Yes, you CAN buy a home with a Reverse Mortgage

Laurie MacNaughton © 2019

I got a call from a darling client who, a number of months back, purchased a home using a Reverse for Purchase mortgage.

I’ll call my client Marie  – and I need to mention she long ago immigrated to the U.S. and speaks in lightly accented English.

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

Well, Marie isn’t wrong. But it is true that many people don’t know Reverse for Purchase even exists.

If you are 62 or older and have questions on how Reverse for Purchase may help with your home purchase needs, give me a call. I always love hearing from you!

 

Laurie

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

Remember When? Mortgage Debt and the Older Homeowner

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

By A Country Mile

I spoke with two homeowners yesterday, and both had the same question.

This made me realize it’s not even close: by a country mile the most common question I’m asked regarding Reverse Mortgage is, “When the homeowner dies, how does the Reverse Mortgage get repaid?”

How does any loan get repaid?

For the moment, let’s forget we’re talking about a Reverse Mortgage. How does any home loan get repaid when the last person on title dies?

Let’s make up a bank – we’ll call it First Community Bank – and let’s say it holds the mortgage. When the executor sells the home, First Community Bank gets repaid and the family or heirs get the rest. This is a concept we all grew up with. If we put it into an equation, it would be:

Sales price of the home – Amount due on the mortgage = What you pocket

If the family wants to keep the home, they would either pay off First Community Bank, or refinance the home by getting a new loan.

Same thing with Reverse Mortgage

The same holds true with a Reverse Mortgage: when the last homeowner permanently leaves the home, the family can sell the home. The lender gets repaid at closing, and the family gets the rest. The same equation holds, namely:

Sales price of the home – Amount due on the mortgage = What you pocket

If the family wants to keep the home, they repay what’s due on the loan and keep the house, or they refinance the home by getting a new loan.

Rocket Science

My dad was a rocket scientist – literally. He worked on some of the Cold War era’s biggest defense projects, and I grew up in a home where pocket protectors and slide rules, mechanical pencils and graph paper were part of the landscape.

Reverse Mortgages are not rocket science. They are a home equity loan for the years when having a monthly mortgage payment can be a back-breaker. They can be a miracle for adult children struggling to bankroll their parents’ longevity. They can make aging in place possible.

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 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

Ten Reasons Not to Read The Motley Fool

Laurie MacNaughton

Ok, enough is enough – what started off as sloppy journalism unbefitting a widely-read publication that purports to “help people take control of their financial lives” has become flat-out obnoxious as it spreads through the news channels.

I’m speaking about Peter Bennett’s poorly-reasoned, poorly-researched piece on reverse mortgage, published yesterday in The Motley Fool. The first time I was emailed a link and asked to comment I was willing to be forbearing: year’s end is historically slow in the financial markets, and doubtless the reporter was compensating by resorting to a favorite whipping boy.

Then I was sent the piece again for comment. And again. And…yet again. And pathetically, each was from a different news outlet. Apparently, fact-checkers for every major American publication are in Boca for the New Year, and left their cell phones in their hotel room.

So let me address some of most laughable, some of the most sensationalistic, and also some of the rudest and most elder-demeaning statements made by Motley Fool reporter Peter Bennett.

Bennett lists 10 reasons not to consider a reverse mortgage, and nearly each point becomes more fantastical. I have picked out his first couple points and last couple points, and analysed them sentence by sentence.

Point 1. High fees

Statement: Closing costs for a typical 30-year mortgage might run $3,000.

Reply: True. But they might not run $3,000. Closing costs are contingent upon many factors, and to pull a number from thin air is presumptuous and subject-matter ignorant.

Statement: For a reverse mortgage, they could run as much as $15,000.

Reply: True, but they might not run $15,000. There are many, many factors that determine closing costs, and in some cases closing costs could be, well, the $3,000 Bennett seems fond of.

Statement: That’s a lot of money just to access the equity in your own house.

Reply: Says who? If closing costs are this high it typically means there is a “forward” mortgage being paid off. A monthly mortgage payment is the single biggest monthly expenditure for most seniors, and a refinance that reduces their payment $70 a month just isn’t going to do the trick as far as putting them on solid financial footing. What they need is NO monthly mortgage payment, and a financial buffer. A reverse mortgage is the only main-stream refinance product available that can provide both, and that creates a solution to the cash flow problem so common during retirement.

