4 Ways Older Americans are Hurting Financially
Which demographic group is hurt the most by the Federal Reserve’s series of interest rate hikes and inflation? If you answered older Americans you would be correct. Here are four ways our older neighbors and friends are suffering in today’s economy. #1 Purchasing a home While older homebuyers are a smaller slice of the purchase market, many have a need or desire to either relocate or right-size during their retirement years. But there’s a catch thanks to the Federal Reserve’s measures attempting to lower inflation. Higher interest rates. A single percentage point increase in home mortgage rates pushes out 16% of low-income borrowers according to a recent Federal Reserve Board working paper. Some homeowners over the age of 62 could possibly use a HECM for Purchase to close the gap. Nevertheless, the odds are most are either unable to get a reverse mortgage, or unfamiliar with the loan and consequently will be pushed to the sidelines due to a lack of affordability. However, more significant problems loom for today’s American retirees, most of which are related to daily living expenses. #2 Repairs Most retirement planning is focused on meeting monthly expenses. But what about those unexpected lump-sum expenses such as replacing an aging HVAC system or purchasing a vehicle? MSN noted in a recent column that one trick economists recommend for housing costs is to budget 1% of your home’s total value for annual repairs and maintenance. For example, the owners of a $400,000 home should allocate $4,000 annually for potential unexpected purchases or repairs. #3 FoodThe U.S. Department of Agriculture’s 2023 forecast for food prices is stark. The agency predicts that food prices could be… 10% higher than they were in 2022. “Food prices are expected to grow more slowly in 2023 than in 2022 but still at above-historical average rates,” the USDA’s Food Price Outlook said in late March. Eating out will cost more as well with the USDA forecasting an 8.3% increase. While the rate of inflation has somewhat slowed, food prices continue to climb. #4 Medicare Workers who were fortunate enough to have health insurance benefits as part of their employment are likely going to have to foot the bill. The average Medicare premium for the standard part B is $164.90 a month, Part D runs about $49 a month, and typical supplement plans run about $155. For a single individual, health-related premiums can take $400 or more out of their monthly budget. A lifeline Money Magazine reports that since 2000 American seniors have lost 40 percent of their purchasing power, much of that in the last year. How in the world do older Americans cope? In several ways. Many choose to work longer while some are deciding to return to the workforce. Others are turning to the ‘gig economy’ taking jobs delivering food and other staples. Not surprising considering the uncertain economy and inflation. The tragedy is many older homeowners simply ignore or have misgivings about another potential solution that could allow them to enjoy their retirement without the burden of employment- a reverse mortgage. by Shannon Hicks March 27, 2023
How a Reverse Mortgage Works After the Borrower’s Death
When the last surviving borrower on a reverse mortgage loan passes away, the loan becomes due and payable. The amount due is equal to the full loan balance, which is the sum of the borrowed amount, interest, and other charges. Here’s an overview of how your client and their family can expect the reverse mortgage to work after death. 5 Things to Know About Conclusion In conclusion, a reverse mortgage loan must be paid back after the passing of the last surviving borrower. The estate is responsible for repaying the loan, and has several options for doing so, including selling the property, paying off the loan with other assets, or refinancing the loan. Typically, the loan is repaid within six months of the date of death, but extensions may be granted. Your client and their family should always speak with their attorney and/or financial advisor to determine loan repayment for their specific circumstance. The estate is generally not held responsible for any loan balance above the property’s value, thanks to the loan insurance.