No one can whistle a symphony

Laurie Denker MacNaughton © 2018

Put a bunch of experience in a room and you’re going to get a good result, right?

Not even close.

This morning I read an interesting study: when surgeons are with a familiar team, outcomes are good. When the same surgeons are with an unfamiliar team, outcomes are…not so good.

The same holds true in sports – some teams with great players cannot get it together, while others achieve magical results with less stellar athletes.

And another sector studied? Financial services. Yup – financial services.

Turns out, team dynamics are hugely important. No amount of experience can replace the “magic” of an established, well-functioning team.

A few days ago I had a closing with a client whose reverse mortgage application had very big issues. In fact, he had been told by another lender he did not qualify. How did our team get him across the finish line?

It wasn’t just experience, though we have lots. Much of our success lay in knowing whom to turn to for what.

Reverse mortgage is a unique product designed to help meet financial needs in retirement. But there can be difficulties: homeowners may have several goals to consider. Extended family often has detailed questions. Online information can be outdated, uninformed, or outright wrong.

I would love to talk with you about how our reverse mortgage team may help you meet your retirement goals. Because as the saying goes, “No one can whistle a symphony. It takes a whole orchestra.”

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Did you know?

Did you know the average reverse mortgage borrower is not in financial distress?

Rather, the typical person doing a reverse mortgage is the retiring boomer who watched a parent’s financial situation later in life and is determined to avoid a financial crunch down the road.

And did you know there are two “flavors” of reverse mortgage, a refinance and a purchase?

Typically, the homeowner doing a reverse mortgage refinance is the baby boomer putting together a long-range financial plan.  The homebuyer using a reverse for purchase is looking to buy a home without pinning down a huge chunk of cash or taking on a new 30-year mortgage during retirement.

A reverse mortgage is not mysterious, nor exotic, nor any more complex than any other loan. It is simply a home loan repaid when the last title-holder permanently vacates the property.

So if this looks like it fits your retirement goals, or the goals of someone you love, give me a call. I always love hearing from you.

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Kelly Ridings Sings With His Mother

Kelly Ridings grew up singing hymns with his mother. She now has Alzheimer’s, but her songs remain – listen to this amazing mother and son sing a duet:

The Heart Sings On

 

Can a reverse mortgage create a financial safety net?

Laurie MacNaughton © 2018

Can a reverse mortgage create a financial safety net in retirement?

In a word, yes.

This morning I received a call from a wealth manager who led off by saying he wasn’t “that familiar with reverse mortgages.” He specifically wanted to know whether a reverse mortgage could offer retirement-aged clients a measure of security during market fluctuations.

Here was my answer: the most familiar “flavor” of reverse mortgage is the line of credit. It’s an equity line that is repaid when the last person on title permanently vacates the home. Once the home is no longer the primary residence, typically it is sold and the loan is repaid; the homeowner, heirs, or estate get the remaining equity. End of story. No mystery here, nothing “too good to be true.”

Many wealth managers routinely recommend traditional equity lines. However, with a traditional line of credit, once homeowners draw funds they then have a monthly mortgage payment due. Because the retirement years can be a time when access to liquidity is crucially important, a monthly mortgage payment can create an increasingly unstable financial environment.

A reverse mortgage line of credit does not have a monthly repayment obligation. This means that if homeowners need a cash infusion, they do not pick up a monthly mortgage payment. Furthermore, the unused portion of a reverse mortgage line of credit grows larger over time, making more funds available for future use.

As is the case with other homeownership, property taxes, homeowner’s insurance, and home repairs must be kept current, and if there are condo dues or a homeowner’s association, fees must be paid on time.

The FHA-insured reverse mortgage is not exotic, mysterious, nor even particularly complex. It can be, however, a helpful financial safety net when life becomes unpredictable.

For more information on reverse mortgage, give me a call. I always love hearing from you.

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Market volatility and reverse mortgage

Laurie MacNaughton © 2018

If you’re even a casual market observer, Monday’s financial news grabbed your attention as the Dow plunged 1175 points, the biggest point drop in history.

As a result of the market turbulence, the first call I took Tuesday went like this: “In light of the market crash, should I do a reverse mortgage?”

So…a couple things here.

First, and perhaps most importantly, a loan officer is not the same thing as a financial planner, wealth manager, nor accountant; most loan officers are neither estate attorneys nor CPAs. Even if your particular loan officer does carry one or more of these designations, he or she should not be dispensing advice across disciplines, as conflicts of interest might quickly become an issue.

