And…It’s Good News!

Laurie MacNaughton © 2016

So, first the technical mumbo-jumbo (and it’s good news): FHA just announced the Reverse Mortgage loan limit will go up to $636,150, effective January 1, 2017.

Why You Care

Starting January 1, homeowners aged 62 or older who have higher-value homes (i.e. homes that appraise for $636,150 or more) will have access to more equity – potentially meaning a bigger line of credit or a larger monthly stipend.

Reverse for Purchase

For those looking to purchase a home using Reverse for Purchase, this new lending limit means homebuyers may be able to consider extra aging-in-place amenities or other upgrades.

Rates Are Low, Housing Values Are Strong

If you are considering a Reverse Mortgage, now is a really great time to move forward, as you may qualify for more than ever before. So give me a call – I always love hearing from you!

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The Old, Poor, Sick Fallacy

Laurie MacNaughton [506562] © 2016

As supper came to a close my engaging dinner companion surprised me – not because he said something I hadn’t heard before, but because I hadn’t heard it for a long time.

“My clients aren’t candidates for reverse mortgages. Reverse mortgages are basically for the old, poor, and sick.”

There is certainly no dearth of data on the matter, so I was somewhat taken aback by my colleague’s settled declaration.

Fact versus fiction

So what do the data show regarding homeowners who take out reverse mortgages?

Nationwide statistics show that homeowners with higher than average incomes, and above average educations, tend to take out reverse mortgages at an earlier age than do homeowners with lower income and education levels. Part of the reason for this is access to better information, such as Dr. Wade Pfau’s report in last month’s Forbes Magazine:

[Researchers] found that using the standby [reverse mortgage] line of credit improved portfolio survival without creating an adverse impact on median remaining wealth (including remaining home equity). This provided independent confirmation that the reverse mortgage line of credit can help mitigate sequence of returns risk without impacting legacy goals.

Though wealth managers tend to be well-informed about recent retirement research, many of our oldest, poorest, and sickest are not actively working with financial planners. On the other hand, regions of the country with the highest home values and the highest education levels also have the greatest numbers of homeowners originating reverse mortgages while in their 60’s, well before they need access to the funds.

Inaccessible wealth

Most Americans have the majority of their wealth tied up in their home – a dynamic called asset illiquidity. Reverse mortgage, fundamentally a home equity line of credit, is designed to enable homeowners to access some of that equity, while not obligating them to a monthly payment. And, in what is perhaps the least known feature of the reverse mortgage line of credit, the credit line accrues a compounding growth rate. This means by the time the homeowner does indeed need access to a safety net, in most cases that safety net has grown appreciably.

Reverse mortgages are not a fit for everyone – no one financial product is.

But a reverse mortgage is going to play an important role in many homeowners’ financial health in retirement, particularly when used as part of a sound, informed, long-term retirement plan.

For more information on how an FHA-insured reverse mortgage may help with your clients’ long-term financial goals, give me a call. I always love hearing from you.

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Did you hear the one about the realtor?

Laurie MacNaughton

It’s not that I was unaware of the fact realtors have a hard job – after all, I dragged my own realtor around for months, six months to be precise, before finding exactly what I was after. But to be honest, it was not until I changed careers and became a lender that I came to truly understand the caliber of our Loudoun area realtors, the skill set necessary to meet homebuyers’ needs, the adaptability it takes to function in our ever-changing housing market, and the daunting amount of knowledge required of today’s realtors.

But mostly I did not know of the unsung acts of selflessness, the dedication to community service, or the deeds of sheer human kindness regularly displayed by our realtors.

By way of background, I am a lender – a reverse mortgage lender. This means all my clients are aged 62 or better. The vast majority of my clients use reverse mortgage for long-range planning purposes in what is called a “reserve reverse.” These clients tend to be younger, healthier, still employed, highly educated, and working with a financial planner – or they’re purchasing a retirement home using a reverse for purchase loan.

But as a reverse mortgage lender it also means a certain percentage of my clients are advanced elderly. Some have very specialized needs and some are working with major life changes: loss of a spouse, major health issues, financial challenges. For many of these clients a reverse mortgage is nothing short of a miracle. And most of these clients are referred to me by realtors.

They are referred by realtors who could have seen a need but moved on without getting involved. Realtors who could have concluded there was no paycheck to be had in helping a senior refinance out of a bad situation. Realtors who could have been unwilling to make that call, go that extra mile, lend that listening ear, extend that helping hand.

So what, exactly, I am talking about?

Early in January I received a call from a realtor working on a potential listing. The older, self-employed homeowner was still feeling the effects of a struggling construction sector, and had also run into some health challenges. He deeply wanted to stay near doctors, adult children, and the community where he had lived his entire life. However, he knew of few choices but to sell: his upper-valued home held much of his net worth, and there were medical debts to pay.

The realtor could have simply tabulated the potential commission, listed the home, and ignored the homeowner’s other concerns. But he didn’t – he recommended that his potential client refinance using a reverse mortgage.

In another instance a realtor visited me at my office. Her homebuyer had a relentless, degenerative disease and needed to get into single-level living, but had been turned down for “forward” financing – a sadly common situation for retirees. A few days later when I met in person with the homebuyer in her current 5-story home, the realtor had stayed an extra hour in order to spare the homeowner a trip down the stairs to answer the door. Small stuff? Maybe. But it wasn’t small stuff for that homeowner.

And, I should mention, that frail homeowner is now safe, sound, and secure in a beautiful new home due to the realtor’s familiarity with FHA reverse for purchase.