Statement: Reverse mortgages come with more regulations than a regular mortgage so that accounts for some of the additional fees.

Reply: Baloney. Check your facts, Mr. Bennett.

Statement: Lenders also charge more because they claim they take on unique risks, in that reverse mortgages aren’t based on your income or credit score.

Reply:  Again I say baloney and check your facts. Or, better yet, cite your references.

Point 2. Property taxes and homeowners insurance to pay

Statement: With a reverse mortgage, the property remains in your name.

Reply: Score one for the “B” – he got this one right.

Statement: And because the property is in your name, you are responsible for paying all property taxes.

Reply: Um, do you know how this works, Mr. Bennett? They’re already paying property taxes themselves if they have no mortgage, and if they do have a mortgage, they’re escrowing for them. They’re already paying. This is not a new concept for a homeowner aged 62 or older. AND, many older homeowners qualify for a property tax reduction or for a property tax waiver. Their reverse mortgage does not impact their eligibility for this.

Statement: The lender also requires that you continue to carry homeowners insurance.

Reply: This is also not a new concept for a homeowner. And it is really rather demeaning to suggest the mature, experienced homeowner is not aware of homeowners insurance.

I’m going to skip several points here, each of which contain line after remarkable line of trash talk. But the last two points are so bad I can’t skip them.

Point 9. Stringent repayment rules

Statement: Typically, when the last remaining borrower living in a reverse mortgage property dies, the FHA requires loan servicers to send a letter showing the balance of the loan due.

Reply: No “typically” here: the servicer is required to send a statement of the balance due.

Statement: Upon receipt, the heir or estate administrator has 30 days to declare whether the loan will be repaid or the home sold.

Reply: By federal mandate there is an automatic 6-month period to sell or refinance the home, with two additional, six-month extensions possible.

Statement:  If no decision is made, the lender can initiate foreclosure proceedings.

Reply:  If no decision is made on any financed home, the lender can initiate foreclosure proceedings – and no 6-month grace period is tendered in the case of a “forward” mortgage. It’s just plain rude to imply homeowners and their families are unaware that homes with financing have to be dealt with.

Point 10. Heirs get less

Statement: As every month passes, the homeowner with a reverse mortgage sees debt increase and equity home equity (sic) decrease.

Reply: This is an appalling presentation of half the story. The amount the lender has lent collects interest, which will be repaid along with the loan, once the last person on the mortgage has permanently left the home. However, if homeowners have a line of credit, that line accrues a compounding growth month over month – imagine it’s a lump of bread dough sitting on the counter, getting bigger over time. The line of credit will grow even if the home goes down in value.

Statement: That equation doesn’t benefit heirs, so if you planned on leaving your heirs a little something, it will probably be very “little.”

Reply: Want to know what really doesn’t benefit heirs, Mr. Bennett? Adult children of aging parents burning through their own retirement funds at a double pace as they struggle to help finance their elderly parent’s longevity. If that older parent, however, can be self-pay through the end of life, his/her adult children stand a much greater chance of enjoying financial survival in their own retirement.

So to the armchair critics of reverse mortgage I say this: check your facts. Do your research. And don’t sit in judgment on those striving to maintain their own independence and dignity during retirement.

If you have questions regarding reverse mortgage, or would like to receive published research on the contribution reverse mortgage can make toward financial survivability in retirement, give me a call. I always love hearing from you.

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

It’s Not Just a Boomer Issue

This is not a rant about profligate boomers and slacker Gen X kids, so hang with me here while I quote a couple statistics that are pretty scary: according to a Wells Fargo study out this month, 71% of Americans between the ages of 50 and 59 lack confidence they will have enough retirement savings to live comfortably during retirement, and 41% have no savings whatsoever.

The Wells survey, which has been conducted each of the past five years, added a new question this year, with 22% of respondents stating they would rather “die early” than run out of money in retirement.

The poll was not a sampling across all economic classes; rather, the median income was $63,000, well above the national average.

