MAKING CHILD’S SECOND TIME A CHARM

“A wedding planned in your fifties is a different planning problem from the one the bridal magazines were written for,” Eleanor Wren explains in the If She blog, cautioning couples to “scale down before scaling up” in terms of spending. “Money is better spent buying back time than buying up a step,” Wren advises. “For brides scaling down from a young bride’s default, the savings often equal one significant piece of post-wedding spending: a first-class honeymoon flight, a small home renovation,” she adds.

It’s interesting that these last two items are precisely the ones with which you are contemplating helping your own daughter as she embarks on a second marriage (she was widowed fifteen years ago, and, after struggling to raise three children on her own, has finally found love again. In the process of moving from her apartment into her fiancé’s home, your daughter’s confided in you that she would have liked to make several design changes to the place. Given the costs of the wedding, any big expenditures would need to be postponed, they’d realized. They are in the process of planning a brief honeymoon trip, but, with an eye to the finances, have ruled out flying to Europe and will probably just enjoy a week in French Lick.

As a widow yourself, retired these last ten years, you’ve needed to be very careful to preserve assets and avoid irresponsible spending, but with this occasion representing so much hope and promise, you’re determined to make these two meaningful gifts. In order to avoid increasing the amount of the periodic withdrawals from your retirement accounts, you’re contemplating applying for a home equity loan of between $20,000 and $30,000. Obviously, there will be regular payments to make, but you think that might be the easiest way to finance the gifts, actually giving a lump sum to the couple for the honeymoon trip, then paying for the home improvement project as the work progresses. 

You might find that using the equity built up in your own home in the form of a reverse mortgage, a more budget-friendly way to raise the capital needed to fund the home adaptation, plus treat your daughter and new son-in-law to some honeymoon “extras’. Just as would have been true with a home equity loan, you will remain responsible for property taxes, homeowner’s insurance, association fees, and overall maintenance costs on your own home. The big difference is that with a reverse mortgage, there will be no obligation to make monthly mortgage payments.* In fact as you make withdrawals from that line of credit (either to pay the contractors for the improvements on the couple’s home or, right away, fund the honeymoon trip, those withdrawals will be tax-free.** In fact, the “un-borrowed” portion of your equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance.

As proud mother-of-the-bride, you’ll be turning those two “significant pieces of post-wedding spending” into one very meaningful gift.

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

**Please consult a tax advisor.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

 HOME EQUITY HELPS CREATE LIVING SPACE FOR TWO — GENERATIONS

For years now, even before aging in place was a “thing,” you and your significant other have pictured spending the rest of your lives in the Indy neighborhood where you’ve lived since the early years of your marriage. With your retirement planned for next year (his coming up at the end of this one), you’ve already begun the very minor upgrades needed for your ranch-style home, which you’ve always kept in excellent repair.

Your one daughter, who is divorced, has worked for decades as a traveling nurse. She is now set to move back to Indiana next spring, having accepted a position (thankfully, a non-traveling one!) at a hospital here. In preparation for her arrival, you’d begun driving around, scouting out homes within convenient distance (convenient to her new office and selfishly of your own place!).

A few weeks ago, invited to a book club meeting on the northwest side of town, you were shown a possibility you hadn’t considered. Your hosts’ home had what they called a “carriage house” on their grounds, a very charming, fully furnished small home that the hosts were renting out as an Airbnb. That visit planted a seed in your minds: Why not have one of those small homes built on your own property for your daughter to live in? (Much to your delight, she liked the idea, although she didn’t want her parents going out on a limb financially.) You’ve already begun investigating the laws for Marion County and – it’s permitted! Now, after meeting with several builders and gotten cost estimates, you’re contemplating a second mortgage on your own home in order to avoid the tax effects of cashing in a substantial chunk of your investments, or the need to claim social security benefits earlier than you’d planned.

You might find a reverse mortgage a more budget-friendly and tax-friendly way to raise the capital needed to create the ADU (Accessory Dwelling Unit) for your daughter. As would be true if you took out a second mortgage, you’d remain responsible for property taxes. homeowner’s insurance, association fees, and overall maintenance costs on your own home. However, with a reverse mortgage, so long as at least one of you continues to occupy your home, there will be no monthly mortgage payments. As you make withdrawals from your line of credit to pay the contractors, those will be tax-free.* In fact, the un-borrowed portion of your housing equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance.

There will undoubtedly be many details to work out with your daughter as well as your estate planning lawyer and tax adviser, but the beauty of the plan is that you’d be using your housing wealth to create housing for your daughter convenient to her place of work and close to you! 

*Please consult a tax advisor.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

POST-DIVORCE, HOME EQUITY HELPS RESTORE EQUILIBRIUM 

In the two years since you retired, life has seemed to be on a negative turn. After 35 years of marriage (three grown children and a couple of grandkids) – last year, your husband moved out and initiated divorce proceedings.

