Tag: FHA HECM

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Difference Between a HELOC and a Reverse Mortgage

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

Laurie Denker MacNaughton © 2025

What is the difference between a reverse mortgage and a home equity line of credit (HELOC)?

Traditional equity lines, of course, have a required monthly mortgage payment, and the more you borrow, the higher the month-end mortgage payment becomes. Also, most HELOCs have a 10- or a 15-year term, meaning the full balance is due at the end of the term. If the home falls in value during the life of the loan, the full balance is still due.

A reverse mortgage line of credit does not have a monthly repayment obligation. Rather, the mortgage is repaid on the back end, in reverse, when the last title holder permanently leaves the home. Most commonly, the heirs sell the home and the loan is repaid at the time of closing. However, the heirs can refinance or repay the loan and keep the home.

One of the most important things to note with a reverse mortgage is that if the home falls in value there is never a deficiency due. This means that if the loan is underwater at the time it’s sold, the home will repay what it can, and any shortfall will be covered by the FHA mortgage insurance.

A reverse mortgage line of credit can be a transformative retirement resource, and may provide one of the biggest retirement buckets in a homeowner’s portfolio.

If you’d like to see if a reverse mortgage may be a fit for you – or for someone you love – give me a call. I always love hearing from you!

It’s a big down payment. But bigger than WHAT?

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Laurie Denker MacNaughton © 2025

I know this is a bit weightier than usual—but this conversation was SO profound that it needs recounting.

Brenda and her husband were due to retire in late 2025, and they had just downsized into a beautiful new home that was perfect for aging in place.

Four weeks after moving in Brenda’s husband died, suddenly and unexpectedly. Six weeks after THAT Brenda had a massive stroke and spent weeks in the hospital and then in rehab. Now she is deeply in debt and behind on her new “forward” mortgage.

Ironically, when I spoke to Brenda today she said she and her husband had asked their loan officer about using a Reverse for Purchase home loan to buy their new home.

The loan offer’s comment?

“You don’t want to do a Reverse for Purchase. The down payment is big.”

Big? Bigger than WHAT?

Bigger than NEVER falling behind on monthly mortgage payments? Bigger than being able to live in her own home—even after the loss of a spouse? Bigger than keeping her home even though she has had to retire ahead of schedule?

Brenda may have missed the opportunity to live in this home. I don’t know—but I do know her current plight was totally avoidable. I referred her to legal counsel in the hope something may work out.

Why am I recounting this really sad story?

Because it’s life. And because “life is what happens while you’re making other plans.”

A Reverse Mortgage is a home loan. But sometimes a Reverse Mortgage is not JUST a home loan. Sometimes it changes an aging homeowner’s entire future.

If you would like to discuss your plans—or the plans of one you love—give me a call. I always love hearing from you.

Blessings,

Laurie

Another loan officer said I don’t qualify for a home loan (or, Why you might qualify for Reverse Mortgage)

by ReverseLady, posted in Divorce, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Property Tax, Retirement Planning, Reverse for Purchase, Reverse Mortgage

Laurie Denker MacNaughton © 2025

If you are a homeowner aged 62 or older and are trying to refinance the home you’re in or buy a new home, chances are you know the drill: your income is fixed, savings may be limited, and your debt may be relatively high compared to your income. In other words, you are having a hard time getting a home loan.

So why, then, with the exact same financial profile, might you qualify for a Reverse Mortgage after you were turned down by other lenders?

Here’s why:

First, there’s never a mandatory monthly mortgage payment. That right there makes a huge difference. Take just a second and think about what a difference it would make if you had NO required monthly mortgage payment. You are always allowed to make a payment if you choose to do so.

Second, to qualify you only need a monthly residual income of $529 for a single person, and $886 for a couple. “Residual income” means the amount of money you have left over at month’s end after we account for your property taxes, homeowner’s insurance, HOA dues or condo dues (if applicable), and the minimum amount due each month on your credit accounts.

Be certain to note that no matter what kind of home loan you have – or even if you have no home loan at all – property taxes and homeowner’s insurance are still a monthly expense. Many aging homeowners have some kind of property tax waiver, and a reverse mortgage does not impact eligibility.

Even though this loan is specifically designed for homeowners and homebuyers aged 62 and older, not everyone is going to qualify. However, millions of Americans have chosen to use a reverse mortgage to either refinance the home they’re in or to purchase their aging-in-place home due to the financial flexibility it may provide.

If you would like to talk about whether a reverse mortgage might be a fit for your retirement plans, give me a call – I always love hearing from you!