I see realtors spend untold hours meeting needs outside the scope of their clients’ home purchase. I have stood shoulder-to-shoulder with realtors on home rehabs; I have watched as year after year realtors collect winter coats, food for food banks, blankets for needy families. I have seen drives for shoes and backpacks, school supplies and household supplies, disaster relief and emergency-housing relief. They give and they give and they give – but I don’t often hear them receiving due credit.

I’m not naïve: I know there are bad realtors, just as I know there are bad members of any other profession. However, unlike many professionals, realtors’ acts of selflessness seem to go unnoticed.

So to the realtors of our community I say this: thank you for your unflagging efforts to meet needs as you encounter them, to fight for local housing issues, and to serve our community in so very many ways.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Southern Trust Mortgage.

She can be reached at 703-477-1183 Direct or Laurie@MiddleburgReverse.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

 

 

 

Guilty as Charged

Laurie MacNaughton [506562]  © 2014

I could hear it in her voice, I could see it in her eyes – the fear, the sublimated guilt, the tears lurking just beneath her every word.

Her sin? Old age.

Her crime? The loss of her husband of 58 years. And, with his death went fully 50% of her household income.

And now a new challenge: she has suffered a stroke, and though her recovery is steady, it is slow, and the long-time family home is simply no longer appropriate.

I met with “Mrs. Jones” last night. Her darling middle-aged daughter joined us, and mentioned it was a realtor who had given them my name. After speaking with both mother and daughter it became clear just how good a call it was on the part of the realtor: Mrs. Jones needs out of this big house, and to get into a home appropriate to aging in place.

HECM for Purchase

HECM for Purchase (also known as Reverse for Purchase) is an FHA-insured home-purchase loan available to seniors aged 62 or older. The purchaser provides a down payment – often derived from the sale of the exit home – and the HECM for Purchase loan provides the rest of the purchase funds.

Punto. That’s is. That is the last mortgage payment the home buyer will make on that home until s/he permanently leaves the home. At that point the loan will be repaid from the proceeds of the sale, and the remaining equity will belong to the homeowner, or to the heirs.

Property taxes (if applicable), homeowners insurance, and routine upkeep of the home are still required.

Are you in a home too big, or with too much upkeep, or with too many stairs? Have your longtime neighbors moved, leaving you in a neighborhood you no longer recognize? Has traffic become such an ordeal you are afraid to leave your house?

Give me a call and let’s talk. Include your adult children on the conversation. And together, let’s explore your options. You may have far more than you know.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 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).

You Thought it Couldn’t Happen – A New Home in Your Future

Laurie MacNaughton 11|2013

The numbers are compelling: according to the National Association of Realtors, last year over 26% of homes were sold to homebuyers over the age of 50. And as the peak bulge of the boomer generation approaches, this number is expected to rise dramatically until it makes up the largest homebuyer market in American history.

But here’s the thing: it’s this same cohort that has had the toughest time saving adequately for retirement. Many people automatically assume this group has been spendthrifty, careless about planning, poor at saving, in denial about aging, and overly optimistic about retirement costs. And to some extent this is true, especially if they are compared against their own parents, the highly thrifty members of the Greatest Generation.

However, there are many untold sides to this story. First, the boomer cohort was disproportionately hit by the Great Recession. Though fewer of those aged 50-62 lost their jobs than did 20-somethings, if laid off, older workers experienced a dramatically longer period of unemployment. As they are hired back, often it is for lower wages than they earned at their previous job. Further complicating their financials is that many in this group still have children at home – or in college.

But the really pricy bill comes due when boomers care for their aging parents. By the time most people are in their 60s, their parents are in their late 80s or early 90s. In many cases the parents long ago depleted their own savings and assets, and now look to their aging children for support. It is this multifaceted convergence of events that causes an almost unwinnable financial challenge.

So with this as a backdrop, a question I commonly get from aging boomers is, “Should we refinance the home we’re in, or should we buy something with less upkeep?”

Obviously I don’t know – but I do have quite a body of knowledge of what others have taken into consideration. Following is a starting point for things to consider:

  1. Is your existing home safe, including layout and accessibility to bedrooms, bathrooms, kitchen and laundry?
  2. Is the home the right configuration? How about size?
  3. Are you able to keep up with the yard and the household maintenance?
  4. Is the location still right, meaning are you close enough to family so they can check in on you?
  5. Have traffic patterns gotten dangerous?
  6. Are you close to doctors, shopping, amenities, recreation, and your house of worship?
  7. Do you still know your neighbors?
  8. Will this still be the right house in 10 years? How about in 15?

If you answer a significant number of these “no,” moving might be a logical consideration. However, for anyone who recently has applied for a home loan knows, lending laws and regulations have become akin to invasive surgery. And for those looking to retire, or who have already retired, securing a loan can be very, very difficult.

However, FHA’s seniors’-only HECM for Purchase was specifically designed with the retired – or soon to be retired – buyer in mind. While there are qualifications that must be met, they are not as stringent as those governing “forward” lending.

Another very beneficial element of HECM for Purchase is that you can buy your new home before you have sold your exit home. Not only does this get you into your new home in a timely fashion, but you now have time to market your exit home and wait for the next peak sales season to roll around before selling.

But perhaps best of all, rather than tying up a significant amount of your financial resources in the new house by doing an all-cash purchase, you bring to the table only a percentage of the purchase price, which allows you to keep liquid more of your savings, or more cash from the sale of your exit home.

If you have been thinking about moving and didn’t think it was a realistic possibility, give me a call and let’s talk. You may very well be delighted to learn you have a new home in your future.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com