Reverse Mortgages – Why So Scary?

Laurie MacNaughton ©2016

“Why are these things so scary?” That was how the man on the phone led off.

I had to laugh – not at the question, because, honestly, we’ve all been there. No, I had to laugh at his frankness.

Why are they scary? What is it about a reverse mortgage that causes significant numbers of people to dive for cover when they hear the very term?

There are many ways to answer this, but basically it boils down to this: it used to be a bad product. There was poor regulation and there were problems with some of the lending guidelines. And, frankly, there were some bad characters in the field of reverse mortgage lending.

So now you’re expecting me to say all those things have been fixed and it’s a good product.

That’s not what I’m going to say. I’m going to say all those things have been fixed and it’s a great product.

I’ve been in this field for years now, and have watched reverse mortgages perform just as intended: they create a financial buffer, they provide funds for in-home care, they extinguish income-sapping “forward” mortgage payments. And increasingly often I see them relieve aging adult children from draining their own retirement savings as they struggle to bankroll an advanced-elderly parent’s longevity.

A reverse mortgage is not a fit for everyone – no one financial product is. 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 financing retirement.

If you are – or someone you know is – thinking about a reverse mortgage, now is a really good time.

If you’d like more information on how a reverse mortgage may help you or someone you know achieve retirement goals, give me a call. I always love hearing from you.

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Harvard Report Points to Dramatic Senior Housing Shortage

Laurie MacNaughton ©2016

Ok, so we’re not exactly dealing with breaking news when we see Harvard’s housing research team reporting a shortage of senior-appropriate housing.

In fact, everywhere we look we see evidence of the shortage in senior-appropriate housing: Warrenton, Leesburg, Middleburg, Reston, Oakton, Arlington – pretty much everywhere you look in the greater D.C. Area you see new construction. But many of the new homes are multilevel “starter castles”…as I call them.

Harvard’s Center for Housing Policy study, titled “Housing an Aging Population,” backs up observations with numbers, and they’re a bummer.

Among other things, the report documents:

Within the next couple decades the population aged 65 and older will increase 120 percent. Over the same period the number of our oldest Americans, those aged 85 and older, will increase more than 200 percent.

Wowzers, right? But here’s where the report gets really scary:

  • The need for appropriate housing will radically outpace the availability of appropriate homes.
  • One in four households aged 85 and older spend at least half their income on housing.
  • Housing challenges are particularly severe for older adults with very low incomes – and most household incomes decline after the age of 85.

The takeaway? Pretty straightforward:

The number of older adults is rising. The need for affordable senior-appropriate housing is rising. But affordable options are not rising.

Not everyone can age in place. That’s just the hard truth. However, for those whose can age in place, everyone involved benefits. But we need to urge our communities to support construction of appropriate housing.

We can do this.

It’s just a matter of doing it.

Laurie

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This You Can Count On: Things Fall Apart

Laurie Denker MacNaughton

Here’s a phrase I haven’t thought about in years: critical system redundancy.

I’ve been aware of the term – along with other phrases like “gyroscopic effect” and “linear actuator” – since I was about three years old, the consequence of having a rocket scientist for a father. The reason I haven’t thought about the term for a very long time is that it just doesn’t come up that often in the world of Reverse Mortgage lending.

But when speaking with a friend today “critical system redundancy” came to mind, and despite the uncommon nature of the term itself, the concept is very common.

In a nutshell, here’s the idea: if you have something essential to operations, you’d better make darn sure there’s a backup. This is equally true when talking about the ruler of a sovereign nation, Pampers in the diaper bag, a spare tire in the trunk…or retirement finances.

Over the years I’ve met couples who didn’t save enough for retirement. But I’ve never met anyone who purposely didn’t save enough. And only rarely have I met someone who burned through retirement savings in foolish spending.

Rather, this is what I see: homeowners who have reached the age experts call “advanced elderly.” Many of these homeowners once had extensive savings, but simply have outlived their reserves.

I see homeowners whose adverse health event consumed savings, or whose late spouse suffered a condition that left the survivor with substantial debt.