Laurie

You’re not as pretty as you used to be

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

Laurie MacNaughton ©2022

My client sat down, looked at my business card, looked at me and said, “You’re not as pretty as you used to be.”

Yup. That happened.

I laughed and said, “You’re right – that’s an older picture. I need to get new cards.”

After his comment, for the millionth time I had to reflect on the weirdness of aging.

Because aging is weird. Aging is confusing. And, frankly, aging can be kind of scary. Add money concerns to the mix and aging can be…really scary.

Many clients tell me they’re concerned – or even outright scared – about money. This concern, of course, is why they’re exploring a reverse mortgage in the first place.

This said, it would be a misconception to paint all my clients with one broad brush. Truth is there are many reasons homeowners look into a reverse mortgage – but there are roughly three categories of enquirers.

The first is a group I call the “pre-need planners.” People realize their income, savings, and investments are likely not to be sufficient as they age, and they’re looking for a tax-free source of liquidity for future use.

The second reason is debt. Often this debt was driven by a health emergency, and uncovered expenses were paid with credit cards. Now the crisis is past, and they’re left struggling with high-interest payments.

The third reason is in-home healthcare. These costs can be breathtakingly high, and it’s not unusual to see couples paying $22,000 per month for care. $22,000. Per month. Many of these clients went into retirement with hundreds of thousands in savings, but have simply outlived their money.

Many past clients have called to say their reverse mortgage has been a “miracle.” As blessed as I am to hear this, a reverse mortgage is not a miracle. A reverse mortgage is… well… a mortgage. As such, it will be repaid.

But rather than being repaid on a monthly basis, the loan is repaid on the back end, in reverse. This means homeowners can use their equity without picking up a monthly mortgage payment. The impact of having a tax-free “bucket” to draw on can be truly profound.

If your client, friend, or loved one would like to explore how a reverse mortgage may contribute to their financial wellbeing in retirement, give me a call. I always love hearing from you.

Oh, and that old business card? There’s a new one in the works.

Funding the space between end of health and end of life

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

Laurie MacNaughton © 2022

It’s called health span – and though I only recently became aware of the term, turns out…not a new idea.

This odd-sounding term refers to how long one’s impairment-free health lasts. Some experts refer to this as “healthy life years,” and it is a concept separate from lifespan. What makes this topic significant is that for many older adults there is a years’-long gap between the end of health and the end of life.

Though there isn’t (yet?) a succinct term for it, for many there is another gap – a “finance gap.” It can be summed up simply as the years of life left once the money has run out – and often this chapter of life is accompanied by ever-increasing care costs.

So how do you fund that gap, the gap between the end of health and the end of life? Where does one turn for money once health is declining and finances are depleted?

If you’re very lucky, your adult kids can help. However, rarely is this the best option as that means the kids are using dollars they should be saving for their own retirement. Also, monies gifted to parents typically are not tax deductible by the gifter, and in some circumstances gift money may imperil a parent’s benefits.  

Though it’s an easy default position to judge those whose finances have grown thin, it’s not fair: when today’s retirees started working, lifespans were notably shorter. While it’s entirely possible to work 40 years and save enough for 5 years of retirement, it’s a whole other proposition to save enough for 25 or 30 years of retirement. And, people now routinely live for years with complex medical conditions that once were quickly fatal.

Standard recommendations to improve finances include sticking to a budget, taking a part-time job, and by becoming a “life-long saver,” meaning putting a small amount by each month. But these measures often are impossible once a serious health condition arises.

This is where a reverse mortgage can be a true lifesaver. A reverse mortgage is a seniors’-only home equity line of credit that is repaid when the last titleholder permanently leaves the home; all remaining equity goes to the homeowner, the heirs, or the estate.

Rarely will a reverse mortgage be the whole solution. However, a reverse mortgage can be a significant part of the solution.

This much is certain: none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), a pension, or savings – or a reverse mortgage. But when added together, all these can contribute to financial longevity.

If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.

Rarely is a problem too large

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

Laurie MacNaughton © 2021

It looked like it was heading for a bad outcome: Robert sold his mother’s home and placed her in a care facility.

The problem? Mom was on Medicaid, and her formerly exempt asset was now quite a large countable asset, which spelled big trouble for her care options.

Fortunately, Robert picked up the phone and called an elder law attorney, who listed buying another home among potential cures.

Because Reverse for Purchase has notably easier qualification guidelines, Robert’s mother qualified even on her limited income. And…yesterday she closed on a lovely new home. She is scheduled to move in shortly before Christmas.

