Reverse mortgage advice should encompass many topics—including when, why, and how to formulate a home equity conversation plan. But at the core of the issue is always the question of suitability. Does a reverse mortgage loan make sense for your family?
A big part of the answer hinges on your long-term plans and what we call the “five-year rule.” If you can’t see yourself maintaining primary residence at the property in question, for at least the next five years, it might make sense to sell or explore other alternatives. If you do want to remain in your home beyond that five-year mark, here are some additional factors to consider:
- Physical Attributes of the Property
Much as you may love your long-time home, you’ll need to evaluate how well it can accommodate your needs—today and tomorrow. Would you still be comfortable there if your physical health became an issue? Could home renovations solve any potential problems (e.g. an updated bathroom, a first-floor bedroom, wheelchair accessible features)? And would these changes be affordable, based on your retirement budget?
- Location of the Home
Not all zip codes are senior-friendly—especially for individuals who don’t drive themselves. Ask yourself how you will accomplish day-to-day errands or visit the doctor if/when you are unable to drive. Do you have friends or relatives nearby? Does your local senior center offer shuttle bus service? Even simple things like shoveling your walkway, getting to the mailbox, or bringing garbage to the curb can become a challenge. It makes sense to plan ahead for these needs—either through a personal support network or by budgeting for hired help.
- Cost of Maintaining Your Current Residence
Aging in place has many benefits, including (for many people) major cost savings. According to the executive director of the National Aging in Place Council, aging at home costs $23,000 on average, each year, as compared to $86,000 annually per person for nursing home care, or $60,000 for assisted living. But these estimates don’t hold true for every family. Maintaining your current residence could be significantly more expensive, depending on geographic variables like utility costs or property taxes, and depending on property size/age.
If you’re invested in staying put, but the financial pieces aren’t quite fitting together, here are some options you might want to investigate:
- Subsidies: Fuel assistance, town/city/state-sponsored energy efficiency measures (masssave.com), Massachusetts “Circuit Breaker” real estate tax credit, etc.
- Municipal credits for senior work programs
- Massachusetts Real Estate Tax Deferral Program (for qualifying Massachusetts’ residents only)
- Taking in a tenant (NOTE: any rental agreement must be compliant with local ordinances, and renters should be thoroughly vetted)
- Selling your property (to either purchase or rent a home more suitable to your physical and financial needs)
When exploring these issues we strongly suggest bringing all interested parties into the fray—including adult children, financial advisors, elder law attorneys, etc. The prospect of having to leave one’s long-time home is clearly an emotionally-charged issue. Unfortunately, for that reason, these discussions are often put off until a serious problem arises. However, seeking reverse mortgage advice before a crisis occurs can make the difference between realizing your goals and having your fate decided for you.
If you have questions, or would like to explore the different ways home equity could be utilized, please feel free to contact us.
We at Harbor Mortgage Solutions, hope you have enjoyed this installment and found the information helpful. If you have any comments you would like to add (our skin is thick, we can take constructive criticism) please feel free to e-mail me at cdowney@harbormortgage.com.
