Remortage How to Keeping Your Options Open ?

There are some cases in which a reverse mortgage just isn’t right for you. There are a few main alternatives that counselors often suggest when a reverse mortgage is too costly, or your profile doesn’t fit with the needs of a typical reverse mortgage borrower. If your counselor feels that one may be a better choice for you, take his or her advice to heart. You can always reconsider when your situation changes.

Waiting: In many cases, waiting a few years to get a reverse mortgage really pays off. Since the lender calculates your loan partially based on age, the older you are, the more money you will most likely receive. Interest rates play a big part in determining your loan amount as well — when rates are low, you can probably expect a more out of your reverse mortgage. In a low interest rate market, you can figure on an extra $8,000 to $15,000 for every five years you wait, depending on the value of your home. If you can afford to hold off for five years (or more) it’s definitely worth it. For example, if you’re 65, own a $200,000 home, and are considering an HECM loan, you could probably get about $10,000 more out of your loan if you waited until you were 70. On the other hand, higher interest rates will produce less available funds. If rates seem to be rising, you may want to jump on current rates before they get too high. Either way, don’t wait too long — you want to have time to enjoy your newfound financial independence.

State loans: Some state loans, like the Deferred Payment Loan (DPL), work like a reverse mortgage — they give you money and you pay it back when your leave your home permanently. But there’s a catch . . . the DPL can only be used for a specific purpose, usually to repair something dangerous or unlivable in your home, whereas a regular reverse mortgage can be used for anything your heart desires. Another option is property tax deferrals that allow you to forego paying your property taxes for a while. These vary by state; some let you defer your payments forever, some only for a set timeframe. Both of these state loans offer very low interest and very low closing costs (if any). Check with your counselor to find out if other state loans exist in your area.

Selling your home: This is often the obvious answer to your problems — sell your home, use the money to buy something smaller or simpler to maintain or easier to maneuver around, and live on the excess money from the sale of your house. If you think you’ll be moving soon anyway, selling your home is usually the way to go. This assumes, of course, that you want to move, and that your home is worth enough to buy a new home with the equity. If you live in an average town in the Midwest and think you can buy a condo in San Diego with your equity, you’re in for a big surprise. Housing prices vary greatly across the country, so do your homework if you plan to retire in another area.

Another non-traditional alternative to selling your home is to work out an agreement in which someone (usually a family member or friend) buys your home and rents it to you for a nominal fee. They get the benefit of the home’s appreciation, and you get to stay in your home, collect on the sale of the house, and reduce your payments. Still, some people prefer not to mix family and money, and for good reason. Be sure to discuss this kind of arrangement in detail, and involve a real estate professional if appropriate.

Sharing space: Your financial situation might be such that you don’t need a huge sum of money for any big vacation or fancy new bathroom. You just need money for the essentials or to supplement your Social Security. Your counselor could bring up the idea of sharing a home with a friend or relative in a similar situation. Do you have a sibling or sewing club friend who is also in need of a little monthly help? Invite them to live in your spare bedroom, charge them a fair rent, and meet your monthly requirements. You may also consider moving in with an adult child. This is an ideal situation for some families, but it can be a huge lifestyle change and is not a decision to be taken lightly.

Refinancing with a forward mortgage: Okay, maybe the idea of having a new payment to worry about doesn’t thrill you, but if you can reduce your payments, a forward mortgage may help cushion the savings or retirement income you’re living off of today. ARMs (adjustable rate mortgages) always have lower interest rates, which means a lower monthly payment.

Keep in mind that because forward ARM interest rates change frequently (usually once per year) what may have been a great interest rate last year can suddenly skyrocket next year. If you’re uncomfortable with an unpredictable interest rate, an ARM may not be the best choice for you.

Home Equity Lines of Credit can also be a good option, offering another way to use your equity now. Downsides are that they sometimes have a higher interest rate over the long term; they have a minimum monthly payment (that’s you paying the lender); and some have a balloon payment built in, which forces you to pay more after a certain time period.

Public assistance: Many people think of public assistance as a negative, and would often rather protect their pride than get the help they need. Don’t be one of those people. Public assistance is nothing to be ashamed of, and can give you all kinds of breaks on daily expenses. There are meal delivery programs for those who can’t cook anymore (whether it’s due to inadequate funds or mobility), prescription drug benefits, medical assistance, transportation for those who can’t drive, in-home helpers, and many, many more opportunities for help. Several resources aren’t being utilized by enough people. You’ve paid for these public assistance programs through taxes all your working life. This is the time to reap the benefits of your own tax dollars.

A great resource for all types of help is the Area Agency on Aging. They can give you information about some of the options listed here, plus reduced energy bills, tax support, and more. Contact them at 800-677-1116 or online at www. eldercare.gov. Another great resource is a Web site called www.BenefitsCheckup.org. BenefitsCheckup is sponsored by the National Council on the Aging and works by creating a profile of you and your needs and matching it to all the programs out there that may be able to help you. All you have to do is fill out a questionnaire and let the Web site do the work. Your results will include information about each organization and how to contact them to apply for benefits.

Of course, with hundreds of thousands of individual circumstances, your counselor may be able suggest another alternative that’s tailor made just for you. The point is: You have options. Just because you’re reading up on reverse mortgages doesn’t mean you’re locked into a loan. Before you meet with your counselor or your originator, keep an open mind to all options so you find what works best for you.