SIZING DOWN, UPPING CONVENIENCE AND SAFETY

Now (finally!) both fully retired, you’ve come to the decision about what you do – and don’t – envision for yourselves in terms of your environment. Bottom line: you do not envision moving into a retirement community – or facility.  

At the same time, you realize that the home in which you’ve lived for so many years is not going to offer the safety and convenience you’ll need for aging in place. You envision, for example, a one story (you now have two floors, a basement, and an attic), easier access to shopping, and (especially) less grass to mow. Fortunately, you’ve realized after some exploratory “drive-arounds”, those changes should not mean moving very far from friends and family members,; you hope no totally unsustainable financial commitment will be involved.

You’re not planning to list your own home for sale until you’ve found the next one, but, at the same time, you want to “gear up” financially and be ready to act. You’re reluctant to sell off a substantial portion of your investment accounts (not knowing, with all the weather and political upheavals, what “blows” might be in store for market value), but the two of you agree that the decision to move –and then to “stay put” — is the smart path to take going forward.  

Once you’ve selected a home that you’re interested in purchasing, you might begin by getting pre-approved for a HECM (Home Equity Conversion Mortgage) for Purchase, also known as a Lifestyle Home Loan.* The concept involves financing the purchase of a new residence with a combination of a one-time down payment and a Lifestyle Home Loan.* The underwritten pre-qualification process for the HECM will have the advantage of having your offer treated seriously. 

Most significant, once you’ve completed the move, so long as the new house remains your primary residence, there will never be a requirement to make monthly mortgage payments.** Of course, you’ll need to keep up with property taxes and maintenance costs, but those might well be lower than those on your current (older and larger) home; you’ll also need to pay any Homeowners’ Association fees that may apply in the new location.

Having made the important decision to “age in a better place”, a reverse mortgage can enable you to size down, all while “upping” convenience and safety in the years ahead.

https://mutualreverse.com/david-garrison

*The Lifestyle Home Loan is a Home Equity Conversion Mortgage for Purchase. **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

HOUSING WEALTH ENABLES AGING IN PLACE IN AN OLDER HOME 

Discussing the article about Indianapolis’ “aging housing stock problem”, you remarked to each other that you’re right in the middle of it…. the aging housing stock problem. While you love your home — and had made the decision four years ago, when you’d both retired, to “age in place”, it’s becoming increasingly obvious that your house has been undeniably aging as well.  “A large portion of housing inside the Indianapolis real estate market is aging…that means roofs, HVAC systems, plumbing, windows, and electrical systems are approaching or hitting replacement age,” Living Indianapolis points out, adding that “renovation costs have not been kind…Labor and materials have surged over the last four years. 

Your own aging in place “renovation cycle” is hardly as uneven as the “long term pain” described in this piece, but it has you thinking: You had the roof replaced five years ago, but plumbing and HVAC system updates will no doubt need to have a place in your plans moving forward. Although yours is a ranch home with few accessibility issues, there are some concrete entryway steps that might later need to be reconfigured. So far, you’ve been able to cover the repairs and updates without borrowing, but the article has triggered some uneasiness.

As both you and your home advance in years, one strategy to consider would be tapping the equity built up in the property in the form of a government-backed reverse mortgage. As needed to fund the repairs and accessibility adaptations, you could tap your HECM line of credit without needing to tap your retirement funds or investment accounts. While you will continue to be responsible for insurance and upkeep of your home, there will be no need to make monthly mortgage payments.* In fact, the unused portion of your home equity will grow at the same rate as that being charged on any borrowed funds. 

Precisely because the cost of labor and materials for renovation have, as the article points out “surged over the last four years”, with reverse mortgage funding, you might well choose to go ahead with the accessibility adaptations sooner rather than later.

It’s your housing wealth that can be the secret to aging in place in an “aging place”!

https://mutualreverse.com/david-garrison

*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

PLANNERS: IN THE RETIREMENT PLANNING PROCESS ==

INCLUDE HOUSING WEALTH AND SOCIAL SECURITY BENEFITS 

In our last blog post “case study”, we introduced a couple who had calculated that, in order to maintain their desired income level in retirement, it was going to take both Social Security benefit checks to augment the annuity and investment income they were going to have coming in. 

In a Kiplinger article we cited, the author noted that noted that that “the timing of the decision to start taking Social Security benefits is highly personal, and important factors such as financial assets, life expectancy, and marital status must be considered”. Personal health conditions, major health concerns with any immediate family members need also considered.

An alternative for the couple would have been to consider tapping the equity in their home through a reverse mortgage, which would serve to cover the income shortfall at least until the older of the two has qualified for the maximum social security benefit.

