HECM And The Sandwich Generation – Relieving The Financial Cost Of Older Parents On Children

According to Pew Research, almost one-half of adults in their 40s and 50s fall into the Sandwich Generation, with about one-third (32%) of those saying they had given a parent financial support in the past 12 months. And when those middle-aged adults also have children to support, welcome to the financial cost of older parents on children.

Tom and Julie M. found themselves in just that position.  Trying to raise their children and increasingly being called upon by their parents for financial assistance.

It wasn’t that their parents didn’t have some means, but unfortunately nearly all their savings were tied up in the equity in their home.  A common occurrence in today’s older households.

But, something had to give, because the fear of the unknown expenses were causing a great deal of stress between Tom and Julie and, of course, with their parents.

Enter Ridge Reverse and Richard McWhorter, who was referred through Tom and Julie’s financial professional.  After sitting down with the family and learning of their needs, a Home Equity Conversion Mortgage Line of Credit was agreed upon as the solution.

The parent’s home had a value of $750,000 and a small first mortgage of around $100,000, but unfortunately had a $50,000 home equity line of credit that was soon to convert to its amortization period.  Not a good situation on their limited income.

So, Richard proposed a $300,000 Home Equity Conversion Mortgage that paid off the $150,000 first and second loans and left the remaining as a line of credit that could be drawn upon whenever any necessary repairs or other unexpected expenses came up.*

Why was the HECM the solution for them?

• A HECM has no personal guarantees to the parents or heirs. The home is the sole collateral.
• A HECM LOC is non-callable and non-freezable, provided one of the borrowers continues to live in the home as their primary residence and maintains the home, pays the expenses (taxes, insurance and upkeep) and honors other default provisions common to other mortgages.
• The Line of Credit has an FHA guaranteed growth rate that is the same as the rate on the outstanding loan balance and grows without regard to the underlying value of the home. (A key factor in this higher interest rate environment…)
• The HECM requires no monthly payments, freeing up the parents to forego their previously required monthly mortgage payments and substantially improve their cashflow.

But, best of all, Tom and Julie are relieved knowing that the parents are self-sustaining, that they can not just survive, but live more comfortably now that their expenditures are covered by the increased cash flow as well as the home equity when needed.

For the parents, they far preferred their equity being used to solve cashflow problems than to have to ask their children for the help.  Tom and Julie far preferred it as well!

*Note, the example used herein is for informational purposes only.  Actual equity proceeds available are based on age, appraised value and the expected interest rate as determined by HUD.

Maybe you, or someone you know, needs a similar success story but still thinks the new Home Equity Conversion Mortgage is too good to be true?  As with any loan product, there is always additional information to discuss. Give Richard McWhorter of Ridge Reverse a call, text (863-456-7810) or email (richard.mcwhorter@amerifund.com) and find out why what you thought you knew about reverse mortgages is keeping you from one of the best and safest long term financial products on the market today.

Next step?

Want to know more about how access to your equity line of credit can help you thrive? 

Simply reach out to us at Ridge Reverse and let’s discuss how we can help you with a product designed specifically to meet your needs for a lifetime of happiness… while enhancing long term cashflow and quality of life. Feel free to call, text (863-456-7810), or email richard.mcwhorter@amerifund.com and find out more.

Ridge Reverse, powered by Amerifund, provides an Equal Housing Opportunity. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to secure a loan. Some restrictions may apply. This material is not from HUD or FHA and has not been approved by HUD or any government agency.

Richard W. McWhorter, NMLS 1618644, is an independent reverse mortgage specialist and can assist in your reverse mortgage needs in most states. Follow him on LinkedIn, the Ridge Reverse website or contact him directly at richard.mcwhorter@amerifund.com.