Half of Americans Struggling to Afford Their Mortgages

June 4th, 2014  |  by Jason Oliva Published in News, Senior Housing

Americans have been struggling with housing affordability over the last three years, with 52% having to make sacrifices to cover their rent or mortgage, according to a recent survey.

Getting an additional job, deferring saving for retirement and cutting back on health care were just some of the sacrifices these struggling homeowners have made to afford housing, reports the “How Housing Matters Survey” conducted by Hart Research Associates.

The survey, commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation, represents a shift among Americans’ attitudes toward the overall housing market and how they view homeownership as a valuable investment. 

About 43% indicate it is no longer the case that owning a home is an “excellent long-term investment and one of the best ways for people to build wealth and assets.”

Additionally, more than half (54%) believe that buying a home has become “less appealing” than it once was, given the current market environment, while a similar proportion of adults (51%) believe that renting has become “more appealing.”

“The housing crisis that began more than five years ago has left an indelible mark on the attitudes and experiences of Americans,” stated Geoffrey Garin, president of Hart Research Associates. “Housing affordability has driven a large share of the American people to make significant financial adjustments.”

Driving these attitudinal changes is a growing perception that the aftermath of the housing crisis has yet to signal relief for a high proportion (70%) of Americans.

Of this group, 51% continue to believe the country is still in the midst of the crisis, while 19% believe that the “worst is yet to come.” 

The public in 2014 is only slightly more optimistic than it was a year ago, the survey notes, when 77% believed the nation was still in the grips of the crisis. 

“The continuing stresses felt by the vast majority of Americans in the aftermath of the housing recession are real and profound,” stated Jula Stasch, MacArthur’s vice president of U.S. programs. “It is clear that Americans believe more can and should be done to improve housing affordability for renters and owners, and that government should take action to invest in both equally.”

Written by Jason Oliva

Retire at 62????? Monte Carlo Scenario explains HOW

GOAL:  Retire at age 62

Profile:  US Citizen - Age 61.5 - Marital Status: Single -

Social Security Benefit: Earning Basis

Scenario 1: without reverse mortgage         Scenario 2:  with a reverse mortgage

Income total:                         $75,000             Income total:                  $75,000

1.  Salary (100% taxable)              75,000   1. Salary  (100% taxable)   $75,000

Begins at 61, ends at 62                                      Begins at 61, ends at 62

2. Social Security Monthly          1,222     2.  Social security amount    $2,141

FV 85% taxable                                                 FV 85% taxable

Annual increase                                   2%        Annual increase                      2%

Begins at 62, ends at 90                                   Beings at age 70, ends at 90

                                                                      3. Reverse Mortgage Monthy Amount

                                                                          (PV, 0% taxable)                       $1,223

                                                                           Annual increase                              2%

                                                                The income begins at age 62,ends at age 70

Expenses                               Annual Total            Assets

Housing                                             $7,800          Home value

Transportation                                     5,400         Mortgage or liens

Food, beverage, clothing,

personal care, cash                           9,900            Home equity  $0

Medical                                               7,200          Bank Accounts $0

Entertainment                                      5,900          Qualified Retirement Accounts   $300,000

Other                                                  1,300          Investment acounts                    $200,000

                                                                                  Total Market Value                 $500,000

                                                                              Liabilities: $0 Life insurance: NONE

                           Description            Required need      Desired Need             Total Need

RETIREMENT

Needs               Housing                       $8,034                       $0                           $8,034

                           Transportation              5,562                                                         5,562

                           Food, clothing etc     $10,197                                                    $10,197

                           Medical                           7,416                                                      7,416

                           Entertainment                     $0                  $6,077                        $6,077

                           Other                               2,575                                                     2,575

                           tax on prior yr returns   4,375                                                        4,375

                  TOTAL                                $38,159                  $6,077                      $44,236

Has objective been met?                            Has objective been met?

Scenario 1:  Without a Reverse                  Scenario 2:  With a Reverse

Based on the analysis of your retire          Based on the analysis of your retirement

ment income needs, expected                    income needs, expected income sources

income sources and available                    and available assets, your retirement

assets, your objective will be                      income objectives will be completely

will be satisfied until age until                    satisfied.

age 86.  At retirement, additional

funds of $50,386 will be needed.

Scenario 1 (without reverse mortgage): Has Objective been met?

