A financial planner talks about adjustable mortgage rates and a life insurance plan

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Dear Rick:

I have some financial problems that I hope you can help me with. My first issue is that a few years ago when I bought my house I originally thought I would only be in the house for a few years so I got an adjustable rate mortgage.

My plans have changed and I plan to stay in the house longer than expected. As a result, my mortgage has adjusted and my rate has gone up significantly, and I’m not sure what to do. I can’t afford the new payment. What options do I have?

My next question is about my life insurance policy. I have a 10 year term insurance policy that is coming to an end. When I went to take out a new policy for another 10 years, the rate was considerably higher. I’m not sure I need the policy yet, but I’d like your opinion. I have no dependents, but I have two adult children who live alone.

Thank you Julie

Dear Julia:

The first thing I would recommend regarding your home is to contact your mortgage lender. There may be some sort of program you might qualify for that could benefit you.

In addition, I would also like to look at the Michigan Homeowners Relief Fund. This program was established as a result of the American Rescue Plan Act of 2021. This program is intended to help homeowners who are experiencing financial hardship due to the coronavirus. Under this program, if your household income is less than 150% of the area median income, the property is your primary residence and your financial hardship was a direct result of COVID-19 on or before the 21 January 2020, you may qualify. up to a grant of $25,000 from this program. For more information on this program, you can contact them at 1-844-756-4423.

If you don’t qualify for any program, one solution you may want to consider is to sell the home. Home prices are always sellers friendly, 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 it goes away, because it won’t. Unfortunately, high inflation will be with us for some time, and it’s important to do something about your home while you still have options.

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When it comes to your life insurance policy, I’m sure not everyone needs life insurance. The question you ask yourself is if you die, does anyone lose financially. Since your children live on their own and are not financially dependent on you, you probably don’t need life insurance. Remember that life insurance is not an investment; it is a matter of risk management. Ten years ago, you ran the risk of having your children financially dependent on you. Today, this is not the case; so, in my opinion, you don’t need life insurance.

I have always believed 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 we will eventually pass; however, the key is that when we pass, is there anyone who will suffer financial harm because of your passing. Otherwise, you don’t need insurance. Some insurers like to think of insurance as a good investment; I do not 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.

Good luck!

Rick Bloom is a paid financial advisor. His website is www.bloomadvisors.com. If you’d like him to answer your questions, email rick@bloomadvisors.com.

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