Second Homes 411

from Besting

Theresa was living alone in Michigan, where the winters can be cold and harsh. Her home has appreciated over the years and was worth $350,000 when she decided she could no longer stand another winter in the Midwest. She had worked diligently to pay down her mortgage to $45,000, by having a 15-year mortgage during her working years.

Her monthly mortgage payments were $404 per month. The prospect of buying a second home in Florida with an additional mortgage payment would stress her fixed income too much. She felt destined to rent or move permanently to Florida. “I loved my Michigan home, but I wanted to be in Florida sunshine for more than a couple months and I believe in ownership not renting” Theresa said.

She also had some repairs she wanted to do to her home that would make it more comfortable, and maybe more valuable. But without a little extra cash, she felt the repairs would have to wait.

Being 66 years old, she was able to obtain a reverse mortgage. After attending a required educational program on the details of a reverse mortgage, she took a lump sum version of the loan. The reverse loan paid off her $45,000 mortgage, and gave her a one-time lump sum of $125,000. She will never need to pay another mortgage payment on her Michigan home, yet she can own it for the rest of her lifetime. She saved $404 a month in mortgage payments, that were freed up to supplement her retirement income.

First, she made the repairs to her Michigan home.