A few years ago my wife and I went to dinner with some friends and were introduced to Indian food for the first time. Off of Tyler and Magnolia in Riverside is a family owned restaurant called “Punjab Palace” that has been there as long as I can remember, having grown up in Riverside. The food is amazing here, the tikka masala is savory and flavorful. The Garlic Naan bread has become a family favorite. We have tried many other Indian food restaurants but none has equaled the tikka masala at Punjab. All through the pandemic we would pick up orders of tikka and never tired of it. On a recent trip to Punjab they had a sign inside saying all menu prices have been raised 25% because of rising food costs. That is truly an astounding increase; normally a company might raise costs 2 or 5% a year just to keep up with inflation, but having to raise it that much all at once would indicate this is not a normal time we are living in. All restaurants are facing this same dilemma. Consumer prices are rising everywhere we go, the grocery store, car prices, as well as energy and water costs. Gas prices have risen an astonishing 40% nationally since January 1st 2021 according to a report from AAA.
US Treasury secretary Janet Yellen spoke to CNBC recently and validated that we may experience “several more months of rapid inflation. But I think over the medium term, we’ll see inflation decline back toward normal levels, But, of course, we have to keep a careful eye on it. We’re seeing big increases in air fare, hotels and there are bottlenecks and supply chain problems that have particularly affected motor vehicles.” In this same article it cited that the consumer price index, increased 5.4% in June, the fastest pace in nearly 13 years. If you remove costs for food and energy, this index rose 4.5%, the fastest acceleration we have seen in almost 30 years. Prices that goods and services producers receive for their products jumped 7.3%, which is the biggest increase since 2010.
With all of this inflation one would hope Social Security checks would increase the same amount so our seniors are not drowning in these high costs, but these checks only increased 1.3% in 2021. No one holds out much hope for an increase to match inflation in 2022. Each time inflation rears its ugly head it is the retirees that suffer the most. Unfortunately, many are dependent on social security to cover their costs.
To offset rising prices one may look into a traditional refinance, but there are some factors that should be considered when judging these options. A refinance may lower the rate, but it t restarts the amortization period meaning you may have to make payments on that house for 30 more years. If one refinances to pull out cash, this will increase the loan balance and probably increase the monthly payment required. Perhaps you may look into selling your home and stashing that nest egg in an account. This is a great short term solution, but, would cause you to miss out on any future increase in home values, which tend to go up with inflation.
The government has provided some short term solutions: unemployment bonuses, mortgage forbearance (which expired July 31st 2021) and stimulus checks, which have raised the national debt and contributed to significant inflation. These solutions have not really helped older Americans that are no longer working, that don’t have minors living with them and thus don’t get the larger stimulus checks, and many have their homes paid off and don’t need foreclosure forbearance. Retirees need a long-term strategy that doesn’t increase their monthly payments and gives them long term cash flow.
Housing prices in the largest cities in the US surged 15% according to S&P CoreLogic Case-Shiller. Having a stake in the housing game is a game changer when it comes to inflation. As they say, a rising tide lifts all ships. As home values are significantly higher, a reverse mortgage (RM) may be the perfect solution to offset the rising costs of goods. Interest rates are near all-time lows and home values are near all-time highs and you are the oldest you have ever been. These 3 factors combine to make this the “perfect storm” for RM payouts. The higher your home value, the lower the interest rates, and the older you are, the more money you may qualify for. The money that you qualify for can be left in a RM Line of Credit. This money is safe and cannot be taken away if there is a change in your home value. There is also a credit line growth rate attached to it. The most recent quote I gave had a growth rate of 2.82% compounded annually on the money left in the Line of Credit. This will help to protect your money from inflation. This growth rate increases if rates rise in the future, further protecting your money. As conditions are always changing in the housing market it may be wise to look into what a RM could do for you at this time.
If you would like to look into accessing your equity with a RM line of credit or monthly payment, you may contact Robert Krepps rkrepps@hightechlending.com or toll-free at 877-567-7476.
Robert Krepps, NMLS #255191, at HighTechLending Inc. HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act.
