Tag: Aging In Place

Weekly Scenario: What Happens to the Home When we Move?

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Scenario:

My wife and I want to work until we’re both 70, and then move to North Carolina. If we do a reverse mortgage now, what happens to the home when we move?

Answer:

Let’s put aside the concept of reverse mortgage for a moment and just think about a traditional mortgage, also called a “forward” mortgage.

What happens with a forward mortgage when you sell your home?

We all know the answer: your home sells, and when you go to settlement the forward mortgage is paid in full, and you pocket the difference between the sales price and the amount due on the mortgage.

With a reverse mortgage the formula is the same, and looks like this:

Sales Price of the Home – What’s Due on the Loan = What You Pocket

When you meet with your reverse mortgage specialist, one of the mandatory disclosures will be an amortization schedule showing approximately how much you can expect to realize from the sale of your home in any given year.

Just as with a forward mortgage, the sales price of the home will be a major factor in how much you pocket from the sale.

As a side note, when it’s time to buy your new home you can purchase it using a Reverse for Purchase loan, also called a HECM for Purchase. You will make a down payment of approximately 50% of the purchase price, and the Reverse for Purchase loan will make up the difference.

With HECM for Purchase you never have a monthly mortgage payment, which frees up your monthly income for other purposes. It also allows you to retain more cash from the sale of your previous home.

If you have questions either about a reverse mortgage on the home you’re in, or questions about HECM for Purchase, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage. She can be reached at 703-477-1183, Direct, or at Laurie@MiddleburgReverse.com
 

Laurie MacNaughton ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.com ∙ www.MiddleburgReverseLady.com

 

 

 

Never Read the Comments

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Retirement Planning, Reverse Mortgage

A good friend of mine, a professional writer and one of the smartest people I know, once said to me. “Never read the comments at the end of an article – you’ll end up loathing humanity.”

I don’t know why I do it, but I persist in ignoring his advice. And while I can’t say I end up hating humanity, I confess I often end up just this side of appalled at the flawed reasoning, the foul language, and the venomous attacks commenters level against other commenters.

Imagine my surprise, then, when the tables were turned this week after The New York Times ran a piece on reverse mortgage: the article was terrible, but the comments were extraordinary.

The piece, entitled “Pitfalls of Reverse Mortgages May Pass to Borrower’s Heirs,” struck me as a remarkable specimen self-pity, greed, and lack of self-reflection on the part of adult children whose parents had reverse mortgages, and (yet another) instance of poorly-researched reporting by Jessica Silver-Greenberg, who has written other sensationalistic reverse mortgage pieces for NYT.

Then, in an act of self-punishment – you guessed it – I clicked on the comments tab.

The word “astonished” comes to mind.

First of all, at the time of this blogpost there were 598 comments. I read a lot of online news, and that is an unusually high number of people weighing in on a financial piece.

Second, despite the negative nature of the article, the overwhelming majority of comments were highly supportive of reverse mortgage.

But my third and biggest source of amazement? The level-headed, well-reasoned nature of the replies, some from seniors themselves, but many more from adult children of parents who have taken out a reverse mortgage.

A minimal sampling of comments include JPB’s from Chicago, who wrote:

This article is somewhat misleading, and Ms. Santos [the aggrieved daughter featured in the NYT piece] is delusional.

My siblings and I opted to help my parents obtain a reverse mortgage and it’s been a godsend. In their case, they had lots of equity (in a fairly pricey property), good health, and very little cash.

We were never expecting to inherit anything; the reverse mortgage is doing exactly what it’s supposed to do. It has allowed my parents to remain in their home and removed a huge financial burden off their backs.

Jbsa wrote:

My mom has a reverse mortgage from a reputable bank. It lifted her obligation to make monthly payments out of her Social Security and teacher’s pension, which allowed her to stay in her home. We are aware that each month, the payment she would otherwise be making is instead a paper transaction that is reducing her equity in her home. That’s ok with us, her kids. We’d rather have her living in her home and not stressing about the payment. It’s been a huge financial relief. If, god willing, she lives long enough to completely exhaust the equity, the bank can’t kick her out. She gets to stay in the house for as long as she is able to live there. We won’t inherit the house, but that’s not the point. For us to inherit, she’d have to keep struggling to make those payments, or we’d have to make them for her. It’s a loan, just structured differently than a traditional one. It works as intended.

