2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

February 24th, 2022

Five years ago, when your father fell ill, you moved back to Indiana from Tennessee to help your mother care for him; after his passing last year, you decided to stay. Your company has arranged for you to work remotely 75% of the time, with your own retirement planned for the fall of 2025. 

In the months before your dad’s health took that dramatic turn for the worse, your parents had been in the initial stages of exploring a reverse mortgage. Their hope was to spend the rest of their lives in that house. Each of your parents had a long term care insurance policy (in fact this insurance helped finance a lot of the at-home nursing costs).

Now that you have made the decision to stay and live with her, your mother intends to move forward with the reverse mortgage, using some of the equity to remodel the home, creating a “suite” for you with an office, a bedroom and bath.  Mom does not anticipate needing your help with household expenses other than groceries; with what your dad left her, she says she is fine financially.

If this has not already happened, it would be a good idea for you to visit with an estate planning attorney to update your mother’s power of attorney and other documents. You are just now learning about the reverse mortgage and have some concerns about what will happen with the home at the end of your mother’s life.

As your mother’s heir, you will be responsible for satisfying the debt after her death. What’s so reassuring is that if the value of the home for some reason should prove insufficient to satisfy the debt, any deficiency would be covered out of the FHA mortgage insurance fund. If you choose not to sell the home, (depending on the remaining equity and your being over age 62 at the time), you might choose to apply for a reverse mortgage of your own at the time as a way to pay off Mom’s reverse mortgage.

Sounds like your mom is moving ahead with her life, It also sounds like she’s lucky to have a daughter like you!

https://mutualreverse.com/david-garrison/

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

February 14th, 2022

Sinatra was right, the two of you agree, as, in your early seventies, you plan your wedding. You’re both retired from professional careers; each of you has managed pretty well financially on a combination of Social Security, pension, and investment income.

Although your courtship began almost five years ago, you’ve recently decided to tie the knot, with a plan to maintain the finances using a his/hers/ours system, with each of you contributing monthly to a joint “pot” for everyday expenses and travel, and each maintaining separate ownership and control of your investment accounts.

One concern is how to combine households – you each own a paid-for home that has appreciated significantly in value. Selling either would generate a large capital gains tax, you fear, and you would also need to work out the best way to share the costs of remodeling the house in which you choose to reside. Looking ahead, you want assurance that when the first of you dies, the survivor can remain in the home for the rest of his or her life. At the same time, you want to treat both sets of adult children fairly inheritance-wise.

A tax advisor can offer guidance; an estate planning attorney can draft documents advice tailored to your situation. Generally speaking, when one of your two homes is sold, the owner should owe no capital gains tax on the first $250,000 of profit. One strategy might be to take out a reverse mortgage on the home in which you decide to live, tapping the equity to fund the renovations. If the two of you are married by the time the owner applies for the reverse mortgage, the non-owner survivor would have the right to remain in the home after the borrower dies.

While combining two households and two lives is hardly without complexity, as Frank Sinatra would agree, both love and home ownership can be lovelier the second time around.

https://mutualreverse.com/david-garrison/

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

February 10th, 2022

The two of you have always agreed on a conservative approach to investing, more or less following the traditional 60/40 mix of stocks and fixed dollar investments. Conservative about money matters in general, you have zero revolving debt. In fact, having decided to remain in your home, you are mere months away from paying off the mortgage. As recent retirees, you have updated your insurance (including long-term care) and have received your first social security checks, which, combined with your respective pension income, should be sufficient to cover your lifestyle needs for at least the near term without tapping any of the portfolio assets. 

While in general, you’re confident that you’ve planned well for retirement, you are concerned about two current trends – the big jump in everyday costs of living, and the rise in interest rates (with the Fed talking of increases to come). You’re worried about your bond holdings, understanding that when interest rates increase, that will force bond prices down. You realize that the yields on other types of fixed dollar investments such as CDs and fixed annuities will do a poor job at keeping up with inflation. In contrast, your stocks and stock funds (not withstanding some recent drops in value) have appreciated beyond your wildest expectations, but you don’t want total exposure to equities. You’ve been reading predictions from different “gurus” and are in a quandary about next steps. 

A reverse mortgage on your home might provide a long-term solution, allowing you to earn interest on the un-borrowed portion of the Home Equity Conversion Mortgage available line of credit. That resource could take the place of your “fixed-dollar” portfolio allocation, with the credit line growing at the same rate at which the loan interest would accrue if you tapped the line of credit. And, unlike the bonds in your portfolio, rising interest rates will serve as a positive, helping to grow your line of credit without a concurrent loss of principal value.