As a wealth planning professional, you’ve no doubt found that many of your clients are also unaware of the tax planning issues relating to their Social Security benefits. Kiplinger discusses IRMAA, an income-related monthly adjustment amount, the surcharge on Medicare when taxable income exceeds certain thresholds, potentially increasing costs to the client by 3-9% annually. Your tax planning for your clients no doubt involves working with their tax advisors to strategically manage income, deductions, and credits. Since tax planning significantly influences estate planning. (“Understanding how different assets are taxed upon inheritance can guide you in deciding which assets to convert, gift, or leave as donations,” Milestone Financial Planning points out), you’re no doubt coordinating with clients’ estate planning attorneys in exploring retirement planning options.

Just as many estate planning and tax planning decisions are interwoven with retirement planning, housing wealth needs to be discussed whenever clients plan to “age in place”.  A reverse mortgage line of credit, for example, can allow clients to delay taking Social Security benefits, and withdrawals can help fund long term care needs. The equity built up in a home can be used to improve the home environment itself, making it safer and more convenient for senior living.

As an advisor, you’re wise to be cautious about recommending any strategy or product outside of your own training and expertise (or not included in your broker-dealer’s approved product line, as we discussed in post #174, housing wealth considerations help clarify – and complement – retirement planning and social security planning decisions.

https://mutualreverse.com/david-garrison

For professional use only. 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

SOCIAL SECURITY BENEFITS BETTER CLAIMED LATER THAN SOONER

After much thought (arguments, considerations, compromises), you made the decision to retire — both of you –at the end of this calendar year. While the original intent had been for both of you to work until you had both reached “normal retirement age”, you have calculated that, in order to maintain your desired income level in retirement, it is going to take both Social Security benefit checks to augment the annuity and investment income you will have coming in. On the positive side, your cars are in good repair and paid for. The home itself is in good shape with no mortgage, and your hope is to spend the rest of your lives right there. There could possibly be an inheritance in your future, but you can’t rely on that and needed to find ways to secure the income flow now.

Waiting until age 70 to claim Social Security benefits has a double advantage, with monthly payments increasing by up to 8% for every year you wait; the survivor benefit will end up being larger as well. “But to take advantage of higher monthly benefits, you may need to accept some short term sacrifice, a Fidelity.com article advises.”When one spouse dies, the surviving spouse can claim the higher monthly benefit for the rest of their life.”

An alternative to consider would be tapping the equity in your home through a reverse mortgage, which would serve to cover the income shortfall at least until the older of you has qualified for full social security benefits. So long as you keep up your property taxes, insurance, and regular maintenance of the home, you will not be obligated to make monthly mortgage payments.* Meanwhile, two positive things will be happening: your social security benefit will increase by as much as 8% for each year you defer. Meanwhile, with the reverse mortgage structured as a line of credit, the unused portion of the equity still grow at the same rate as the rate of interest being charged on the borrowed funds.

Married couples optimizing their Social Security claiming decision are making use of three things, Brian Alleva explains in the FPA Journal — two worker benefits, and a potential survivor benefit. 

With a reverse mortgage, Social Security benefits can be better later than sooner!

https://mutualreverse.com/david-garrison

*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

REVERSE MORTGAGE FUNDING CARRIES SAME-AS AND UNIQUE TAX BENEFITS

Interesting. The two of you just have beaten this week’s filing deadline to get 2026 property tax credits for senior homeowners. With your combined annual income just under $69,000, you were able to qualify for the $150 credit despite the fact that your property has continued to appreciate nicely. 

The recently passed Senate Enrolled Act 1 offers property tax relief to homeowners. As part of the benefits available as part of that legislation, Hoosiers over 65 are offered a tax credit of $150 (the income limit for qualifying for the credit has been increased to $60,000 for Individuals and $70,000 for couples)

Having made a firm decision to remain in your home for life, you have been exploring the benefits of reverse mortgage funding, with the initial purpose to use part of the equity to do some restructuring of the bathrooms, kitchen, and laundry room. You’ve been attending seminars about reverse mortgages but put the “project” on hold while you focused on the property tax credit topic. Now ready to get “back on track” with interviewing contractors (and raising funds to pay them), you want to better understand whether you’d be losing tax benefits by taking out a reverse mortgage (as opposed to a second mortgage).

You might say that the tax ramifications for reverse mortgage homeowners are both “same-as others” and unique. 

Same-as tax benefits: 

As reverse mortgage homeowners, you will be obligated to continue paying your property taxes (continuing to be responsible for homeowners’ insurance and maintenance casts). Whatever tax credits are available to Indiana homeowners will continue to be available to you.

Unique tax benefits:

The loan proceeds (set up as a line of credit from which you can draw) will be non-taxable. There will be no obligatory monthly mortgage payments.* In fact the unused portion of your equity will grow at the same rate as the rate of interest being charged on borrowed funds. 

Senate Enrolled Act I, (especially since you’ve applied in time to get the benefit this year) will turn out to be good news for you, not only in 2026, but after you’ve accessed the equity built up in your home through reverse mortgage funding.

https://mutualreverse.com/david-garrison

*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