Peter R from Cresskill, New Jersey wrote:

I have the perspective of the reverse mortgage experience from start to finish. We secured a reverse mortgage in 2006 for my wife’s parents. We sold the house after both her parents had passed away by 2011. There are many reasons to have one and many sides to the benefits. The main benefit is for the parents….

But I think my favorite is by a senior homeowner identified as Entice, from Miami, Florida:

So, I’m a homeowner, I paid over the years from the money that I earned. It’s my largest asset. I’m now in need of additional money. I take out a reverse mortgage to provide for my needs – note, I’m not sponging off my grateful children. I die. My grateful children’s response is “what do you mean we don’t get the house, we didn’t support the old man in his declining years.” I took out a reverse mortgage because I can’t get buried with my home and I sure am not going to leave it to my kids who have to learn to earn their own way in life. The mortgage company (RMS) spelled out in detail that when I die they get the house; my heirs might get a small residual from the sale or not; the company did not try to hide anything.

I guess it really shouldn’t surprise me a loan that enjoys over 90% positive reviews from those who have one would get good reviews. I only wish the popular press would stop working so hard to scare the daylights out of seniors and their adult children.

No one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 or Laurie@MiddleburgReverse.com.

 

 

Stick to What You Know, Suze

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Retirement Planning, Reverse Mortgage

I don’t own a television – I never have. And, frankly, I cannot imagine any scenario under which I would want one. This fact is material to what I say next:

Suze Orman needs to butt out of discussions on topics she clearly does not know well.

In order here is a bit of background leading up to this admittedly snarky statement.

This past week I attended an event where a woman said to me, “I don’t really know much about reverse mortgages, but Suze Orman doesn’t like them – so that’s enough for me.” I mentioned I didn’t know who Suze Orman was, and the woman, clearly shocked, answered, “Suze Orman? She’s on TV. She’s America’s financial guru.”

STRIKE THREE, Suze. You’re out, girlfriend.

Strike one is this: for one television personality to impose her opinion upon her entire viewing audience displays presumptuousness beyond measure. Where does she get off saying the 6,000,000 million Americans over the age of 62 have the same needs, and can be told, out of hand, a reverse mortgage should be a last resort? This is particularly audacious in light of the many scholarly pieces published within the past three years showing so-called “reserve reverse” mortgages – those established early and used to augment other savings – greatly increase odds of financial survival in retirement. She’s out of date, off base, and apparently not well read.

Strike two: in her online transcript Orman says, “I would much rather you base your retirement on other income sources—your savings, Social Security, and a pension.” I would love to meet the person who says, “By golly, I would never have thought of that. Use my Social Security, pension, and savings to cover my living expenses? Thank God for Suze Orman, or I would have missed that altogether.”

To this point I say this: one of the worst things I see in the course of my job is the person doing what I call a “rescue reverse” – the person who has drained all other financial buckets, and is now turning to a reverse mortgage as a last resort. Many times, indeed, perhaps most times, had this person done a reverse mortgage when he still had other monies available, he would not be left wondering if his money would last. This is not hypothetical: the studies have been done, and these by major universities and retirement research institutes.

And…strike three? “America’s financial guru.” America’s financial guru? There are 360,000,000 Americans. That’s a lot of people for one “guru.” I’m surprised Janet Yellen, Ben Bernanke, Harold Evensky, Robert Shiller, or any of the other 54 Americans to win the Nobel Prize in economics didn’t make the list.  And anyway, who says she’s America’s financial guru? It’s like saying Sandra Bullock is America’s sweetheart. Thank you, but I reserve the right to pick my own sweetheart – and my own financial advisor.

No one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

If you would like to explore how an FHA reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 or Laurie@MiddleburgReverse.com.

The Eternal Question of the Potato Chip Purchase

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story

Ok – to be honest, here’s a question I never thought to ask: at what age do people buy the most potato chips?

Or how about their first home? How old on average is the person buying that luxury car? For that matter, at what age does a person’s spending peak?

