Tag: reverse mortgage Fairfax

Don’t tell the kids

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Financial Planning, Laurie MacNaughton, Laurie McNaughton, Retirement Planning, Reverse Mortgage
Laurie MacNaughton © 2020

When she called Saturday I was pretty sure I knew what the conversation would involve.

“We’re both in our 80’s, my husband is four years into an Alzheimer’s diagnosis, and our kids live in Nevada. The biggest thing is our investments are getting low.” And then there was this: “But we don’t want our kids to know.”

We don’t want our kids to know. It’s one of the worst statements I hear in the course of my job.

A couple things about this. First, I’m a parent. I understand about not wanting to worry kids, adults though they may be. But I’m also a lender who frequently talks to adult kids worried about their parents.

Would you like to hear how that side of the conversation goes? It’s something like this: “My wife and I live in Nevada but my aging parents are in Virginia. We’re worried about their finances – but they won’t talk about money.”

The risk to adult kids is this: if you do not help parents with the solution, it may get to the point where you are the solution. And odds are good you’re not really the best solution. I have seen adult children quit their job to become a caregiver. I have seen tension in marriages, finances under strain, 401(k)s prematurely tapped. The risk to aging parents is that if your finances are deeply stressed by the time you involve your kids, it’s almost guaranteed they’re going to have to help.

Nobody is going to say the money conversation is anything other than awkward for many people. Talking about money is not fun. But talking about overdue bills is even less fun.

These are anxious times for many, and times may well continue to be anxious for many months to come. There is little we can do to eliminate stress caused by world events. However, there are steps you can take that may greatly reduce hardship, whether you’re an aging parent or the adult child of aging parents.

Three recommendations I often make are the following: first, awkward as it may be, talk to family. These conversations do not get easier over time, so just do it.

Second, pre-crisis, the homeowner should speak with a qualified financial planner, accountant, or elder law attorney who can help put together long-range plans.

Third, the homeowner should consider using the home as a source of retirement funding. Several options exist here, including selling the home and downsizing, renting out a portion of the home, or doing a reverse mortgage.

If you have questions about how you or one you love may benefit from a reverse mortgage, or if you would like contact information for an elder law attorney, accountant, or wealth manager, give me a call. I always love hearing from you.

 

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Shelter in the time of storm

by middleburgreverselady, 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 #506562] © 2020

With market uncertainty caused by current events, it can be reflexive to check investments and to wonder if the traditional 4% rule is sustainable. This “rule” refers to longstanding advice that each year 4% can be withdrawn from assets without running out of money. The problem with a volatile market is that 4% of a shrinking asset pool might not provide enough income to meet expenses.

This week I took a call came from a woman I had first spoken with months ago. “We always knew we would do a reverse mortgage,” she said. “We just thought the time wasn’t right. Now our investments are struggling and we need a buffer from the storm.” Indeed – couldn’t we all.

It’s not new news that a reverse mortgage can serve as safety net during market turbulence. In fact, longstanding research demonstrates that a reverse mortgage can relieve unsustainable drawdowns when retirement funds are under pressure. Some experts actually call a reverse mortgage a “buffer asset” due to the significant role it can play in wealth preservation.

Here are three things to remember about a reverse mortgage:

The first is that a reverse mortgage is a home equity loan. I could pretty much stop there and you would know more than most. However, it’s an equity loan with a few unique features. Most obviously, a reverse mortgage is not repaid on a monthly basis. Rather, it’s repaid on the back-end, in reverse, when the home is sold. Just like with any other home sale, once the loan is repaid all remaining equity belongs to the homeowner or the heirs.

Second, a reverse mortgage line of credit cannot be called due, canceled, or frozen. It’s established at the time of closing and it’s there for the homeowners’ use regardless of market conditions. This makes it a powerful hedge against economic turmoil, as the value of the credit line does not decrease even if housing values fall.

Third, the unused balance in a reverse mortgage line of credit actually grows larger over time. This little-known attribute can add significantly to the amount available in the line of credit.

The takeaway is this: a reverse mortgage can lessen pressure on investments and create an asset source outside the investment portfolio. This may give other assets time to recover lost value as markets stabilize.

If you would like to discuss how a reverse mortgage might benefit you or one you love, give me a call. I always love hearing from you.

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Remember When? Mortgage Debt and the Older Homeowner

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story
Laurie MacNaughton – July 7, 2015

Remember when paying off your mortgage before retirement was a thing? Remember? Now, barely 40% of homeowners aged 60-65 live in a paid-off home.

But remember when seventy was old? Today I know seventy-year-olds who have started second careers, who run marathons, or who take ten days off work to volunteer in health clinics in Kibera.

It’s just a different world we live in – different opportunities, different expectations, different needs.

But there are attendant challenges in this new world.

No matter how gifted, how fit, how determined, at some point most people either have to slow down or just plain want to. But here’s the thing: if you’re still paying on your home, the first fruits of your monthly income go right back out the door to pay the mortgage. Also, like everyone else, most people in their 60’s or 70’s saw steep investment losses during the recession, losses that are harder to recover the older you are.

Added to the mix are these facts: boomers, in general, had babies later, and many are still footing kids’ college tuitions in the years when previous generations were saving for retirement. People also relocate more often, and later in life, so by the time they retire many people haven’t lived in their home 30 years.

If we had a magic wand, most of us would get rid of our mortgage debt. If granted three wishes, we’d gain back what our 401k lost – and add to it a mound of gold. If we had a genie, we’d have her undo that adverse health event. But needless to say, most people will have to look to other solutions.

Last week I met with a retired medical doctor. In addition to running a thriving medical practice, he had taught at one of the nation’s preeminent universities – until he suffered a stroke three years ago. “I never thought I’d be in a position of worrying about money,” he said to me.

“I have a substantial amount of equity in my home, so I tried to get a line of credit to help with cash flow. But I was told I couldn’t qualify because I’m no longer working. I really didn’t see this coming.”

Fortunately, the loan officer at his bank understood reverse mortgages. She gave the retired doctor my name – and it looks like he’ll be able both to get rid of his monthly mortgage payment and establish a line of credit for use in the future.

“When [the loan officer] first said ‘reverse mortgage’ I just about had another stroke,” the doctor told me. “I really thought she was nuts, because I was under the impression the bank owned the house with a reverse mortgage.”

His comment was one I hear so often it made me want to print up a cue card. It would say the following:

No – the bank doesn’t own the house.                                                                                                                                No – you don’t have to move if you use up your line of credit.                                                                                             No – the kids don’t have to pay back the reverse mortgage.                                                                                              Yes – you can sell the home and move if you want to.                                                                                                      Yes – you can always call me even after your loan closes.

A reverse mortgage is a home equity loan for the years when having a monthly mortgage payment can be a back-breaker. It can be a miracle for adult children struggling to bankroll their parents’ longevity. It can make aging in place possible.

A reverse mortgage is not a fit for everyone – just as homeownership is not a fit for everyone.

But as I’ve said many times, 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-insured reverse mortgage might help during retirement, give me a call. I always love hearing from you.

Laurie

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