In the divorce, (which was mediated), there was never any doubt about who would be allowed to stay in the home (you had inherited the house from your parents and it had remained titled in your name). However, you were ordered to transfer a chunk of your own retirement savings to him (to make up for the fact that he’d contributed to maintain the place and make improvements). One positive factor in all this is that, prior to your husband’s decision to end the marriage, a number of upgrades were done on the property to make it suitable (for the two of you, you’d believed at the time!) to “age in place”. 

Taking stock of your own finances going forward, you’re reassured that despite the forced transfer of funds to your now” ex,” most of the nest egg accumulated over the course of your own professional career is intact; you have good medical and long term care insurance in place, Still, you’re now realizing how challenging it might prove to be to support your own needs and keep up with property taxes, homeowner’s insurance association fees, and overall maintenance all on your own.

The data may be of only small comfort, but “gray divorce”, which is divorce occurring among adults age 50 and older (what you’ve just experienced), is a growing phenomenon; which, according to a report in the National Library of Medicine, can cause as much as a 45% drop in women’s standard of living post-divorce.

The silver lining in your own divorce story is to be found in your housing wealth. While you’ve needed to transfer a portion of your retirement savings to your ex, the equity in your home can be accessed through a reverse mortgage line of credit. And while it’s true you will remain solely responsible for property taxes, homeowner’s insurance, association fees and overall maintenance costs, your withdrawals will be tax-free.* The unborrowed portion of your housing equity will be guaranteed to grow at the same rate as that being charged on the outstanding balance, and so long as you continue to occupy the home, there will be no monthly mortgage payments.** What’s more, neither you nor your estate will ever owe more than the home’s value (a reverse mortgage is a non-recourse loan).

As you embark on your post- gray divorce future, your home equity can help restore some measure of equilibrium to your life.

*Please consult a tax advisor.

**Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

BOLDLY VENTURING OUT WHILE STAYING SAFELY AT HOME 

Overall, looking back over the five years since you retired, the two of you are generally satisfied that your careful planning has “paid off”. You’ve been able to check all the important items “off your list” – the home remodel and system upgrade, the life/long term care insurance policy, the prepaid funeral arrangements, the auto maintenance warranties, plus visits to (and gifts to) kids and grandkids, not to mention updated estate planning documents. Every one of these things, you’re proud to say, was accomplished with zero debt incurred. Life has settled into a very pleasant routine. Active members of your local community center, you’ve enjoyed cultural events and exercise classes there along with a circle of close friends.

Then, after participating in a book club discussion of the Daniel H. Pink book, The Power of Regret: How Looking Backward Moves Us Forward, 

you couldn’t help but realize that you really do have regrets. Has being so orderly and well-planned meant there’s never going to be “more” and “bolder”? Once that “seed” was planted in your minds, you agreed to each come up with ideas for – and research – the costs and steps needed to implement a “bold venture” in the form of travel, which you agreed would include as many family members as possible. So far, you’ve both been gravitating towards the concept of a trip to Europe or Africa. However, while you agreed that working on the details feels “freeing”, as lifelong planners and careful money managers, you’re not sure you can muster sufficient financial “boldness” to move ahead.

The path to financing your “more and bolder” venture with the least disruption to your carefully budgeted retirement finances might be through your housing wealth in the form of a reverse mortgage line of credit. Once the details of the trip itself have been agreed upon, you can use tax-free* withdrawals to pay for the expenses. There will be no required monthly or quarterly mortgage payment**, and the “unborrowed” portion of your housing wealth will be guaranteed to grow at the same rate as the interest being charged on borrowed funds.

You’d be boldly venturing out – while staying safely at home – continuing your “very pleasant routine”!

*Please consult a tax advisor.

**Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

STAYING HOME WHILE TRAVELING THE FAR EAST 

Prior to your retirement last year, you had spent your entire adult lives working full-time as educators, spending every summer hiking and touring in Europe, Canada, or South America. Your plan was to keep living in your home, using your travel budget to explore destinations in Asia.

You’d assumed that your home, a ranch-style house built on a relatively small parcel of land and long ago fully-paid for, would be suitable for “aging in place” without the need for major renovations, and, to a large extent, that’s still true. However, due to a back injury your husband sustained in an auto accident, he now uses a wheelchair or walker most of the time. There was a settlement, which was enough to fund the building of a ramp and a bathroom overhaul. But, obviously, the travel lifestyle you’d envisioned is going to be dramatically reshaped.