Turns out, all these age-related questions have highly predictable answers.  And because the answers are highly predictable, there are trends you can pretty much hang your hat on, particularly when it comes to expenses related to aging.

On February 11 the weekly Congressional Budget Office reported:

Beyond 2017, CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades. That projected slowdown mainly reflects long-term trends—particularly, slower growth in the labor force because of the aging of the population. (Read the full report at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45098-Testimony_Senate.pdf)

But who is responsible for paying for aging-related costs? That was a question posed to nations around the globe by the Pew Research Center. In January of this year Pew reported the U.S. is one of only four countries that believe seniors should be self-pay throughout retirement. In fact, 46% of U.S. respondents believe the elderly should be financially self-supporting, topping by a fairly wide margin the other three nations, which include South Korea, Germany and Britain.

Frankly, count me squarely among the 46%. I don’t want my daughters footing the bill for my retirement years: they’re going to need for their own retirement every penny they can save.

However, saying you want to be self-pay and actually achieving it are two different things. In fact, according to some studies, in the U.S. nearly 70% of seniors receive family assistance – both financial and physical.

There are no easy answers to financing longevity. It would be nice to think someone holds the magic solution to financial issues related to aging. Expecting the government to come up with the solution clearly is not going to work. Hoping for a miracle is a long shot, and hitting the lottery a longer shot still.

It’s going to take planning, creativity, help from family, friends and faith communities, and cooperation at the hyper-local level to get most Americans through retirement with as much independence and dignity as possible.

Fortunately Americans in general, and boomers in particular, are characterized by creativity, resilience, and determination, and I, for one, think we’re up for the challenge.

And, as I have said many, many times: reverse mortgage is going to play a role for many of us.

Reverse mortgage was never meant to be the full financial solution to retirement needs.  For most of us, there is not going to be one all-inclusive solution that meets evolving needs in retirement. However, when combined as part of a comprehensive plan, reverse mortgage funds will combine to fund our ever-increasing longevity, and make aging in place possible for many.

Oh, and by the way – age 42, 31, 53, and 46. Just in case you were wondering.

Laurie

Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 or Laurie@MiddleburgReverse.com.

Alien Abductions, Anyone?

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton [506562]

This past week an article on reverse mortgage appeared in the online edition of CNNMoney, a publication with a solid history of well-written, well-researched financial news. Last week’s piece, however, entitled Reverse mortgages: Safer, but far from risk-free, is chock full of inaccuracies, muddled concepts, and inflammatory comments, and is altogether unworthy of an esteemed publication. Just about the only way the reporting could be worse was if it included interviews with victims of alien abductions.

The article’s subtitle reads, About 10% of reverse mortgage borrowers go into default. Apparently, author Les Christie failed to read the report from which this statistic was taken. Or is it rather that CNNMoney editorial staff jobs have been outsourced to piecework editors in India? Whichever the case, the inaccurate reporting is inexcusable.

Accurate information on FHA-insured reverse mortgages is not hard to come by – but it does require at least a minimum of fact-checking, and – gasp – a careful reading of the publicly-available congressional reverse mortgage audit.

If this blogpost were simply a rant about yet another sensationalistic slam aimed at reverse mortgage, it would not be worth the reading, much less the writing.

But here’s the thing: something far larger is at stake here, namely, the financial well-being of an already fearful, highly vulnerable sector – Americans heading into retirement and those already well into their retirement years.

With every inflammatory, factually-inaccurate, poorly-researched piece, seniors grow yet more fearful of a product that has a long track record of success when used as part of a long-term financial plan. Les Christie and CNNMoney do seniors no favor by presenting obsolete objections, inaccurate figures, and wrongly-interpreted statistics.

Reverse mortgage was never intended to meet every financial goal in retirement. However, it can create a federally-insured financial safety net, an extra financial “bucket,” to draw upon in the retirement years.

If you would like to learn more about how FHA-insured reverse mortgage may help meet your retirement goals – or would just like to talk – give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage. She can be reached at: 703-477-1183 or Laurie@MiddleburgReverse.com.

