wanted a reverse mortgage line of credit.  I didn’t want a lump sum.  My reverse mortgage line of credit would grow at nice increments – it was growing faster than my stock portfolio was growing.  [The reverse mortgage line of credit grows at .5% more than the interest on the loan.  For example if the interest on the loan is 2.5% the growth rate is 3% on funds left in the line of credit.]

“I also decided to take a minimal monthly payment.  Now I’m going to get that payment until I’m 150.  I’m going to be 83 this year and I’ve got my mind set that I’m going to live to 150 so that I can get that last dollar from HUD that I’m helping to pay into on this insurance program. [Note the due date listed on the reverse mortgage recorded at the county is the 150th birth date of the youngest borrower.]

Reverse Mortgage Allows Dorothy to Travel“The reverse mortgage has given me a great feeling of security.  Because if I want to take a trip I just send a fax in and request the amount of money I want.  I don’t have to touch my stock.  My line of credit is going up every month as long as there are funds there.  It’s much better than CDs.

“I’ve done home repairs, this winter I had to replace my car and it turned out I couldn’t use my driveway so I’ve taken some funds to get my driveway repaired.  My yard needed some attention that I had overlooked because I didn’t want to spend the money.  So I’ve taken some funds for that too.  I still have a nice sum in my line of credit and I haven’t had to use my stock.

“I watch the market go up and down and it’s not life and death like it had been before when I knew I just had that stock and when it was gone then what would I do.

“It’s worked wonders for me.  I’ve been able to take trips with the money, repair my house, re-roof it, and do this and that.  It’s given me ease of mind and it’s certainly helped my kids because at one point I think they thought they would have to help me financially and they weren’t looking forward to that.  Now that worry is off their mind.  So as long as I can, I will stay in my home, and that’s what I plan to do.”

This is one example of how a reverse mortgage has made a positive difference in the life of a senior and allowed her to strategically manage her assets during her retirement years.

© 2010 Beth Paterson 651-762-9648

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