Rarely in life is a problem too large. More often, solution sets are too small. In this case, Reverse for Purchase was the perfect fit for a problem that had few other solutions.

If someone you know is in need of options, give me a call. I always love hearing from you!

Forbearance-to-Foreclosure Pipeline

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Property Tax, Retirement Planning, Reverse Mortgage

Laurie MacNaughton © 2021

She’s 78 years old.

She’s 78 years old and heading into foreclosure.

How did she get here? How the HELL did she get here?

A year ago, as allowed for under the CARES Act, she put her home into forbearance. Now one year on she’s newly widowed, meaning she’s got half the income and all the debt, and her home is coming out of forbearance in just a few weeks.

According to correspondence from her mortgage company, she also has a $69,000 lump sum due on her existing mortgage come September 1. If she cannot come up with that amount, per her mortgage company, her home is headed toward foreclosure. She has tried to refinance both with her current lender and with several other lenders.

But here’s the thing: it can be very difficult to refinance if you are not currently making payments. This means many thousands of our seniors may soon be in dire distress.

So back to our 78-year-old.

This past week her banker mentioned the possibility of refinancing using a reverse mortgage.

To answer your question: yes.

Yes I can qualify her.

Here’s why: with a reverse mortgage she does not have to have income enough to make monthly mortgage payments…because with a reverse mortgage there is never a monthly mortgage payment required. Rather, the mortgage will be repaid on the back end – in reverse – when the home is sold. All remaining equity belongs to the homeowner, the heirs, or the estate.

Because homeowners still own their home, they continue to pay homeowner’s insurance, property taxes (unless tax-exempt), and HOA or condo dues, if applicable.

We may well be in the calm before the storm. But our older homeowners currently in forbearance do not have to lose their homes if they can refinance using a reverse mortgage.

Please, please be proactive in asking the hard questions of your loved ones currently in forbearance. You know, as do I, that many older homeowners are not comfortable asking for help – until they’re out of all options they know to pursue.

Do please pass this message on to lenders, bankers, planners, attorneys – anyone in your life who deals with older homeowners.

And do call at any time if you have a client, friend, or family member aged 62 or older who wants to talk. I’m always available.

Let’s talk about the “F” word

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse Mortgage
Laurie MacNaughton [NMLS ID#506562] © 2020

Forbearance. It’s the hot topic of the day. It may also prove catastrophic for some homeowners who haven’t read the fine print – if they can even find fine print to read.

Social media posts state in emphatic terms, “Congress gives free money!” “Mortgage holiday!” “Don’t pay your rent!” In a time of uncertainty it feels good to think those in charge are all-wise and all-knowing, that they are looking out for us, that they have our best interests in mind. But it is well to remember the saying, “Rumor circles the world while truth is still lacing on its shoes.”

From the outset I want to make clear: if it comes down to feeding your family or making your mortgage payment, feed your family. If you truly must, ask your mortgage servicer for forbearance. Just don’t imagine for one moment your mortgage payment was forgiven, that it disappeared, or that there will be no long-term consequences.

Which leads to my second point. To date there has been little guidance regarding penalties for forbearance. But as a federally-licensed lender I can tell you this: it is highly unlikely there will be no credit implications for missed payments. Some credit blemishes last a very long time, and mortgage lates can dog homeowners’ feet for years to come.

The likeliest forbearance scenario is that if you miss three months’ worth of payments, all four payments will be due in month four. Let’s say your mortgage payment is $2,000, and you engage in a “mortgage holiday” all three months. Now you owe $8,000 in one lump sum, and you’ve just gone back to work. This would be nearly impossible for most Americans under the best of circumstances, let alone current circumstances when many have been unpaid for weeks. I fear, I deeply fear, we are going to see a foreclosure crisis that makes 2009 pale in comparison.

The punchline is this: if you can pay your mortgage, pay your mortgage. If you can only make a partial payment, call your loan servicer to see if they will accept a partial payment. If you truly cannot pay, bear in mind there will be consequences.

One last word to homeowners aged 62 or older: this time may be the right time to look more deeply into a reverse mortgage. An FHA-insured reverse mortgage is far different than most people think. You do retain title, and the home remains yours until you or your heirs sell it. The loan is not repaid on a monthly basis, but rather in reverse on the back end when the home is sold. All retained equity belongs to you or to your heirs.