Guilty as Charged

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Retirement Planning, Reverse for Purchase, Reverse Mortgage
Laurie MacNaughton [506562]  © 2014

I could hear it in her voice, I could see it in her eyes – the fear, the sublimated guilt, the tears lurking just beneath her every word.

Her sin? Old age.

Her crime? The loss of her husband of 58 years. And, with his death went fully 50% of her household income.

And now a new challenge: she has suffered a stroke, and though her recovery is steady, it is slow, and the long-time family home is simply no longer appropriate.

I met with “Mrs. Jones” last night. Her darling middle-aged daughter joined us, and mentioned it was a realtor who had given them my name. After speaking with both mother and daughter it became clear just how good a call it was on the part of the realtor: Mrs. Jones needs out of this big house, and to get into a home appropriate to aging in place.

HECM for Purchase

HECM for Purchase (also known as Reverse for Purchase) is an FHA-insured home-purchase loan available to seniors aged 62 or older. The purchaser provides a down payment – often derived from the sale of the exit home – and the HECM for Purchase loan provides the rest of the purchase funds.

Punto. That’s is. That is the last mortgage payment the home buyer will make on that home until s/he permanently leaves the home. At that point the loan will be repaid from the proceeds of the sale, and the remaining equity will belong to the homeowner, or to the heirs.

Property taxes (if applicable), homeowners insurance, and routine upkeep of the home are still required.

Are you in a home too big, or with too much upkeep, or with too many stairs? Have your longtime neighbors moved, leaving you in a neighborhood you no longer recognize? Has traffic become such an ordeal you are afraid to leave your house?

Give me a call and let’s talk. Include your adult children on the conversation. And together, let’s explore your options. You may have far more than you know.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · Laurie@MiddleburgReverse.com

   Visit me on Facebook at www.facebook.com/MiddleburgReverseMortgage

Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN).

Jean Wasserman Denker – The Passing of an Era

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Reverse Mortgage

Laurie Denker MacNaughton

It’s the second anniversary of my mother’s passing. Though the pain is no longer fresh, in some ways the memories are more Technicolor than ever.

Like many young couples, Mother and Daddy were on a budget when they started out, so family outings often meant taking long drives through the Southern California hills. Gas was cheap, we kids were small, and Friday night Little League games hadn’t yet been invented, so we would grab pillows and pile in the car. Though there were favorite routes, the destination was not the point; the journey itself held the magic.

On these drives Mother and Daddy would break into song, singing in what to a child’s ear sounded like perfect harmony. Though I was still very small, wistfulness would drift over me as they sang I’m Going to Leave Old Texas Now, only to be brought back up to childhood buoyancy by Dance With the Dolly With a Hole in Her Stocking. Other than when digging holes in the rich California backyard soil, I cannot remember ever feeling happier as a preschooler than I did on those Friday night car rides.

I turned five the year we moved to Tucson. Often Mother would call us to the window to look at the breathtaking Santa Catalinas. “Look,” she would say. “Do you see how the mountains fade from blue to gray?” More times than I possibly could count she would grab a pencil and illustrate distance, tone, perspective, light and shading.

Mother was not good at everything – to this day I have about 100 undistributed fourth-grade school pictures as testament to her lack of hair-cutting skills. But there was nothing she wouldn’t try, and her stunning successes, based upon her breathtaking skillset, was nothing short of spectacular.

Many – indeed most – of my friends, never learned to sew; nor to embroider; set a formal table; discern sterling from plate, or Baldwin from look-alikes; build an open cook-fire; set a solar still; catch a snake; sketch a cityscape, landscape, eye, hand, or face; bind a book; bind a wound; bake a cake; change a tire; row a boat; feed a crowd of hundreds; write a poem; recite a soliloquy; fire a gun; shoot a bow; arrange a bouquet.

Not only could Mother do all this, and more; Mother could – and did – teach her children, and many others’ children, all this, and more.

My mother was far from perfect. She could be harsh. She could be relentlessly judgmental. She was often vexing. But she was one of the great souls of our age and truly, with her passing passed an era.

