I have a couple of financial problems that I hope you can help me with. My first issue is that a couple of years ago when I bought my house, I originally thought I’d only be in the house a couple of years and thus, I got an adjustable-rate mortgage.
My plans changed and I plan to be in the house for longer than I expect. As a result, my mortgage has adjusted and my rate went up substantially, and I’m not sure what I should do. I cannot afford the new payment. What options do I have?
My next question deals with my life insurance policy. I have a 10-year term policy that is maturing. When I went to purchase a new policy for another 10 years, the rate was substantially higher. I am not sure I still need the policy, but I’d like your opinion. I have no dependents, but I do have two adult children who are on their own.
Thank you, Julie
The first thing I would recommend with regards to your house is that you contact your mortgage lender. There may be some sort of program that you may qualify for that can be beneficial to you.
In addition, I would also look into the Michigan Homeowner Assistance Fund. This program was established as a result of the American Rescue Plan Act of 2021. This program is to help homeowners who have financial difficulties due to the coronavirus. Under this program, if your household income is less than 150 percent of area median income, the property is your primary residence, and if your financial hardship was a direct result of COVID-19 on or before Jan. 21, 2020, you may qualify for up to a $25,000 grant from this program. For more information on this program, you can contact them at 1-844-756-4423.
If you do not qualify for any programs, one solution you may want to consider is to sell the home. Home prices are still favorable to sellers, and you may find that by selling the home, you may be able to find more affordable housing.
Your mistake would be to do nothing and hope this goes away, because it won’t. Unfortunately, high inflation will be with us for a while, and it’s important to do something with your home while you still have options.
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With regards to your life insurance policy, I am a believer that not everyone needs life insurance. The question you ask yourself is that if you pass away, does anyone lose out financially. Since your children are on their own and are not dependent upon you financially, you probably do not need the life insurance. Remember, life insurance is not an investment; it’s a matter of risk management. Ten years ago, you had the risk that your children were financially dependent upon you. Today you don’t; so, in my opinion you don’t need life insurance.
I have always been a believer that all types of insurance are matters of risk management. If you don’t have the risk, you don’t need the insurance. For example, I don’t have boat insurance not because I don’t think boat insurance is important, but rather because I don’t have a boat. With life insurance, we all know that eventually we will pass; however, the key is when we pass is there anyone that will be financially harmed by your passing. If not, you don’t need insurance. Some insurance people like to think that insurance is a good investment; I don’t believe that. As far as I’m concerned, if I have to die for an investment to pay off, it’s not a very good investment.
Rick Bloom is a fee-only financial advisor. His website is www.bloomadvisors.com. If you would like him to respond to your questions, email firstname.lastname@example.org.