Second, even though 1175 is an uncomfortably large number, percentage-wise it’s not anywhere near a big enough drop to qualify as a market “crash” by any reasonable definition.

Third – and I want to emphasize this – if a reverse mortgage was a good fit before a market plunge, it’s a good fit following a market plunge. If it was a poor fit before a drop, it may well continue to be a poor fit. And for those urgent reverse mortgage sales pitches? It’s always a good idea to listen to a “sky-is-falling” message with a healthy measure of skepticism.

But this topic does suggest a very real question, namely what are some factors that make a reverse mortgage a good fit?

Optimally, a reverse mortgage is one part of a long-range financial plan in retirement.

Here’s what I mean: as life expectancies continue to increase, retirement is going to take more than just Social Security. It’s going to take more than a well-funded 401-K. In fact, it’s going to take more than a pension, an annuity, an IRA, or a bank account – or a reverse mortgage. But when added together, these can combine to create a long-term means of maintaining dignity and independence in retirement.

So, don’t panic. And certainly don’t get caught up in catchy sales pitches. But do understand your options – and how a reverse mortgage can fit into your long-range financial plans.

If you would like more information on reverse mortgage, give me a call. I always love hearing from you.

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No crystal ball

Laurie MacNaughton © 2018

“My mother’s home was paid off, and at the time we thought a home equity line was going to be the best way for her to pay medical bills. But at this point the payment is crushing her – and she has new medical bills coming in. Looking back, what we really needed was a crystal ball.”

Truth is, a crystal ball would come in handy in much of life. It’s just that more is at stake when we’re dealing with our aging parents.

No honest lender is ever going to tell you a reverse mortgage is a universally good fit: there are older homeowners for whom the time has come to sell their home and transition into other housing. Some are better served by doing a traditional home equity line of credit (also called a “forward” line of credit). And there are those who benefit from drawing down monies under management.

But for homeowners who wish to stay at home and need to leave managed retirement accounts untouched as long as possible, or for those with Medicaid considerations, a reverse mortgage may be the perfect fit.

If you would like more information on how a reverse mortgage might help you or your loved one with retirement plans, give me a call. I always love hearing from you.

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In a nutshell: how a reverse mortgage works

Laurie MacNaughton © 2018

Reverse mortgages…you’ve seen the ads a hundred times. But odds are you have a lot of questions.

In a nutshell, here’s the scoop

The first thing to know is a reverse mortgage is an FHA-insured home loan. I always start with this point simply because there can be confusion about the fact this is a home loan, in many ways not unlike any other loan we’ve all grown up with.

Here’s where the difference comes in: a reverse mortgage loan is repaid when the last person on title permanently leaves the home. In fact, the very name itself comes from the fact the loan is repaid in reverse on the back-end, rather than being repaid monthly.

The second thing to know is there are two kinds of reverse mortgages, namely a refinance reverse mortgage and a purchase reverse mortgage.

Reverse Mortgage Refinance

The best-known “flavor” of reverse mortgage is the Home Equity Line of Credit. It only differs from a traditional line of credit in that a reverse mortgage line of credit is not repaid until the last person on title permanently leaves the home. In other words, homeowners can borrow some of their home equity without picking up a monthly mortgage payment.

Reverse mortgage proceeds can be used for any purpose. Common uses include:

  • Financial safety-net in retirement
  • Healthcare
  • Home repairs or improvements
  • Paying off debt

Reverse for Purchase

This is an seniors’-only purchase loan, and it was designed as a way for homebuyers to purchase a retirement home without adding a monthly mortgage payment to their retirement budget.

Homebuyers provide a down payment (typically about 50% of the purchase price), and the loan amount covers the other 50%. There’s never a monthly mortgage payment due.

Buying a home with a Reverse for Purchase loan is an ideal way for homebuyers to double their purchasing power, and it is notably easier to qualify for this FHA-insured loan than it is to qualify for most other home loans.

Homeowner Responsibilities

With either type of reverse mortgage, because they still own the home homeowners remain responsible for:

  • Property taxes (unless property tax exempt)
  • Homeowners insurance
  • Homeowners association dues (if applicable)
  • Condo Dues (if applicable)

To explore how an FHA-insured reverse mortgage might help you or your client with retirement plans, give me a call. I always love hearing from you.

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