Laurie

Laurie Denker MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Southern Trust Mortgage. She can be reached at: 703-477-1183 or LMacNaughton@SouthernTrust.com

Soldiering Through: Men on the Front Lines of Caregiving

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton

When my firstborn was barely two she and her best friend, a little boy named Willoughby (really), spent the afternoon playing with an assortment of stuffed toys. While Willoughby practiced drop-kicking the animals against the wall, Jessica sat diapering them. When I fed them peanut butter sandwiches for lunch, Jessica nibbled hers into a rainbow; from his, Willoughby manufactured a gun.

Assertions of my feminist friends notwithstanding, as the mother of girls I firmly believe it is the easy province of a woman to care for the weak, the sick, the young, the aged. And, be it nurture or nature I think these tasks come harder to men. Thus, I have unqualified respect and admiration for what seems to me to be an increasing number of adult sons serving as primary caregivers for aged and infirm parents.

I am just returned from visiting my own mother whose agonizing last chapter is rapidly drawing to a close. Seated beside her, hour after hour, is my oldest brother. A retired Bell Labs particle physicist and former Ivy League professor, this caregiving role is not an easy fit. Yet there he sits, tending her unglamorous, repetitive, relentlessly-increasing needs. I took his place as much as possible during my stay, and invariably he headed for bed in an attempt to catch up on months’ worth of missed sleep.

For my part, when my mother slept I returned phone calls. Back-to-back I spoke with two men, one a prospering real estate broker who, weekends, travels a thousand miles each way to help with his mother’s care; I then spoke with an aging adult son serving as primary caregiver for his advanced elderly father. Not many days earlier an elder law attorney called me in reference to a client trying valiantly to honor his mother’s wish to age in place, despite her degenerative condition.

Then tonight, Thanksgiving night, as I drove home from the airport I took a call. An unspoken universe of sacrifice implicit in the adult son’s one statement hit home in a way he could scarcely imagine: “My concept of normality has gone to pot,” he said simply.

Nothing more need be said, my friend. Well am I aware of what you have forgone to care for your mother. And well I know how meager is the support for a man serving on the front lines in this role as primary caregiver.

Residential managed care has an indispensable function in today’s world. Professional in-home caregivers are invaluable, and hospice a godsend. But rarely are any of these the full solution to aging parents’ needs. It is appropriate that family cares for family – and there simply is no substitute for family.

So men – those of you who diaper and dress and swab and shower an aging parent, who mop and launder and scour and scrub until late into the night: you are an example to all of us privileged to know you.

And if you would like to talk about help financing your aging parents’ needs – or would just like to talk – give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS 506562] is a freelance writer and Reverse Mortgage Consultant at Middleburg Mortgage, a Division of Middleburg Bank. She can be reached at: 703-477-1183 or LMacNaughton@MiddleburgBank.com.

In-Flight Reflections Tapped Out on an iPhone

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton

Thank you, Michael P.

But maybe I should back up a bit.

This morning as scheduled my iPhone alarm went off at 3:00 AM. And as scheduled by 3:30 AM I was out the door and on my way to Baltimore Washington Airport. But that’s where the last of the morning’s plans went off as scheduled.

Even by DC standards traffic was oddly heavy for early morning, and by the time I pulled into BWI long-term parking I knew it was going to be close. Then, the terminal shuttle – which I could see from the bus stop – sat parked a good five minutes before making its rounds. However, there was still time to get my boarding pass and make it to the gate…if everything went smoothly. Which it didn’t.

For some reason every self-serve ticket kiosk was dedicated solely to members of the armed forces, meaning the backup at the service counter was tremendous – and it was not yet 5 AM.

To say I travel light doesn’t begin to tell the story: last year I packed in a book bag everything I needed for a three-week international trip. But not so for many of my co-travelers: this morning the French couple immediately in front of me apparently had prepared for the coming global clothing shortage, checking in a remarkable six suitcases – each. In front of them were first-time parents who clearly hadn’t yet learned just how few of those fancy baby accoutrements really are necessary. But finally I had my boarding pass and was free to race through the airport.

And then security.

Enough said on that front – other than the observation that if world peace ever breaks out, we should seriously consider repurposing TSA agents as speed-control personnel and altogether forego every other form of speed constraint.

By the time I finished re-robing and re-packing my electronics, I embarked on my morning’s second marathon with a growing sense of futility: by now nothing short of transformation into a photon was going to get me on my flight.

