The rope and the cow

Laurie MacNaughton © 2019

Many years ago a friend of mine named Alan, who had spent more than a decade working in Africa, told me this story: a boy came to Alan to say he had found a rope. Alan told him to fetch the rope and when the boy returned, tied to the rope was a cow.

The real issue was the boy had found…a cow.

While none of us may have issues either with ropes or with cows, here what we often do have: small problems that are tied to much bigger problems.

This past week I met with a couple who thought they were having cash-flow issues due to in-home health care costs. And here’s the thing: they are having cash-flow issues.

But that’s not all they have. They also have accessibility issues and, perhaps most of all, estate planning issues.

Money was the biggest felt need – it is the rope. The other issues are the cow.

And cows can sneak up on us. In the case of my clients, the wife is 14 years into an MS diagnosis and the husband, until this past year, was her fulltime caregiver. However, he now is undergoing chemotherapy and can no longer adequately care for her. They have legal documents, but they are critically outdated. Case in point: the couple’s Power of Attorney states their son will make medical and legal decisions for them if they become incapacitated. However, 10 years ago he died in a car accident on I-66.

Life is filled with the unexpected. We all know that. We also know no amount of planning will cover all life’s curve balls. But planning goes a long way toward protecting ourselves and those we love best when the unexpected occurs.

As a reverse mortgage specialist I frequently meet with people who are planning ahead for the unexpected, as they understand that long-term illness, a major accident, or the death of one spouse might well put them financial jeopardy. It’s not that my clients haven’t saved; most of them have both savings and investments. Rather, they have done the math and realize that with care costs often running some $10,000 per month, they eventually are going to need every financial resource available.

And here’s why a reverse mortgage can uniquely fit long-range financial plans during retirement: each month a small amount gets added to a reverse mortgage line of credit. This growth compounds over time, and is not based upon home appreciation, but rather upon prevailing interest rates. It’s counterintuitive, but if rates go up, the line of credit actually grows more quickly.

I will be the first to say there is no one-size-fits-all financial product. Financial needs vary and every homeowner’s circumstances are a bit different. So are long-term financial goals.

But this much is certain: none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), or pension – or, for that matter, on a reverse mortgage. But when added together, all these can contribute to financial health in retirement, and a reverse mortgage can play a very important role in financial wellness in the retirement years.

If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.

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Too good to be true?

Laurie MacNaughton © 2019

The conversation often progresses along a similar path: first skepticism of reverse mortgages, to comprehension, to the following statement, “This sounds too good to be true.”

I get this progression, as I myself walked this precise path when I first learned about reverse mortgages.

There are a few seemingly “too-good-to-be-true” elements of FHA-insured reverse mortgages, the first of which is its mode of repayment: this is a home equity line-of-credit that doesn’t saddle homeowners with a monthly mortgage payment. Rather, the loan is repaid on the back-end, in reverse, when the last homeowner permanently vacates the property. There is simply no other home equity loan that does that.

But another feature of a reverse mortgage is much less well-known, and is the following: the unused balance in the line of credit grows over time, much the same way money in a high-interest savings account grows over time. However, unlike monies in a savings account, the compounding growth on a reverse mortgage line of credit is not taxable. This growth, along with the principal, is there for the homeowners to use as needs arise.

And this growth can be substantial – at today’s rates and terms, homeowners starting off with some $90,000 in their line of credit might expect to have some $165,000 in ten years. This means that if the homeowners were to do a reverse mortgage before they need the funds, and were to let the line of credit grow for 10 years, by the time they start accessing the monies there would be far more available to them than there had been at the outset. And, as I mentioned, this growth is always tax free.

Several misconceptions often surround reverse mortgages, including the question of who owns the home. The answer, without any caveats, is “the homeowner.” End of story. The second question often is whether the homeowners, the heirs, or the estate, can end up owing the lender if the home were to decrease in value. Again without any caveats, the answer is “no.” And a third question I am often asked is whether there is a prepayment penalty if the homeowner moves. Nope, never – there is never any kind of prepayment penalty.