Age     Total      Social        Additional    Needed        Required        Asset   (Shortgage)

             Needs   Security    Income       fm Assets    Distributions   WD      Unmet Needs

61     $47,100       $0          $47,100           $0                       $0                 $0            $0

62       42,738    12,321               0          $30,307                  0         $30,307             0

63       41,456    12,679               0            28,776                  0            28,776            0

64       45,502    12,933               0            29,569                  0            29,569            0

65       43,572    13,191               0            30,380                  0            30,380            0

66       44,665    13,455               0            31,210                  0            31,210            0

67       45,784    13,724               0            32,059                  0            32,059            0

68       46,927    13,999               0            32,928                  0            32,928            0

69       48,096    14,279               0            33,817                  0            33,817            0

70       49,290    14,564               0            34,725         17,801           16,924             0

71       50,645    14,856               0            35,789         18,479           17,310             0

72       52,036    15,153               0            36,884         19,180           17,704             0

73       53,466    15,456               0            38,010         19,900           18,111             0

74       55,070    15,765               0            39,305         19,855           19,450             0

75       56,722    16,080               0            40,642         19,714           20,928             0

76       58,424    16,402               0            42,022         19,457           22,565             0

77       60,176    16,730               0            43,447         18,974           24,473             0

78       61,982    17,065               0            44,917         18,417           26,500             0

79       63,841    17.406               0            46,435         17,578           28,857             0

80       65,756    17,754               0            48,003         16,512           31,490             0

81       67,729    18,109               0            49,620         15,181           34,440             0

82       69,761    18,471               0            51,290         13,535           37,755             0

83       71,854    18,841               0            53,013         11,516           41,497             0

84       74,009    19,217               0            54,792           9,056            45,736            0

85       76,230     19,602              0            56,628           9,025            50,603            0

86       78,517     19,994              0            58,523           6,025            31,499           0

87       80,872     20,394              0            60,479               0                     0          (24,620)

88       83,298     20,802              0            62,497               0                     0          (60,479)

89       85,797     21,218              0            64,580               0                     0          (62,497)

Scenario 2 (with reverse mortgage) Has Objective met?

Based on the analysis of your retirement income needs, expected income sources and available assets, your retirement income objective will be completely satisfied.

Age     Total      Social        Additional    Needed        Required        Asset    (Shortage)        

             Needs   Security    Income       fm Assets    Distributions   WD      Unmet Needs

61     $47,100       $0          $47,100           $0                       $0                 $0          $0

62       42,738         0             12,431       $30,307                  0         $30,307            0

63       41,456         0             12,679        28,776                  0            28,776            0

64       42,502         0             12,933        29,569                  0            29,569            0

65       43,572         0             13,191        30,381                  0            30,381            0

66       44,665         0             13,455        31,210                  0            31,210            0

67       45,784         0             13,724        32,059                  0            32,059            0

68       46,927         0             13,999        32,928                  0            32,928            0

69       48,096         0             14,279        33,817                  0            33,817            0

70       49,290    21,761               0           27,529         17,801             9,728             0

71       50,699    22,196               0           28,503         18,479           10,024             0

72       52,148    22,640               0           29,508         19,180           10,328             0

73       53,638    23,093               0           30,544         19,904           10,640             0

74       55,168    23,555               0           31,613         20,653           10,960             0

75       56,742    24,026               0           32,716         21,427           11,289             0

76       58,424    24,507               0           33,917         21,818           12,099             0

77       60,176    24,997               0           35,180         21,925           13,254             0

78       61,982    25,497               0           36,485         22,053           14,432             0

79       63,841    26,007               0           37,835         21,973           15,862             0

80       65,756    26,527               0           39,230         21,767           17,463             0

81       67,729    27,057               0           40,672         21,411           19,261             0

82       69,761    27,598               0           42,163         20,876           21,287             0

83       71,854    28,150               0           43,704         20,125           23,579             0

84       74,009    28,713               0           45,296         19,114           26,182             0

85       76,230    29,713               0           46,942         17,670           29,272             0

86       78,517    29,873               0           48,643         15,857           32,786             0

87       80,872    30,471               0           50,401         13,604           36,798             0

88       83,298    31,080               0           52,215         10,821           41,397             0

89       85,797    31,702               0           54,095           7,399           46,696    

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How Reverse Mortgages Can Benefit Older Divorcing Women

Divorcing later in life is not a new phenomenon, but it is becoming more and more common. Indeed, the increased occurrence of “grey divorce,” as it’s called, has been identified as a significant 21^st century divorce trend:  Even though the overall divorce rate is actually declining, it’s on the rise among older generations.