You’d been told about the non-profit Road Scholar organization, “a community of people who love learning and exploring the world,” and are encouraged by the fact that they offer tours – including to east and southeast Asia – tailored to mobility needs. However, the cost of these trips is substantially higher than you had originally bargained for. Instead of the two trips per year you’d envisioned for the first five years of retirement, you may need to cut back to one a year or even one every other year.

“It’s not that simple for people with disabilities whose accessibility requirements often lead to additional costs,” wheelchairtravel.org admits, reflecting on h ow destinations, business, and disabled people themselves can work to reduce “disability surcharge.”

Still, rather than cutting back on the travel adventures you’d planned for the early years of your retirement, you might consider tapping the equity built up in your home by applying for a reverse mortgage.

Needless to say, you’d continue to pay real estate taxes and insurance and keep the home in good repair, but there will be no monthly mortgage payment* to worry about. In fact, as you draw funds from your line of credit to pay for the trips, any unused portion of your equity will be credited with (non-taxable) growth at the same rate as that being charged on borrowed funds.

True, that auto accident changed your lives, and not for the better, and hiking Asia has been taken off your life planning list. Turns out, though, your decision to “stay home” could be the key to your being able to realize your dreams of exploring the Far East.

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

MODIFY THE HOUSE, TWEAK THE ESTATE PLAN 

As a lifelong do-it-yourself-er, your husband has been making plans to change several things about the home in which you’ve spent the past forty years (now that the two of you have agreed to spend your hopefully long “old age” right there. As a lifelong careful manager of the household money matters, you’re trying to work out the budgeting for the proposed changes. It’s apparent that some borrowing will be necessary, particularly since the bulk of your financial resources are in tax-deferred accounts and a couple of business rental properties that produce very little net income. You’ve been researching both second mortgage loans and reading up on reverse mortgages. 

Some four years ago, as you were going over all your finances, preparing for your retirement (which happened last year), you had meetings with an estate planning lawyer and made some important decisions (creating a trust and the other documents). To ensure (hopefully) there would be no bad feelings or resentments among the sons later on, you “hosted” a special family get-together to explain your intentions. Everyone was comfortable with the idea that the only one of the three sons who lives anywhere near you (and who does not have a family or own a home) would inherit the house. 

Now, as you consider a reverse mortgage to fund the “big reno,” you’re worried that you’ll need to redo the whole estate plan (so much time – and money – went into that effort…) in order to make the property division “fairer” to this one son (who would be saddled with a big loan). 

Establishing a reverse mortgage line of credit to fund the aging-in-place renovations need not mean a total reworking of your estate plan. True, were you to move out of your home (or at the time when the second of you has died), dies, the reverse mortgage loan balance would need to be paid off in order for your son to keep ownership. An idea to consider would be using part of the reverse mortgage line of credit to fund a “second-to-die” life insurance policy with your third son named as beneficiary. That could provide money for him to pay off the reverse mortgage balance.

As a “lifelong careful manager of the household money matters,” you’ll agree that having a conversation with a reverse mortgage professional, an insurance agent, and your estate planning attorney” will be the right next step. That way, your husband can focus on modifying the house; the two of you can work with your lawyer to “tweak” the estate planning documents.

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702.

These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender 

REVERSE MORTGAGE CAN ENABLE TRUE BROTHERHOOD

Your older brother, a widower in his late seventies, had originally been planning to “age in place.” He’d even been going to seminars about reverse mortgages (so that he could remodel the house to make it possible to live on one floor). Unfortunately, following a number of recent health scares, he’s come to terms with the fact that managing a large home, even after remodeling, is no longer going to be feasible. He’s made the decision to buy into a nearby retirement community that has both assisting living and full-care options (should those become needed). 

Because you’re the only one of the siblings who lives nearby, you’ve tried to help him with this difficult life transition. Your brother has found the place he wants and would like to get on their waiting list. Problem is, he lacks sufficient means to cover the upfront buy-in for the new place before this one is sold. You agree that community care-type living is his best choice, and you’re more than willing to oversee the listing and selling of his home. However, as much as you’re devoted to helping, you don’t have that much in liquid resources to offer and are reluctant to liquidate assets at this point in the stock market (there would also be severe tax consequences). Meanwhile, for your brother, the pressures are mounting, with many decisions to be made about which furnishings he should sell and which to take with him. It’s all you can do to help him keep up with all those medical tests and appointments!

Since your brother had already been considering a reverse mortgage, you might consider tapping into the equity in your own home in the form of a reverse mortgage, making a lump sum withdrawal from your own equity to pay the continuing care community fee on behalf of your brother. It would be a good idea to consult tax and estate planning advisors (in addition to the reverse mortgage professional) in order to properly structure the “family loan” you’d be making to your brother. The general idea is that when his home ultimately is sold, a portion of the proceeds can be used to “restore” the equity in yours. 

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702.

These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org

Equal Housing Lender