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 Online information can be outdated, uninformed, or outright wrong.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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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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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 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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How is a Reverse Mortgage different from an Equity Line of Credit?

Laurie MacNaughton 2017

Answer? In several important ways…

Silver Divorce – How Reverse Mortgage Can Make a Way Forward