And I was right.

The plane still stood at the gate, and though the agent was able to walk onto the plane to speak with the attendant, she came back with a message I can only assume was supposed to convey something: the “final numbers were already entered.” I had missed my flight.

Over the years I have missed many flights. I have been stuck in DC traffic and gotten to the airport too late. I have been at JFK an hour early only to have my flight cancelled. I have been in international airports when gate changes were announced in English so heavily accented I couldn’t understand the announcement. I have been on Air France flights that were so late my entire connecting itinerary was useless. But never have I missed a flight when I stood in line praying my mother would live long enough for me to reroute my journey.

Now enter Michael P.

Or more precisely, thank you, Michael P, for not entering. I have your seat on American Airlines. And because I have your seat I will land a full hour earlier than I would have had I made my original flight.

I hope you’re ok – and that you have flexibility in your travel plans.

With my mother at the very end of life’s runway, life seems remarkably short. Certainly life is remarkably complex.

And sometimes, life is just remarkable.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com

You Thought it Couldn’t Happen – A New Home in Your Future

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse for Purchase, Reverse Mortgage
Laurie MacNaughton 11|2013

The numbers are compelling: according to the National Association of Realtors, last year over 26% of homes were sold to homebuyers over the age of 50. And as the peak bulge of the boomer generation approaches, this number is expected to rise dramatically until it makes up the largest homebuyer market in American history.

But here’s the thing: it’s this same cohort that has had the toughest time saving adequately for retirement. Many people automatically assume this group has been spendthrifty, careless about planning, poor at saving, in denial about aging, and overly optimistic about retirement costs. And to some extent this is true, especially if they are compared against their own parents, the highly thrifty members of the Greatest Generation.

However, there are many untold sides to this story. First, the boomer cohort was disproportionately hit by the Great Recession. Though fewer of those aged 50-62 lost their jobs than did 20-somethings, if laid off, older workers experienced a dramatically longer period of unemployment. As they are hired back, often it is for lower wages than they earned at their previous job. Further complicating their financials is that many in this group still have children at home – or in college.

But the really pricy bill comes due when boomers care for their aging parents. By the time most people are in their 60s, their parents are in their late 80s or early 90s. In many cases the parents long ago depleted their own savings and assets, and now look to their aging children for support. It is this multifaceted convergence of events that causes an almost unwinnable financial challenge.

So with this as a backdrop, a question I commonly get from aging boomers is, “Should we refinance the home we’re in, or should we buy something with less upkeep?”

Obviously I don’t know – but I do have quite a body of knowledge of what others have taken into consideration. Following is a starting point for things to consider:

  1. Is your existing home safe, including layout and accessibility to bedrooms, bathrooms, kitchen and laundry?
  2. Is the home the right configuration? How about size?
  3. Are you able to keep up with the yard and the household maintenance?
  4. Is the location still right, meaning are you close enough to family so they can check in on you?
  5. Have traffic patterns gotten dangerous?
  6. Are you close to doctors, shopping, amenities, recreation, and your house of worship?
  7. Do you still know your neighbors?
  8. Will this still be the right house in 10 years? How about in 15?

If you answer a significant number of these “no,” moving might be a logical consideration. However, for anyone who recently has applied for a home loan knows, lending laws and regulations have become akin to invasive surgery. And for those looking to retire, or who have already retired, securing a loan can be very, very difficult.

However, FHA’s seniors’-only HECM for Purchase was specifically designed with the retired – or soon to be retired – buyer in mind. While there are qualifications that must be met, they are not as stringent as those governing “forward” lending.

Another very beneficial element of HECM for Purchase is that you can buy your new home before you have sold your exit home. Not only does this get you into your new home in a timely fashion, but you now have time to market your exit home and wait for the next peak sales season to roll around before selling.

But perhaps best of all, rather than tying up a significant amount of your financial resources in the new house by doing an all-cash purchase, you bring to the table only a percentage of the purchase price, which allows you to keep liquid more of your savings, or more cash from the sale of your exit home.

If you have been thinking about moving and didn’t think it was a realistic possibility, give me a call and let’s talk. You may very well be delighted to learn you have a new home in your future.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com