While your intention is to continue living at home for the rest of your days on Earth (your husband died almost eight years ago), you realize that, with both your children living in other states, neither is going to want to inherit the house, beautiful as it is, once your own life is over. For that very reason, you are considering transferring half ownership to the kids while you’re still alive. In case some health setback were to force a move to move to some kind of care facility, the children could simply wait for the right time to sell and handle everything. You would not need to concern yourself with “prepping” the property, hiring a realtor, etc.  

An tax advisor or estate planning attorney would probably point out to you that transferring a home to your children during your lifetime (as opposed to naming them beneficiaries in your will or trust) may not be such a good idea. Assuming your home has greatly appreciated in value over the years you’ve owned it, at least under current tax law, if you die while still owning the home, there would be  a “step-up in basis“, avoiding a large capital gains tax liability for your children, an advantage would be lost were you to transfer your home to your children now.

There’s a second reason to avoid giving the home to your children now. You might be deemed ineligible for Medicaid benefits if ownership of the home has been transferred within five years of applying for benefits Medicaid. (You would be seen as having given away assets which could have been used to pay for your care). 

A more viable and flexible plan might be to apply for a reverse mortgage as a way of establishing a source of growing wealth earmarked to go to your children upon your death. Under such a plan, were ill health to force a permanent move out of the home, the children would have six months (plus possibly two ninety-day extensions) to either sell the home or satisfy that loan with their own funds and holding onto the property for as long as they cared to.)

While it may not be practical for your children to be given ownership of your home now, your housing wealth will remain an important part of your legacy to them.

https://mutualreverse.com/david-garrison

Please consult a tax specialist. This is not tax advice. 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.orgEqual Housing Lender

With both of you now in your in your mid-seventies, you’ve decided it’s time to move out of your three-story home with elaborate landscaping, into something more appropriate to what the AARP likes to call “aging in place.” You have been contemplating building a home that is more in keeping with your tastes and needs, rather than buying one and are considering one of the newer communities 45-60 minutes north of your present location. 

While you do have liquid funds sufficient to fund a down payment, you’re concerned about the timing of the sale of your present home, not to mention once again taking on the burden of a mortgage.  

With an earnest money deposit, many custom homebuilders will finance the building of a new home until it is ready to for you to occupy. At closing, the money owed the builder will come from a combination of the proceeds from the sale of your present home and a HECM (Home Equity Conversion Mortgage) for Purchase, which is a reverse mortgage on the new home. 

It might well be that you have money left over from the proceeds of the sale of your present home, which can be used for furnishing the new home or adding to your investment accounts. There will be no obligation to make monthly mortgage payments;* if you should choose to “replenish” the equity in the new home, that money will grow at the same rate as that being charged on the reverse mortgage loan.

A Home Equity Conversion Mortgage for Purchase can smoothen your move from  your “good”  to your “best and last” home! 

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.orgEqual Housing Lender

Recent political and stock market volatility seems to have combined, throwing many of your clients “for a loop”. One retired couple in particular – (for the sake of confidentiality, you refer to them as “Jack and Jill”), are worried that, not only is their portfolio under threat, but that they will now be unable to carry out their plan to escape Indiana winters and  acquire a second  residence in South Carolina.

While all your clients have been conditioned to understand that panic selling of assets is never a good idea, and that long-term positives outweigh short-term volatility, there’s no doubt that , for “Jack and Jill”, making the planned substantial cash withdrawal needed to finance the purchase of a winter home would not be wise.  Proud that their present home has been mortgage-free for years, the couple has been considering  applying  for a line of credit in order to move forward with the South Carolina property purchase, reasoning that such a move would at least avert a monumental “hit” to their investment assets.

One stratagem well worth discussing with your clients is leveraging the power of their own housing wealth in the form of a reverse mortgage on their current home” to help finance their new South Carolina home. Not only are many clients unaware of their options in this regard, but many financial advisors are unaware of the extent of “cash” such a transaction can ‘bring to the table” for homeowners of retirement age who want to – or, who have for medical reasons be advised to – escape Indiana winters.

(As just one example, for homeowners in their 70s, given current interest rates, a reverse mortgage on their current $750,000 home might contribute as much as $260,000 to the purchase of a second home in South Carolina.

Important to understand, given the Jack and Jill situation, no monthly mortgage payments are ever required on a reverse mortgage, provided they maintain their obligations of real estate taxes, maintenance costs, and homeowners’ insurance. Later, should the investment climate turn “sunnier”, any monthly mortgage payments* they decide to make will flow dollar for dollar into a line of credit that will grow at the same rate as the interest being charged on the borrowed equity. 

No financial advisor can assure clients that the investment “climate” is bound to improve. On the other hand, introducing “Jack and Jill”  to the concept of a HECM for Purchase might result in a three-fold benefit – helping  them  escape our Hoosier winter weather while “staying put” – in both their present home and  in their investment portfolio! 

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.orgEqual Housing Lender

A year or two ago, you had come to the decision to remain in your home rather than relocating to a nearby retirement community. However, while even the crazy weather variations of this past Indiana winter have not changed your minds about moving, you have been giving thought to owning a second, smaller home someplace south – where you can enjoy sunnier – and warmer – winter seasons.