As an aside, I once went to someone’s reverse mortgage seminar, and the speaker said, “Reverse mortgages are a miracle.” Maybe I have a higher bar for miracles. Or maybe, as a reverse mortgage specialist, I take exception to silly statements like that. Reverse mortgages are not a miracle. But they’re also not a mystery; they’re just a mortgage – a mortgage with some amazing features, it’s true, but just a mortgage, in most regards just like any other mortgage we all grew up with.

There is never a one-size-fits-all financial product, as financial needs vary and every homeowner’s circumstances are a bit different. So are long-term financial goals.

But this much is certain: with longevity being what it is, none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), or pension – or, for that matter, on a reverse mortgage. But when added together, all these can contribute to financial health in retirement, and a reverse mortgage can play a very important role in financial wellness in the retirement years.

If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.


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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Silver Divorce – How Reverse Mortgage Can Make a Way Forward

The Breathtaking Irony

Laurie MacNaughton ©2016

It wasn’t yet noon, but already I had had the same conversation with two separate homeowners:

“It’s not that you have insufficient income; it’s that the first fruits of your income are going right back out the door to pay your home mortgage.”

“It’s like you know me,” the caller said.

Know you? No.

Intimately know your situation? Absolutely. I see it every day.

It boils down to this: retirement + mortgage payment = not a good combo for many older homeowners.

Nationally, most homeowners of retirement age owe nothing on their home by the time they retire. In the greater Washington, D.C. area, however, that is less likely to be true because many homeowners moved to the area as consultants after spending much of their successful career elsewhere. This means many homeowners go into retirement with years yet to go on their mortgage. An alternative – but common – scenario is that homeowners paid cash for their home, and now have much of their net worth tied up in a pricy, illiquid asset.

And the breathtaking irony is this: the same gifts and skill packages that enable homeowners to work into later life can also set them up to falter financially if health fails abruptly and catastrophically, or if any one of life’s many other vagaries ensue.

Back to this morning’s conversation: this homeowner, indeed a consultant, has a home conservatively valued at $1,000,000. He and his wife are in their mid-70’s, but still have 15 years to go on their mortgage. His health is still robust, but his wife was recently diagnosed with cancer. Their fear is they will encounter uncovered medical costs that will consume their investments. It was their financial advisor who suggested they look into a reverse mortgage in order to free themselves of their monthly mortgage payment.

Is a reverse mortgage a fit for everyone? Of course not. No financial product is.

Is a reverse mortgage going to play a part in the long-term financial wellbeing of many retiring – or retired – homeowners? Absolutely.

If you have a family member, client, or colleague who would benefit from knowing more about an FHA-insured reverse mortgage, give me a call.

I always love hearing from you.

And…

Check out my various YouTube videos. Just click the link, or google Laurie MacNaughton YouTube.

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Is A Reverse Mortgage Right For You

Is it just me? Am I the only one who finds telemarketers’ Reverse Mortgage ads just a little “off”?

I logged into my email and up popped a Reverse Mortgage ad – and I was left with this feeling: Reverse Mortgage is the USB cord of the mortgage world. It fits everywhere!! It fits everyone!! Call now!!

But as a Reverse Mortgage Specialist, I can say with unqualified certainty: before doing any kind of financing, there are things you’ll want to consider.

In this short video, I walk you though a few of these considerations.

Feel free to call if you have 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
Visit Laurie MacNaughton on YouTube

Hop on the “Aging in Place” Bandwagon

By Jacqueline D. Byrd , Esq.
Used By Permission

He who every morning plans the transaction of the day and follows out that plan, carries a thread that will guide him through the maze of the most busy life. But where no plan is laid, where the disposal of time is surrendered merely to the chance of incidence, chaos will soon reign. — Victor Hugo, French poet and novelist (1802-1885)

The aging in place concept and planning for aging in place is a bandwagon that all seniors should hop on quickly. Just about 100 percent of older adults, if they could have their choice, would choose to grow old and die in their own home.

