I AM tossed between my usual practical beliefs and a survival situation that is very common with retired homeowners. A lot of homeowners rent out rooms to make their mortgage payments, these homeowners usually are retired couples or a retired individual living on their own. The particular homeowner owns a house that has 2-4 extra bedrooms and this homeowners rents outs rooms to boarders not for profit but for survival. I have encountered similar situation over and over again throughout the past few years and usually have the same advice. My advice to these retired homeowners usually is for them not to have to deal with boarders in order to survive the mortgage payments, I felt that they are basically holding themselves hostages to the bank and their boarders. Why? These homeowners get a retirement income and can survive just staying in a much smaller house or just renting a one-bedroom house for about 1/3 of their income. Why would they sustain and keep an oversized house with an outrageous mortgage balance and payments? If you have retired I would really think your goal should be to travel multiple times a year, visit your family and friends multiple times a year. If you are retired and surviving by keep an oversized house and an oversized mortgage payments with boarders, to me you are slaving yourselves to the mortgage payments and your boarders.
Now, I have encountered a retired individual who might not have a choice but to keep his upside down and oversized mortgage balance. The situation of these particular person is that his retired income is so small that he has to rely of his current boarders to survive, although he has a large mortgage payment, this retired homeowner owns a 6 bedroom house that he rents out and gets about $3,000 in monthly income, although his mortgage modified payments might be up to about $2,200 a month, that extra $800 gives him additional income to survive. The property has a very large loan balance and is currently upside down. In this case I don’t believe this homeowner can survive with his retired income alone and might have to hope that his boarders stay with him till the market comes to a point where he can sells for a profit.
I have always felt really sad for retired homeowners who got into these large size mortgages with unqualified income. These homeowners don’t have the flexibility to start over again and they are the ones that always also might have to carry some other family members also hurt by the economic downturn. My advise to the retirees is for them to use only about 1/3 of their retirement income as their housing expense, the rest of their income has to be for traveling and expenses. A lot of retirees lost their savings due to the recent economic crisis; unfortunately this crisis is especially hurtful towards these age group.
Home sales improved in May with a total existing home sales rising to 4.2 percent from April. The positive housing numbers are good signs of the US economy showing long sustainable strength. Existing home sales are at the highest level since November 2009 when market jumped to 5.44 million as buyers took advantage of the homebuyers tax credit. May 2013 marked the 23rd month that sales have recorded year over year gains.
We still have a shortage in homes for sale, while new constructions are coming back to supply the demand of homes, rising rates hopefully will not dampen the momentum we are all watching closely. The only hope I have when rates are higher is for banks to be more aggressively lending and trying to ease up on guidelines for borderline qualified borrowers. I believe it should be in the works and bank should come out and send us signs that they are looking for more homebuyers to finance.
* * *
Thanks for your inquiries, please CALL Ken Go of 1st Innovative Finance at 562-697-7028 or write to [email protected] for all your inquiries, comments, financial and Real Estate needs.
