The cost of bankrolling Mom

Laurie MacNaughton [NMLS ID #506562]

The topic under discussion was the cost of aging in America.

“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.

The speaker, a Virginia Circuit Court judge, wasn’t asking these two questions of just any group; this was an assembly of some 200 attorneys, presumably a demographic with greater-than-average net worth.

As a reverse mortgage specialist, I would make this observation: not leaving kids an inheritance is one thing; having adult children bankroll parents as they age is another thing altogether. Zero inheritance looks great compared to adult children prematurely tapping their 401(k) so they can cover a parent’s medical bills. I know firsthand – I’ve been there.

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 by 2030 one in five Americans will be 65 or older.

This statistic becomes important when talking about reverse mortgage because, for many people, the go-to objection to is that the homeowner might not have equity left to leave the kids. But this is very flawed reasoning…on many counts. I’m going to point out just a couple.

First, current federal guidelines make it all but impossible for new reverse mortgages to deplete a home’s equity. But even if a homeowner were to use all available funds, this likely means there were no other funds to draw from – and that the reverse mortgage was a lifeline.

Second, an alternate scenario is that the parent does indeed have other funds but does not want to consume those funds, which presumably will go to the kids. Under either scenario the kids are the big beneficiaries. After all, every dollar of her own money mom can use to meet her financial needs is a dollar the adult kids do not pay out.

Of course, negative equity is by no means a foregone conclusion. There very well may be equity left for the kids. But is it true there might not be equity left for the kids? Yes. The pertinent issue is that the parent relieved the adult children from draining their own financial reserves – or at very least, the parent delayed the time the kids had to step in to help financially.

The critical nature of an aging parent’s financial decisions are likely to become ever more conspicuous as Gen X’ers themselves edge toward retirement and the solvency of Social Security runs low. Anything a parent can do to remain “self pay” throughout the retirement years is a blessing and gift to their heirs. And, thirty years’ worth of data shows that homeowners with reverse mortgages tend to enjoy significantly greater odds of financial survivability in retirement.

If you have questions about how a reverse mortgage may benefit your loved one, give me a call. I always love hearing from you.


President's Club Business Card - Updated Picture


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!



FHA Reverse Mortgage: Rumors Of Its Death Have Been Greatly Exaggerated

Well, well, well – one thing certainly can be said of those of us living in the Washington, DC area: we read our news.

Yesterday, MetLife unexpectedly announced it was exiting the Reverse Mortgage field, catching even its own employees off guard. Met had already sold its bank and closed its home mortgage division months earlier.

Within 10 minutes of the announcement my phone began to ring. And ring…and RING. Colleagues, clients, and co-workers wanted to know if Met’s exit meant my employer, Middleburg Bank, was going to be negatively impacted.

So what does this mean for you, for your clients, and for those of us privileged enough to live here in the greater Baltimore-Washington corridor?

NOTHING. It means nothing.

And WHY? Because the FHA HECM only works when there is equity in the home sufficient to extinguish “forward” loans on the property. Put a home in Tucson or Tulsa, Denver, or Dubuque and chances are the HECM just isn’t going to work.

Put that same home in Bethesda or Brandywine, Arlington or Alexandria, Middleburg or Marshall, and it’s a different story altogether.

The Blessed Are…Well, Blessed: Using Home Equity to Supplement Retirement Income

There are no two ways about it: we here in the shadow of D.C.are blessed in many ways. History books are filled with reasons why those with options have more options still, and those with few options have still fewer.

As one nationwide lender after another exits the HECM market, the product becomes a regional offering. And it makes sense: why would a national lender maintain a workforce of hundreds – or thousands – if the product only works in a handful of regions across the country. We have always had good options – and now we still have good options.

I am grateful to live in a region in which our senior clients, adult children caring for parents, and our family and friends still have available to them the FHA HECM as a planning tool to see them safely through retirement.

Give me a call with any questions or concerns you may have. I am always delighted to hear from you. And, as always, I am privileged to work with you to find solutions to the financial needs of the seniors in your life.


Laurie MacNaughton [NMLS# 506562]
Reverse Mortgage Consultant
Middleburg Mortgage
20937 Ashburn Road, Ste 115
Ashburn, Virginia 20147
703-477-1183 Direct
703-995-4870 Fax