I want to tell you about my experience with a reverse mortgage loan, and how it reshaped retirement for me. My husband and I are baby boomers nearing retirement age, with a close-knit family of grown children and grandchildren. We lived in the same area of Connecticut for over thirty years, sharing the joys and trials that come as part of being a family. We were very happy that our children still lived close to our home for many years. Who wouldn’t be? It’s the house where they grew up in from an early age, the house where they brought their spouses home to meet us in, and where our grandchildren loved to spend time. Each of my grandchildren made their own stepping stones with hand prints and stone decorations for my garden. As they grew, I took each of them for “grandma” days – lunches or sleepovers with special activities. We made plaster masks together, penny fishing lures to go fishing together with (even though I am petrified of fish), planted flowers, and baked together.
Everything Changed Overnight
All of our retirement plans with our family where upended when we learned that the employer of two of our children was closing their doors, and that they had lost their jobs. Those children needed to relocate when new employment presented itself. We helped them pack up their lives and said goodbye to our grandchildren. As we waved and watched them drive away, suddenly we found ourselves wondering if our home of so many years was still the place we wanted to stay in throughout our retirement. How often would we really see them if we stayed in it as we had always planned? Would we still love our old home if the people whom we loved lived so far away? For us, spending life together mattered more than where we were, or even what we did for work. My house was my home because of the memories that were made there, and it would have felt unnatural to not be together. Careful thought prompted us to take action and make a plan towards relocating.
Financial Challenges of Relocating
Now we were faced with a challenge – we quickly realized that despite generous equity from the sale of our former, mortgage-free, home, we would need additional funds to purchase our perfect next home. A home that was not only the right size for us, but which already had the amenities and upgrades we wanted to see us through our retirement comfortably. My husband was tired of doing the yard maintenance that came with a large lot, but we still wanted plenty of square footage to host our family. We didn’t want an old house that would need repairs and immediate upkeep, either. Relocating itself involved its own set of expenses, and were both adamant that we did not want to use our retirement savings to pay for a move. We also knew we didn’t want to be committed to expensive monthly mortgage payments, and were searching for a financing option that met our needs.
The Reverse for Purchase Solution
At this point our realtor introduced us to H4P, the purchase option of the Home Equity Conversion Mortgage called a reverse for purchase. He explained how the product could be a funding option for us to consider more housing alternatives that suited our needs. We learned more about it and saw that it would be the perfect refinancing tool for our needs.
We liked the idea of having a growing line of credit, and decided to use a reverse mortgage, but to over pay by contributing more of our money from the home we sold, not using all of the available reverse mortgage proceeds. We closed on our home with the reverse mortgage and established a line of credit the same day. We found a new, city-style house that was the right size and perfect for us in our retirement, in a lovely community of homes that offered the lifestyle we hoped for. We have a small lot, but plenty of green spaces in our community, a pool we can use, and a community gym and clubhouse.
We didn’t have to liquidate our investment accounts to do it and can protect our retirement savings for the future. Since we are both still working, we have been able to reduce the balance of our loan by making voluntary payments, which result in funds applied dollar for dollar into our line of credit for future use in case of need. Understanding this little-known financing option helped us to make a big change with confidence and security.
Most importantly, we now live very close to our family, and get to share life as it happens instead of waiting for holidays to see one another. We go to soccer and robotics tournaments, see smiles when teeth fall out, drop in for quick moments or plan evenings together eating and playing games. Our grandchildren know us – their grandfather’s ticklish spots, my fix-anything ability to help with projects and repairs. My granddaughter and I have our own language, and I hope to be there for her challenges as she grows like my mother was there for my daughter. We celebrate birthdays and play cards over pizza just like we did with our own children, but we feel that grandparents get to be different people than they were as parents. We are so thankful that we have chosen to continue to share life, however that looks.
I am Karen, a member of Finance of America Reverse’s learning and development team, and a reverse for purchase borrower.