I was at a meeting this morning where the topic came up of the “American Dream”. It started by talking about the story of an immigrant who came to America and took a job as a young man cleaning the backroom of a liquor store. The cleaning job took him to a part time sales person, then to full time, then to a manager, and finally he purchased the store form the owner. As with many immigrants, he met his dream of owning his own business. And of course with that, came the raising of his children to follow in his footsteps and take over the family business. There is much more that follows, but I will save that for a later time.
As I heard about the story, I thought about senior homeowners, who, in a similar fashion, were raised with certain expectations. One of those expectations was to own your own home. And this of course means, owing NO ONE. Today there is a significant population of seniors who own their homes out-right. They take a great deal of pride in their accomplishments, and rightly so. To some degree I believe these folks have put so much effort into paying off their homes for two reasons. One, so that they don’t have to worry about mortgage payments as they get older and are assured of a place to live, and two, as a means of creating a legacy in a home that they can pass down to their children.
As much as I admire and respect these noble reasons, I would have to say there are a few changes that have taken place that would prompt me to ask the senior homeowner, if it might not be better to place a reverse mortgage on the home.
First of all, we simply live in a different culture. It used to be that families lived in the same town for generations. Passing your home down was true wealth. Now it can be more of a burden as the remaining heirs have to deal with selling the home. It used to be that parents would live in the home with their children until they passed. Now children move out and rarely come back. It used to be that the cost of living was minimal. Now the cost to maintain a home, pay for medical expenses, let alone food, has skyrocketed. Seniors need more money, especially as they are now living even longer.
A reverse mortgage is becoming a sign of strategic wealth today, as more and more seniors or utilizing the equity in their homes to cover the increasing costs of inflation. We no longer live in a society in which it is expected that our parents home will be passed down to us. Should a senior home owner wish to utilize their home as a means of passing down an inheritance, they can actually use the reverse mortgage and utilize the funds as a living inheritance, thus they can see how they have changed their children’s lives.
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Quote: “we simply live in a different culture”
Yep. If the house will be sold in the end, putting it on a reverse mortgage does benefit both parties since the beginning. The parents get more income, the children still have cash inheritance.