A review of your finances shows that you do, indeed, have sufficient resources to both make a meaningful down payment on a second property, even to furnish it. An outright purchase, though, would mean overhauling your investment strategies to an uncomfortable extent.

It appears as if a HECM (Home Equity Conversion Mortgage) for Purchase might offer a solution. Backed by the Federal Housing Administration (FHA), a HECM refinance on your current residence could create enough cash proceeds to allow you to purchase your second smaller home down south. 

As just one example of the extent to which a HECM for Purchase (H4P) can positively impact the transaction of a second home purchase,  given current interest rates, a for a seventy-year old purchaser, the H4P could bring $263,000 towards the purchase of a $750,000 second home!

With the understanding that you must continue to occupy your Indiana property more than six months out of the year, there would be no obligation to strain your budget resources by making mandatory monthly mortgage payments.* (You’d continue to be responsible for property taxes, homeowners insurance, and home maintenance costs.) 

If enjoying the “warmth” (in place of the “worst”) of winter seasons to come sounds like the retirement existence you envision for yourselves – you’re in the mindset to explore how a HECM for Purchase can help you transition into the “Snowbird scenario”!

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

In your very first year of retirement, you found the recent wild fluctuations in the investment markets downright terrifying. While you have never been a “Nervous Nellie” when it comes to your portfolio, having put money into your investment portfolio for as long as you can remember through all the ups and downs over the years, now that you’ve begun systematically withdrawing funds, the “vibe” has definitely changed.  You’ve just finished paying off, not only the primary mortgage on your home, but also the second loan you took to finance the age-appropriate adaptations you had done to the property itself.

The plan has been for your wife to retire at the end of this calendar year, at which time a systematic withdrawal plan was planned out of her Teacher Retirement and annuity accounts. The original thinking was to postpone Social Security beyond the so-called Normal Retirement Age for each of you. You’re not so much concerned about paying for basic living expenses as covering some lifestyle luxuries you’ve been waiting to enjoy.

There’s a name for the particular brand of worry you’re experiencing – sequence of return risk. When the investment markets decline early in one’s retirement, even if it later stages a dramatic recovery, the longevity of one’s portfolio can be shortened in terms of being able to make periodic withdrawals of cash to support your lifestyle needs.

Like many who happen to retire just prior to a very volatile period in the market, you need a buffer, one that doesn’t involve taking assets out of the market just when those assets need to work their hardest for you. Consider “reversing the sequence” by using your housing wealth for support. In other words, with a reverse mortgage line of credit, you could defer tapping your retirement portfolio, instead supporting those “lifestyle luxuries” with periodic, tax-free* “draws” out of the equity you’ve built up in your home.

Important to understand is that, unlike the first and second forward mortgages you used to have, no monthly mortgage payments** are ever required on a reverse mortgage, provided you continue to pay real estate taxes, maintenance costs, and homeowners’ insurance. Should you later decide to make any payments, those amounts will lower the mortgage balance, add to the line of credit and grow at the same rate (plus1/2%) as the interest being charged on the borrowed equity”.

Rather than becoming “terrified” at recent turn of events in the market, you can shore up the sequence of returns, keeping  your eye on the long game.

https://mutualreverse.com/david-garrison

*Please consult a tax specialist. **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.orgEqual Housing Lender

After sharing with your son, daughter, and daughter-in- law your plan to remodel your home with an eye to “staying put” (as opposed to moving into a retirement facility as your daughter-in-law’s parents have recently done), your daughter (single and living nearby) surprised you by expressing an interest in someday inheriting the home. 

In the process of setting up our powers of attorney and other documents, you had not considered that either of the children would actually want the home, which is four months away from being mortgage-free. You have more than enough money set aside for the costs of reconfiguring the sleeping quarters, installing certain safety rails, and even changing the access pathways, but now want to be sure that a) the aesthetics will be suitable for a younger resident and that b) you change our estate plan so as to equalize the value we pass on to each of the two children.

Given this changed view of the future now keeping the home “in the family”, you might consider a combination of two financial strategies:  1) a HECM, or reverse mortgage set up as a line of credit on your home 2) a survivorship whole life insurance policy, which would pay a death benefit to your son after the second of you has passed away. 

While there is no way to know precisely what the market value of your home will be years into the future, the idea would be to “equalize” the inheritances you leave to your two children, with your son receiving the insurance proceeds, your daughter the home. 

Meanwhile, the reverse mortgage would ensure that both of you have the right to remain in the home for life. As you continue to “age in place”, you will be able to “draw” on your own housing wealth to help finance any unforeseen additional remodeling costs, as well as to help pay the insurance premiums. (Your estate planning attorney can discuss with you setting up a life insurance trust to implement the plan.)

Over the years to come, you might choose to “repay” part or all of the borrowed amounts, with any unborrowed portion of your equity credited with growth at the same rate as the interest accruing on the mortgage balance.

Think of this combination as an “aging-in-place, then bequeath” housing wealth management plan!

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.orgEqual Housing Lender