And the WINNER for Most Embarrassing Is…

What would be the most embarrassing thing for you to admit? Your weight? Your age? Your bank balance?
For most Americans, it’s none of these. It’s their credit score.

According to a new poll conducted by National Foundation for Credit Counseling, 37% of respondents nationwide indicate the element of their life they would least like divulged is their credit score. Next on the list of embarrassing secrets? Credit card debt.

That these two go together really shouldn’t come as any surprise, as they are often closely linked.

How Credit Scores Work

Credit card debt is one of the most highly-weighted factors in credit scores, and it works like this: think of a jar. That jar represents the limit on your credit card. When the jar is full, you have hit the max on your card. You have filled your jar with debt – and that’s not good. In fact, if your jar is more than 30% full of debt, you will start to see it significantly impact your credit score. And no one needs to tell you it’s hard to dig out from under credit card debt.

Good Advice Gone Bad

Many seniors have credit card debt. There’s no question about that. And many seniors are having a hard time managing that debt – there’s no question about that, either.

But here’s the place I think a lot of financial advice gets wacky – almost mean. When you ask seniors how they accrued so much debt, the answers rarely include lavish expenditures, exotic travel, or irresponsible habits. Rather, most tell stories of illness, unexpected home or auto repairs, or assistance to distressed family members. Often I work with leading-edge boomers taking care of advanced-elderly parents, causing a double draw-down on retirement savings. To preach a gospel of austerity to a widow struggling to pay off her husband’s final illness goes beyond uninformed thoughtlessness; this is rank insensitivity bordering on cruelty.

What are the Options?

In retirement, options often become limited by health, skill set, and available employment. Selling the home and moving in with family is indeed an option, and for some it is a good option. Selling the home and renting is not currently a good option for many, as rents are at historic highs. “Forward,” or traditional, lines of credit can, in certain cases, make sense. However, with a forward line of credit, the homeowner acquires yet another monthly payment, which renders the loan of dubious assistance.

For many, the way forward is going to include a many-faceted solution set, including a reverse mortgage. With a reverse mortgage, one of the potential options includes a line of credit that can be drawn against in emergencies, and which does not require a monthly repayment. The debt is repaid when the last person on title to the home permanently leaves the home.

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

 

Laurie MacNaughton [NMLS# 506562] ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage ∙ 8190 Stonewall Shops Square ∙ Gainesville, VA 20155 ∙ 703-477-1183 Direct ∙ Laurie@MiddleburgReverse.comwww.MiddleburgReverseLady.com

 

 

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

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

 

 

 

Wait, Wait…I Can Explain!

Do you ever do something, and even while you’re doing it you’re thinking, “This is stupid”?

I do this thing that drives me crazy, but I just can’t seem to stop myself…and it’s always when I’m already doing something that makes me look stupid. It’s like, “This is bad. Quick! Make it worse!”

Here’s an example: I’m in the parking lot of the grocery store, and I walk up to the wrong car. I have keyless entry – you know, one of these cars where the door opens if you have the key fob in your pocket, or, ladies, you have the fob in your purse. Only, if you have enough stuff in your purse, the car door doesn’t always open the first time you pull the handle.

But here’s the thing: if you’re trying to get into the wrong car, the door doesn’t open, either – so you try again. And by the time you realize it’s the wrong car, you’ve been tugging at the handle four or five times.

So here I am the other day, tugging at the door of the wrong car, I realize it’s the wrong car, and what do I do? I turn around – and here’s the part that drives me crazy – I feel compelled to explain myself to everyone in that parking lot….because we all know what everyone’s thinking:

“Hmmmm, middle-aged lady, end of business day, business suit, heels, grocery bags over her arm…I know! She’s trying to steal that Camry Hybrid. Is that the worst car thief ever, or what?”

No one’s thinking that – it kind of goes without saying that I have the wrong car – but I just can’t seem to help myself. I just have to explain.

Explaining our circumstances seems to be human nature, doesn’t it?

In my career as a reverse mortgage specialist I see the same thing nearly every day: retired, successful professionals come into my office and spend the first 15 minutes explaining how they’ve gotten to the place where they need to know more about reverse mortgage.

So what is going on here? Why do seniors seem to feel guilty when asking about a reverse mortgage?

And, what is going on in the bigger picture that so many seniors are realizing they need an extra retirement bucket?

The second question is the easier of the two: why so many seniors are asking about reverse mortgage. And here’s the deal: most people saved for retirement – not everyone, by any stretch, but most people saved what they could between raising and educating kids, buying a home, taking care of parents, and all the other things woven into the tapestry of life.

So seniors saved for retirement as best they could. But now they’re having to fund longevity…and that’s a whole other proposition.