These days, we are faced with sequestration that looks like it has no end. As government help grows more and more scarce, we need to work together to find other sources of help and to make aging in place the most practical and affordable way to care for a growing population of older Americans.

Aging in place means remaining in one’s home safely, independently and comfortably, regardless of age, income or ability level. It is a concept that is exciting for many reasons, not the least of which is that it can mean the pleasure of living in a familiar environment throughout our lifetime.

The Aging in Place Council, www.ageinplace.org, provides links to organizations collaborating on accomplishment of aging in place goals. The National Association of Home Builders offers courses and certification for aging in place building specialists. This program teaches the technical, business management and customer service skills essential for completing home modifications for the aging in place concept. Sometimes seniors can remain in their own homes with just a few simple modifications such as barrier-free bathrooms, wider halls, grab bars and better lighting. These can be less expensive over the years than an assisted living apartment. A web-based directory, www.nahb.org, lists Certified Aging in Place Specialists who have been trained in the unique needs of the older adult population.

Another industry important to the aging in place concept is the reverse mortgage industry. These programs are largely controlled by the government, and loan applicants must meet with an independent FHA-approved housing counselor to be certain that they understand the reverse mortgage program.

Briefly, a reverse mortgage is a financial tool designed to help you remain in your home and retain full ownership. It allows you to convert the money you have built up as home equity into income that you can use however you choose. Unlike a traditional mortgage, there is no repayment until you permanently leave your home. There are no income or credit requirements to qualify, and because the funds are considered to be a loan rather than income, they are tax free and do not affect regular Social Security or Medicare benefits.

To take advantage of this program, you must be age 62 or older and the home must be your primary residence. If you have a deep desire to leave your home to your children or other heirs, it’s important to discuss the possibility of that with the reverse mortgage people. Sometimes a reverse mortgage and the wish to leave your home to your heirs do not go together well. Make sure you understand that issue completely before signing on the dotted line.

Those who sell long-term care insurance find the aging in place idea a perfect complement to their business. The idea of staying at home comfortably is a consumer hot button, says Nancy Morith, president of N.P. Morith Inc. in New Jersey. “People really want to stay on their own turf. They have created their own nest and want to continue to surround it with family and friends.” Most long-term care policies sold today include care at home options.

Geriatric Care Managers, www.caremanager.org, provide extremely important and helpful resources when seniors wish to stay at home. When care is needed, a professional care manager, often a nurse, will make informed judgments to stretch the senior’s funds. They help you decide such questions as whether you need a full-time or part-time aide, or what equipment or home modifications you may need. To find a care manager in this area, you can check with the Mid-Atlantic Association of Geriatric Care Managers, www.gcmonline.org.

In the rapidly growing senior housing industry, aging in place is a term used in marketing by Continuing Care Retirement Communities. These residences do offer the chance to age in place, but they prefer you first move independently to their community to begin aging. They have independent living, assisted living and perhaps Alzheimer’s care and skilled nursing in one location. In most CCRCs, you must also move from one wing of the campus to another to receive the increased services.

To age in place successfully requires planning. We must think carefully about how to accommodate the physical, mental and psychological changes that often accompany aging and provide for those changes in our own homes. Some communities get together with interested volunteers and work out aging in place in their own neighborhoods. Maybe this could somehow work for Bowie. Please email, call or write if you have ideas.

Thank you for reading. Stay well. See you next week.

The writer, a longtime resident of Bowie, is secretary of the Maryland/D.C. chapter of the National Academy of Elder Law Attorneys and a member of the Elder Law Section of the Maryland State Bar Association. You may email her at seniormoments@byrdandbyrd.com.

© 2013 CapitalGazette.com