I meet individuals who were laid off at age 60, aging parents raising grandchildren, retired women newly divorced, couples in need of home healthcare.

But I also meet the planners – the couples who know things fall apart, issues will eventually arise, that days of evil may come upon us as a thief in the night, as the Psalmist says.

These are homeowners who originate a reverse mortgage before a need arises, and who hold their reverse mortgage in reserve in order to take full advantage of the growth rate collecting in their line of credit.

A reverse mortgage is a tool, not a miracle. There is still going to have to be self-discipline. Retirees are still going to have to practice economy. That’s just the way it is for most of us. But that’s a far cry from lying awake nights worrying whether there is going to be money enough to last the month.

As I’ve said many times, in retirement 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 financial independence in retirement.

In fact, you can think of a reverse mortgage as critical system redundancy for retirement finances.

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

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Wouldn’t it be funny…

Wouldn’t it be funny – really funny – if today you ran into a person who dogmatically warned you not to drive too far lest you fall off the edge of the world? Or taught the sun revolves around the earth? Or that babies come from kissing?

Most of us never had a chance to believe these things, because we were taught the truth at the same time we learned the fallacy had once existed.

But how about this? With a reverse mortgage, the bank gets the house and the homeowner is never allowed to move from the home. I heard that one today. Today.

Did you know these are as false as is the concept of falling off the edge of the world?

Watch my little video…and let me know what you think. I always love hearing from you.

Three Common Reverse Mortgage Myths

Laurie

Laurie MacNaughton, President’s Club, is a free lance writer and a Reverse Mortgage Specialist with Southern Trust Mortgage. She can be reached at 703-477-1183, or LMacNaughton@SouthernTrust.com


 

 

 

FHA Overhauls Condominium Approval Guidelines

After years of talk about fixing a truly messed-up process, Friday the Federal Housing Administration (FHA) announced updated Condo Approval Guidelines.

Why is this such a big deal?

Mostly because of this: one of the stated goals of the overhaul is to increase the number of condominium projects eligible for FHA loans – including FHA Reverse Mortgages. The new rules are effective immediately, and are intended to streamline the FHA certification process.

This is big, big news for anyone involved senior housing – homebuyers wanting to purchase a condo, condo owners wanting to sell, realtors, lenders.

Give me a call if you’ve got questions. I always love hearing from you!

Laurie

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

Do Rising Interest Rates Impact a Reverse Mortgage?

It was the last call I took last night and the first call I took this morning.

Basically, both homeowners asked the same question: “Will a rate hike impact how much I can get with a reverse mortgage?”

In a word? Yes.

And here’s why: the percentage of home equity you qualify for with a reverse mortgage is determined by the youngest title-holder’s age and the prevailing interest rate. If rates go up, the percentage of available equity goes down.

We have been in a stable rate environment since 2006, characterized by miniscule rate fluctuations. But following Friday’s strong jobs report, the Federal Reserve has indicated a December rate hike is a “live possibility.”

The near-certain rate hike is not a reason to panic. But it is something to note, and it’s important to know that it will, indeed, be reflected in funds available through a reverse mortgage.

A reverse mortgage 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 are – or someone you know is – thinking about a reverse mortgage, now is a really good time.

If you’d like more information on how a reverse mortgage may help achieve your retirement goals, 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

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Yes You CAN Buy a Home With a Reverse Mortgage

I got quite a humorous call from a darling client who purchased a home using a Reverse Mortgage.

I’ll call her Mia – and I need to mention she immigrated here from overseas and speaks with an accent.

So here’s what Mia told me: When she tells people she bought her home using a Reverse Mortgage, and that she’ll never have a monthly mortgage payment, they tell her she didn’t really understand the transaction. Never mind that Mia’s adult daughter, American born and raised – and a highly successful realtor in Northern Virginia – walked through every step of the transaction with Mia. Never mind that Mia has a PhD in applied physics. Because Mia’s friends don’t know about Reverse for Purchase, Mia must be wrong.

Well, Mia isn’t wrong. But it is true that many people don’t know about Reverse for Purchase.

And because of that, I’ve put together a short video on how it works.

Give me a call with questions. I always love hearing from you!

Laurie

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