Now it is their turn to enjoy life and live a little easier, but with the turn of events over the last two years or so many seniors have seen everything they worked for go down the drain.
As to the children; unless the children are in the position to afford the expenses of taking care of the parents in the years that they will need it the most then they should understand that the parents will need and enormous amount of money to just survive.
So let’s take a look at the typical couple at age 65 just going into retirement!
They may have a home worth (in today’s Market) let say its appraised value is $300,000. They may have $100,000 in some sort of savings vehicle i.e. stocks, bonds, 401k, IRA. Plus if they took social security at a reduced amount they may have an additional $1,400 per month of income.
Now they really only have $100,000 of available funds, if they choose to take money out at this time they are going to have to pay taxes and penalties on the money they take out. So that $100,000 is no longer worth what is was originally.
The $300,000 home is really just dead money sitting there it is not adding to the money pot, in fact it is costing them money because of taxes, insurance, and up keep.
So how do you get the amount of money it is going to take to live off of in the future? Well if the home is worth $300,000 and they are 65 and they went out and applied for a mortgage to create money they would have too qualify first and foremost. In today’s world it is not that easy to get a loan. But just for argument sake; let’s say they did now they have a forward mortgage to pay for each and every month.
· $240,000 mortgage which is 80% of value at 5% interest for 30 years equals $1,288.37 per month.
· If they live to be 80 years of age they will have paid out for that mortgage $231,906 in payments over the 15 years, and still have 15 years to go to pay off the loan. So if they died their children would have to pay off the balance of the loan would be $162,050.00
· The total amount paid for this loan is $457,968.41 over 30 years.
So if you think borrowing is a solution the number speak louder then you could ever imagine. The fact is that a couple who lives to age 80 will need more then $295,000 in spendable monies just to live and pay for medical expenses.
Now let let’s take a look at the Reverse Mortgage out come and the numbers based on the same figures.
· Couple age 65 with a home value of $300,000
· Amount of money available after all cost would be $175,000
· No payments for the rest of their lives
· No balance additional amounts for the children to pay back.
· Federally insured to Guarantee you stay in the home for the rest of your lives.
· Guaranteed that the children will never owe more than the value of the home verse the loan balance.
· No credit Qualifying
· No Income Qualifying
· No taxes paid on the money
So you do the comparison which way makes more sense take out a loan that you will have to take money from the amount you borrowed to make payments. Or have all of the money free and clear and never have to make another payment for as long as you live.