Home Equity for Seniors Often Exceeds Cash Flow

By John Cunniff, Ap | THE JOURNAL RECORD, December 8, 1989 | Go to article overview

Home Equity for Seniors Often Exceeds Cash Flow


John Cunniff, Ap, THE JOURNAL RECORD


As much as $750 billion of equity is held by homeowners who are age 65 years or older, a category in which financial stress is rising because, among other things, of higher taxes and health care costs.

In some instances, older couples meet expenses only by reducing their lives to the bare elements, or worse, while simultaneously sitting atop six figures of housing assets. They are well off - but cash poor.

The situation, always a cause of distress among social workers, government officials and others concerned with the elderly, is becoming even more so as large numbers of people enter the upper age categories.

Simultaenously, the houses in which they live sometimes continue to rise in value, creating an even more pronounced contrast between cash flow and value tied up in real estate.

Repeated attempts to resolve the dilemma have been made over the years, but no private-sector mortgage lender, insurer or other financial institution has marketed a popular solution.

Two of the great fears are clearly revealed in surveys: 1. having enough money to live on, and 2. having to move from the house.

Among the possible solutions now available:

- Sell the house and with the proceeds move into a retirement community. For many people this is a practical solution, but it doesn't help those who want to remain right where they are.

- Sale-leaseback. The house is sold, but the former owners remain where they are. They obtain a guarantee of residency. Money from the sale is invested, and some of it may be used to pay the rent.

Drawback: Insecurity resulting from unknowns, chief of which is the ability to make a sufficient return on investments to make monthly rental payments. …

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