Because there is never a monthly mortgage payment due, there is nothing to fall behind on when finances are tight. The FHA-insured reverse mortgage is not exotic, nor mysterious, nor even complex. It can, however, be a financial safety net when life becomes unpredictable.

Be well, stay safe, and if you have questions, give me a call. I always love hearing from you.

When Ill-Conceived Rules Go Bad

by ReverseLady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Laurie MacNaughton, Laurie McNaughton, Reverse Mortgage

Laurie MacNaughton ©2016

For nearly thirty years FHA’s reverse mortgage program has enjoyed tremendous success in making a way forward for aging homeowners to remain in their own homes. But just like any other loan program, over time guidelines needed to change to reflect evolving realties. In the case of reverse mortgages this included cutting back on available funds to accommodate ever-lengthening life expectancies.

After the housing crisis additional major changes were made to the program, including requiring that every reverse mortgage applicant pass a federal “financial assessment.” This was done to protect the FHA mortgage insurance fund, and to ensure the program’s long-term viability.

Nationally, numbers reflect the fact that some borrowers have indeed failed to qualify under the assessment guidelines – and that may have been necessary.

But now another round of changes is being considered. In addition to raising the bar yet higher, the proposed rules appear plain ill-conceived.

The most problematic of the proposed new rules may be including utilities in the financial assessment, “if failure to pay…utilities would result in a lien on the property.”

A couple things here.

First, what unpaid bill doesn’t run the risk of becoming a lien? I have seen hospital liens. I have seen homeowner association liens. I have seen eye-doctor liens. Why doesn’t FHA just say, “If you’re an aging homeowner and could potentially fall behind on future bills, start packing now”?

Second, there are many, many housing-assistance programs. A quick Google search returns references to hundreds of programs, some federal, some state-run, some private, and many which combine several funding sources.

But most of them have maximum income restrictions, and many, including some of HUD’s own affordable housing programs, don’t kick in until income is 60% below the regional average.

By contrast, as guidelines currently stand, to qualify for a reverse mortgage that enables homeowners to remain in their own home, combined homeowner’s insurance and property taxes are not supposed to exceed 10% of the homeowners’ income (HECM Financial Assessment and Property Charge Guide, §3.98).

So what happens if utilities are now included in that 10%?

Here’s what could happen: fewer homeowners could qualify. And here’s the thing: there is a really big gap between 10% of one’s income going to property taxes and insurance, and financially being in the bottom 30% of one’s region. So where are our aging who fall into the donut hole supposed to go?

I honestly don’t think HUD is trying to turn homeownership into a perk available just to the “welderly,” the wealthiest of our aging homeowners.

But advertently or inadvertently, that certainly looks like what they’re proposing.

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The Breathtaking Irony

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

Laurie MacNaughton ©2016

It wasn’t yet noon, but already I had had the same conversation with two separate homeowners:

“It’s not that you have insufficient income; it’s that the first fruits of your income are going right back out the door to pay your home mortgage.”

“It’s like you know me,” the caller said.

Know you? No.

Intimately know your situation? Absolutely. I see it every day.

It boils down to this: retirement + mortgage payment = not a good combo for many older homeowners.

Nationally, most homeowners of retirement age owe nothing on their home by the time they retire. In the greater Washington, D.C. area, however, that is less likely to be true because many homeowners moved to the area as consultants after spending much of their successful career elsewhere. This means many homeowners go into retirement with years yet to go on their mortgage. An alternative – but common – scenario is that homeowners paid cash for their home, and now have much of their net worth tied up in a pricy, illiquid asset.

And the breathtaking irony is this: the same gifts and skill packages that enable homeowners to work into later life can also set them up to falter financially if health fails abruptly and catastrophically, or if any one of life’s many other vagaries ensue.

Back to this morning’s conversation: this homeowner, indeed a consultant, has a home conservatively valued at $1,000,000. He and his wife are in their mid-70’s, but still have 15 years to go on their mortgage. His health is still robust, but his wife was recently diagnosed with cancer. Their fear is they will encounter uncovered medical costs that will consume their investments. It was their financial advisor who suggested they look into a reverse mortgage in order to free themselves of their monthly mortgage payment.

Is a reverse mortgage a fit for everyone? Of course not. No financial product is.

Is a reverse mortgage going to play a part in the long-term financial wellbeing of many retiring – or retired – homeowners? Absolutely.

If you have a family member, client, or colleague who would benefit from knowing more about an FHA-insured reverse mortgage, give me a call.

I always love hearing from you.

And…

Check out my various YouTube videos. Just click the link, or google Laurie MacNaughton YouTube.

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