A little planning can be a big gift

Laurie MacNaughton © 2018

Charles, sweet-tempered and kindly, sat in my office fidgeting with a ballpoint pen.

“My mom has never really been herself since her fall, and I found out she was having money problems only after I came across a delinquency notice for her property taxes. By the time I opened her bills, she was late on everything – mortgage, taxes, utilities, you name it. I need to negotiate with creditors on her behalf but she never drew up a power of attorney, so now I’m not sure what my options are.”

In my role as a reverse mortgage lender I’ve met with hundreds of aging homeowners and their families. I’ve seen homeowners who have planed extensively for their retirement years, and I have seen homeowners who have done very little planning. I have seen couples who saved extensively, but because they have lived 25 years longer than anticipated, their savings are running out. And then there are the couples who did everything right, but because they were financially assisting a loved one, they depleted their savings much more quickly than they ever imagined. And that scenario can be a huge bummer.

Following are some basic preparations to make before a crisis arises.

The first step is to record administrative information on one master list. Include on this list:

  • The name of your banks and other financial institutions;
  • The name of your pension plan, life insurance plan, investment accounts, CDs, health savings accounts and the like, along with account numbers;
  • All income sources, including Social Security, annuities, veteran’s benefits and the like;
  • All financial obligations, including credit cards, mortgages, car payments, and utilities, along with the names of the utility providers;
  • Usernames and passwords for your online accounts;
  • Copies of driver’s licenses, social security cards, healthcare cards, birth certificates, divorce decrees, death certificates and the like;
  • The names of primary care physicians over the past 10 years. Current physicians may well be different than the ones used in years past, and it can become important to have contact information for previous doctors.

The second step is to meet with an attorney regarding the following documents:

  • Power of Attorney;
  • Will;
  • Advance medical directive;
  • HIPAA release.

If these documents already exist, make sure they’re up to date.

Once you have collected this information, put it in a safe and secure place – and let a responsible party know where the documents are. Preparation is only helpful when the right person knows how to find the information.

In a utopian world there would be no aging, sickness, disability, or financial hardship. But in this world that is our lot, a little planning can be the most loving gift you can give your heirs – not to mention the fact that planning ahead can save thousands of dollars in legal fees should adult children need to become a parent’s legal guardian.

If you would like to look into how an FHA-insured reverse mortgage might help with your family’s financial goals, 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 she’s 87 and the monthly payment is crushing her. Looking back, what we really needed was a crystal ball.”

If you have an older adult in your life, you’ve heard a similar story a hundred times.

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 their investments.

But for homeowners who wish to stay at home and plan to leave their 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 your loved one with financial needs in the retirement years, give me a call. I always love hearing from you.

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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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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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In defense of equity consumption

By Laurie MacNaughton [NMLS ID #506562], as first published in Reverse Review, Oct 2017 edition. Reprinted with permission.

To be honest, the seminar topic was probate. But the two opening questions took my thoughts far afield.

“How many here want to leave their kids an inheritance?” Nearly every hand went up.

“How many here are likely to have an inheritance to leave?” Not as many hands went up. In fact, not many hands went up, period.

I sat through the Circuit Court judge’s talk scribbling down my churning thoughts, the foremost of which was this: not leaving kids an inheritance is one thing; having your kids bankroll you as you age is another thing altogether. If you’re the adult child of aging parents, zero inheritance can look great vis-à-vis the potential alternatives.

According to a Pew Research study, more than forty percent of adult children with a parent aged 65 or older helped that parent financially within the past year. If percentages remain constant, the number of adult children bankrolling parents is likely to get worse, a lot worse, because in little more than a decade one in five Americans will be 65 or older.

For many people, the go-to objection to a reverse mortgage is that the homeowner might not have equity left to leave the kids. But this is flawed reasoning.

If a homeowner with a reverse mortgage used all available funds, it is likely there were not other assets to draw from. This means each tax-free dollar the parent used did not come out of the kids’ post-tax income.

An alternate scenario is that the parent did indeed have other assets but did not want to consume those assets, which presumably will go to the kids. Under either scenario the kids are the big beneficiaries – every dollar of her own money Mom used was a dollar either the kids or the taxpayer did not pay out.

Of course, little or no remaining equity is by no means a foregone conclusion, particularly in light of FHA’s most recent changes to the product. But is it true there might not be equity left for the kids? Absolutely. The pertinent issue here is that the parent relieved the adult children from draining their own financial reserves – or at very least, delayed the time when the kids had to step in to help financially. And as boomers’ kids eventually edge toward their own retirement and the reduction in Social Security benefits impacts Millennials’ long-term financial plans, parents’ decisions are bound to become ever more conspicuous.

On a related note, for years I’ve thought it frankly odd how slow some financial professionals have been to amend their mindset about tapping into home equity, even as evidence mounts that homeowners with reverse mortgages tend to enjoy greater odds of financial survivability in retirement. If the popular press is to be believed, the needle does seem to be edging in the right direction, however.

Case in point: recently I met with a wealth manager who said to me, “Our holistic retirement planning includes reverse mortgages.” Moments later he went on to say, “Most of our clients want to leave their investments for their kids.”

Bingo. He has seen how a reverse mortgage can fit into the goal of leaving something for the kids.

This growing awareness is heartening news all around: as aging homeowners get more informed input on reverse mortgages, their adult children, the taxpayer, and the homeowner all stand to remain financially healthier in retirement.

Good news couldn’t come at a better time.

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Silver Divorce – How Reverse Mortgage Can Make a Way Forward

What to do about Mom?

Laurie Denker MacNaughton [506562]

The respirator’s soft “chhhh…pffff” sounded in the background as Susan and I sat at the kitchen table. “Years ago,” Susan told me, “I promised Mom, come hell or high-water, I would let her die at home – and I plan to do whatever it takes to keep my promise.”

It’s one thing to say that. But what do you do when you’re overseeing care and medical needs outpace your ability to foot the bill?

Susan’s parents had not gone into retirement financially unprepared: they retired with federal pensions, Social Security and Medicare, substantial savings, little debt and no mortgage. But four years back, on Thanksgiving, Susan’s mother had a massive hemorrhagic stroke. She spent 3 weeks in the hospital, and another 30 days in rehab. But when she failed to progress in her recovery, she was discharged – and Susan, true to her word, brought her mother home.

First they utilized their long-term care benefits until the benefits ran out. Then they used their savings. When those were gone, Susan began tapping her own retirement savings to help cover her mother’s in-home medical care. This was clearly unsustainable, so Susan made an appointment with an elder law attorney, who suggested she look into a reverse mortgage for her mother.

In this case, due to the value of the home and the homeowners’ ages, the reverse mortgage will provide funds enough to cover another 4½ years of care, and the attorney is working to put in place additional benefits that will further stretch the reverse mortgage funds.

Increasingly, boomers face this same challenge: helping mom and dad finance care, even as they themselves labor to save for retirement. Reverse mortgage can play a significant role in helping balance this equation.

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

But as we Americans age, nearly all of us will need every financial tool available, either as we fund our own retirement, or help mom and dad fund theirs.

If you have questions, give me a call. I always love hearing from you.

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