Why do I bring up these sobering statistics? Because they represent real people and indicate a real issue.

A conversation I had this week highlighted the issue in Technicolor terms: the adult daughter of a baby boomer said, “Every penny I could be saving for my own retirement is going to support my mother.”  This statement was not self-pitying, nor was it laced with bitterness. It was just a fact. And why hadn’t her mother saved better? There had been a late-in-life divorce, and the mother got the home but little else. She nows lives on Social Security, but every month there is a shortfall which the daughter makes up.

Joe Ready, director of Wells’ Institutional Retirement and Trust, is quoted in the Wells study as saying, “Saving for retirement isn’t easy. It requires sacrifice, and it’s not something people can push off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money. That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year – it is the only way most people will achieve their financial goals to carry them through retirement.”

I often read advice like this addressing spending habits and saving patterns – and saving more while spending less is always a good idea. But like I said, that’s not where I’m going with this. The truth often isn’t that straightforward. Many Americans have yet to financially recover from the Great Recession, and compounding the problem is the fact that many laid off in their 50’s and early 60’s were never rehired. Some had to tap into saving early, and others had to turn to adult children for support. It’s well and good to say one ought to have planned better. Sometimes life just isn’t that tidy.

In another conversation this week a 65-year-old, who is supporting his 90-year-old mother, said, “I never thought I would get to the point where $1,000 a month would be a big deal – but here I am.” He was, as were many of his age cohorts, laid off a few years ago and has not been able to find work since. His aged mother did save – for retirement. But now she’s funding longevity, a different matter altogether. Her retirement savings are long gone and she is dependent upon her son, who is caught in the classic “double draw-down”: he is burning through his savings much more quickly than planned because he didn’t work as long as he anticipated, and he is bankrolling his mother, whose expenses climb year after year.

In both these situations a reverse mortgage is going to pay off the existing “forward mortgage” and create a financial buffer.

There is still going to have to be self-discipline. They are still going to have to practice economy. That’s just the way it is. But that’s a far cry from lying awake nights worrying whether there is going to be money enough to meet monthly expenses.

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 dignity and independence in retirement.

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.

Laurie

Laurie MacNaughton [506562] is a freelance writer and Reverse Mortgage Consultant with Atlantic Coast Mortgage.

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

Alien Abductions, Anyone?

Laurie MacNaughton [506562]

This past week an article on reverse mortgage appeared in the online edition of CNNMoney, a publication with a solid history of well-written, well-researched financial news. Last week’s piece, however, entitled Reverse mortgages: Safer, but far from risk-free, is chock full of inaccuracies, muddled concepts, and inflammatory comments, and is altogether unworthy of an esteemed publication. Just about the only way the reporting could be worse was if it included interviews with victims of alien abductions.

The article’s subtitle reads, About 10% of reverse mortgage borrowers go into default. Apparently, author Les Christie failed to read the report from which this statistic was taken. Or is it rather that CNNMoney editorial staff jobs have been outsourced to piecework editors in India? Whichever the case, the inaccurate reporting is inexcusable.

Accurate information on FHA-insured reverse mortgages is not hard to come by – but it does require at least a minimum of fact-checking, and – gasp – a careful reading of the publicly-available congressional reverse mortgage audit.

If this blogpost were simply a rant about yet another sensationalistic slam aimed at reverse mortgage, it would not be worth the reading, much less the writing.

But here’s the thing: something far larger is at stake here, namely, the financial well-being of an already fearful, highly vulnerable sector – Americans heading into retirement and those already well into their retirement years.

With every inflammatory, factually-inaccurate, poorly-researched piece, seniors grow yet more fearful of a product that has a long track record of success when used as part of a long-term financial plan. Les Christie and CNNMoney do seniors no favor by presenting obsolete objections, inaccurate figures, and wrongly-interpreted statistics.

Reverse mortgage was never intended to meet every financial goal in retirement. However, it can create a federally-insured financial safety net, an extra financial “bucket,” to draw upon in the retirement years.

If you would like to learn more about how FHA-insured reverse mortgage may help meet your retirement goals – or would just like to talk – 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.

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).