Think of it this way: back when most people dropped dead five years into retirement, the numbers worked. You can save enough for a five-year life expectancy. But someone retiring today can reasonably expect to live another quarter century after retiring. The numbers don’t work – they simply don’t work. Most people simply cannot save enough during a 40-year career to fully fund their IRA, their 401-k, their annuity, and all the rest. The numbers just don’t work.

But the available data are prolific: if you can add just one more bucket, it makes the difference between making it and not making it financially in retirement.

Which leads me to the first question: why seniors seem to feel so guilty when asking about a reverse mortgage. I find this such a pity.

Many seniors simply have lived longer than they possibly could have known they would – longer than anyone could have known they would. There is no sin in this, there is no shame.

And yet – and yet, with every new slam piece published on reverse mortgage, with every misinformed, outdated, or just plain factually-incorrect article the sense of guilt and shame seniors feel when asking about reverse mortgage increases noticeably.

No one judges a senior when his IRA is depleted. No one judges a senior when her Social Security check does not cover monthly expenses. And yet, I read again and again in the news that it’s possible to deplete a reverse mortgage line of credit. Well, yes, it is. But it’s also possible to outlive one’s 401-k or IRA.

I have said many, many times: 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.

Give me a call and let’s talk. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and Reverse Mortgage Consultant with Middleburg Mortgage · 8190 Stonewall Shops Square · Gainesville, Virginia 20155 · 703-477-1183 Direct · Laurie@MiddleburgReverse.com 

Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN).
 
   Visit me on Facebook at http://www.facebook.com/MiddleburgReverseMortgage

 

 

Weekly Scenario – Reverse Mortgage and Divorce Settlements

I frequently find myself answering the same questions, so I have decided to begin a “Weekly Scenario” post. If you have a question, let me know and I’ll address it in a future “Weekly Scenario.”

Question:

I am going through a divorce and want to stay in the home where I raised my children. However, I don’t have enough money to pay off my ex-husband’s “portion of the marital share.” Can a reverse mortgage potentially help me?

Answer:

Yes. Here are some things to note:

1)    There are no restrictions on how you use the proceeds from a reverse mortgage. You may indeed use the proceeds to pay the portion of the marital share due your ex-husband.

2)    Under today’s guidelines, to make a reverse mortgage work the homeowner must have a minimum of approximately 50% equity in the home. However, depending upon the terms of your Property Settlement Agreement you might need to have a home that currently has a small outstanding “forward” (traditional) mortgage.

3)    Many family law attorneys are not familiar with the reverse mortgage program. It may be of benefit for you to ask your attorney to speak directly with your reverse mortgage loan officer.

If you have questions regarding reverse mortgage, give me a call or shoot me an email. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage · 8190 Stonewall Shops Square · Gainesville, Virginia 20155 · 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), Florida (FL)

 

 

Never Read the Comments

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

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.

Contemplations of a Crummy Magician

I stood waving my hands in front of the paper towel dispenser like some feeble magician trying to conjure paper towels, when the thought occurred to me: I frankly can’t remember the last time I heard someone complain about the rigors of pulling a paper towel from its dispenser. Electric paper towel dispensers solve a problem that never was a problem.

This got me to thinking: how many other fixes fix problems that aren’t problems? And if you can believe it, I actually came up with several – but that’s a different commentary altogether. It’s the corollary that hit home.

Finite choices

Remember functions? Those funky f(x) equations in math class? Basically, a function says if I do this, I get that – one solution for each problem.

Fortunately, most day-to-day issues have many solutions. But here’s the thing: the farther one travels into retirement, the more limited options become.

Most of us are going to need additional options if we’re going to enjoy what experts call “financial survival in retirement.” Not a cool term…but a very real problem.

Larger solution sets

In what I consider one of the most encouraging transformations in the history of the reverse mortgage product, I am seeing a regular stream of clients referred from the financial planning community. Seniors seeking informed input are turning to an informed source, namely their financial professional. Of course, I’ll never know how many financial professionals steer their senior clients away from reverse mortgage – but I do know an increasing number tell me they view reverse mortgage as a legitimate financial tool when used in concert with a comprehensive financial plan.

Financial professionals refer clients to me well before catastrophe strikes, before clients’ means have dwindled, before financial limits are reached – before the financial boat plunges over the cliff of desperation.

Planners understand that more financial buckets equal a better outcome – and they understand that a reverse mortgage is simply an additional bucket.

Real solutions for real life

I hear the same stories everyone else in the financial industry hears: seniors unable to return to full-time employment. A spouse lost, and the resulting 50% drop in income. A catastrophic event – or a chronic condition that became financially catastrophic. Or, simply, too much life left at the end of the money.

A real problem meets a real solution

Unlike the motion-detecting paper towel dispenser, reverse mortgage is a real solution to a real problem.  When put in place preemptively, before it’s just a crisis management tool, reverse mortgage can be part of a sound retirement plan.

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.