Those of us in the business of helping people plan for secure financial futures have long known that grey divorce presents a unique set of challenges to our clients. Sure, there is overlap, but women divorcing after long marriages (or brief marriages that began later in their lives) typically face different financial concerns –and may have access to different financial products –than their younger counterparts.
For example, a recent article in The Wall Street Journal (written by Kelly Greene) explains how a loan called a “reverse mortgage” can be a useful financial tool for retirees. This type of loan is becoming increasingly popular because instead of making payments to a lender, the homeowner actually receives monthly payments, increasing the amount she owes. Or, she might opt to receive a lump sum, or maintain a ready line of credit.
The loan (and interest) come due when the homeowner dies, moves out, sells the home, or if property taxes or insurance premiums go unpaid. Typically, the home is sold to repay the loan.

As explained in the article, a reverse mortgage provides a mechanism for homeowners at least 62 years old to borrow against the equity in their home. While there’s no restriction on the purpose of the loan, the funds are commonly used to pay for home repairs or modifications, home health care or medical expenses. However, now that the financial services industry has developed new government-insured products, borrowing costs for reverse mortgages have come down, and these types of loans are becoming basic financial management tools, rather than just last-resort methods to increase cash flow.
So, what does all this mean for the divorcing woman?
Well, for those who are close to 62 years old, the possibility of taking a reverse mortgage loan could represent a new factor to consider when deciding whether or not to keep the house. There are many angles to that decision, including:

• equity and potential resale value on one side,
• maintenance and repair costs,
• property taxes,
• insurance premiums,
• and more!

Even so, the potential utility of a reverse mortgage in your financial plan might tip the balance toward keeping the house. Discuss it with your divorce financial planner.
For women whose divorces are behind them, a reverse mortgage might represent a new strategy for making their settlements last as long as possible. For example, using a reverse mortgage to provide cash income during retirement could save you from having to sell temporarily depressed investments. In the event of a drop in the market, payments from a reverse mortgage can be used to cover expenses until the value of your investments sufficiently rebounds.
The Wall Street Journal reports that taking a reverse mortgage can also have implications for your tax bill, and for configuring your potential Social Security income. You may be able to limit your income tax exposure by using cash flow from a reverse mortgage, rather than taxable withdrawals from a 401(k) or other retirement investment, to pay off a traditional mortgage or other debts. If you can delay taking Social Security by using a reverse mortgage as a source of income, you can increase the monthly payment you will eventually receive.
Used judiciously, a reverse mortgage can be a very useful part of the divorcing or divorced woman’s financial strategy, and as a Divorce Financial Strategist™ , I recommend you see how this financial tool might best serve you. The Consumer Financial Protection Bureau is an excellent place to get more information before you look for a lender. If you decide to pursue such a loan, be especially wary of “advisors” who try to steer your reverse mortgage payments into expensive or risky investments. As always, it’s best to be well-informed, and well-advise.
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Reverse mortgages for Aging in Place

With 6 million people today who are over 85 years old that will grow to over 20 millions in the next twenty years, reverse mortgages will become a legitimate device to provide capital to help meet daily expenses.  Studies have shown that Americans are going to be Aging in Place.   So for the duration of their retirement years housing options and services are going to have to adapt to meet those needs.
Most people don't realize that a mere 5% of older American will live in nursing homes or assisted living communities therefor there will be a strong push for services that allow people to remain in their homes.
Families need to understand the benefits of the reverse mortgage to help family members age in place and help the senior understand the pros and cons of the program.  Most children have no interest in inheriting their childhood home.  So saving it for the children is no longer valid.
Unfortunately, many people are not comfortable with the products.  There has been some financial abuses having to do with the housing downturn.  The industry is going to have to learn to present it as a user-friendly, prudent and responsible way to proceed.
Some considerations in helping people age in place is to have the home modified, make adaptations to existing homes, new home construction,  products and services.
So while only 5% of Americans will live in a nursing home or assisted living facility we as a society need to educate and help people learn about utilizing their home as an asset  to age in place.  The home remains in the borrowers name and will always pass to the heirs in the end.
www.reversemortgagesspecialist.com
314-220-3918