Too Much House to little income

 Reverse mortgages

 Marybeth, (age 82), and her husband had raised their kids in a fine neighborhood with low crime and easy access to the city's amenities. But with her husband gone, plus less income from her stock investments due to a long bear market and social security reduced to one check per month, her income was not covering all the monthly cost. Her investment portfolio was shrinking as a result of her need to spend part the principal each month.

Her home was worth about $300,000 and was paid for. She was considering selling her home and renting a condo. Marybeth started looking at rental apartments. She could not find one that suited her lifestyle and she did not really want to move. I suggested that she look into a reverse mortgage to at least, cover the monthly cash shortage and the maintenance and other cost of owning the home. A reverse mortgage could provide her a way to stay in her home.

Marybeth and one of her sons investigated reverse mortgages. They started their search at http://www.reverse.org They learned that she could get up to $12,000 per year from a reverse mortgage on her home. The discouraging factor was the high up front fees charged for a reverse mortgage. (be sure to use an attorney if you decide to do a reverse mortgage).
You can use a reverse mortgage calculator at http://www.goldengateway.com

Marybeth's son decided to act as the bank and send his mother $1000.00 a month with the understanding that he would get his money back, with interest, when the house was sold. She had her attorney do the reverse mortgage paperwork so that there would be no problems when it came time to settle her estate.

She now has her extra income, and she stopped the drain on her retirement savings balance. This arrangement will help assure that her savings will not be gone before she is, and she can afford her current active lifestyle. Marybeth's son has a secure first mortgage investment note secured by a home he knows well.

The interest may be tax deductible to Marybeth and taxable to her son even though it is an accumulation. Check with your tax adviser.