In a sense, while still following the 60/40 model, you could use a reverse mortgage line of credit to replace the 40%!

https://mutualreverse.com/david-garrison/

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 25th, 2022

As a financial advisor, you’ve prided yourself on working in cooperation with your clients’ other advisors (CPA, estate planning attorney, business broker, realtor, insurance agent), even helping clients assemble those advisory teams. It is not unusual for you to host and even “emcee” such advisory team meetings for different clients.

Up until recently, reverse mortgages have not been under discussion at any of these team meetings. For one, your clients have mostly been too young to qualify for reverse mortgage funding. Now that several have introduced their parents to your practice, the topic of housing assets as part of wealth planning has become more relevant, with questions arising about the pros and cons of different types of reverse mortgages.

While there are ways to use a reverse mortgage to help clients achieve a variety of financial goals, one signal that this topic should be included in the “agenda” is clients expressing a strong desire to “age in place”. Since reverse mortgage debt does not need to be repaid until the owners sell, move, or die, clients can plan to spend their retirement years in familiar surroundings.

Since you are the financial advisor on the “team”, the one aspect of a Home Equity Conversion Mortgage most relevant to the services you provide your clients is the financial flexibility they will have to preserve and grow their investment assets. After all, your biggest challenge as a financial advisor consists of helping retirees maintain their desired standard of living without depleting their assets. But, as you’re all too aware, significant market losses in the early years of retirement can dramatically shorten the longevity of a portfolio.

When draws from a reverse mortgage line of credit are substituted for portfolio draws in years following investment market downturns, the longevity of the clients’ investment assets can be restored and even enhanced.

Housing wealth can enable a long term wealth management strategy..

https://mutualreverse.com/david-garrison/

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 24th, 2022

You never thought this would happen, but in your late sixties, the two of you are being given a second chance to practice your parenting skills. Your daughter, a widow, is a traveling healthcare “auditor” and is out of town a good portion of the time. In order to help supervise the two teen children, you decided last year to let all three of them move in with you. As retired educators, the two of you are well-positioned to supervise the grandkid’s studies (including remote learning when necessary), and to chauffeur them to their various activities (neither is yet of driving age). Your daughter has the peace of mind of knowing her kids are well taken care of during her absences.

Fortunately, five years ago you did an extensive remodel of your home, creating a ground floor master bedroom and bath, but still maintaining three upstairs rooms. Your plan was to “age in place”; now you’re “parenting in place”! From a financial standpoint, nothing has really  changed for you, as your daughter is well able to support her own expenses and those of the children; in fact, she has insisted on contributing to the monthly household expenses.

Within the next five to six years, both of the grandchildren will be entering college, and you would like to find a way to help fund those costs. You had used a home equity line of credit to fund the big remodel, and have that loan almost two thirds repaid. Since mandatory withdrawals from your retirement plans will need to start just about when the older grandchild is going to need tuition help, you’re hoping to be able to at least make a dent in the college costs.

As an alternate approach to your situation, consider using your own housing wealth to help with the grandchildren’s education costs. Since your plan always was to remain in your home, a reverse mortgage line of credit can provide the source of funds to help pay college expenses for the grandchildren precisely when most needed. Since reverse mortgage payments are considered loan proceeds rather than income, they are not taxable. You can choose to make each withdrawal precisely when each grandchild is faced with a specific and immediate college expense.

Your housing wealth can help you help those grandkids!

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 13th, 2022

In the year or so leading up to your retirement earlier this year, you put a lot of thought into planning for both best and worst case scenarios. By and large, you’re satisfied that you’ve made very viable investment and retirement funding decisions. You’re pleased with the remodeling work you had done on your home, including a new roof, heating/AC system, a kitchen update, and a greenhouse for your orchid-raising pastime.

Perhaps most important, you’ve reviewed and updated your estate planning documents and insurance plans. In the course discussing those things, you’ve reached firm agreement on one topic: aging in place. Should ill health be your lot at some point in the future, you both agree, you want to do everything possible to remain in your own home. You believe you would be able to afford hiring help to maintain your property.

Should ongoing medical care become necessary later on, you would opt for at-home nursing care you’ve decided. You’ve done some basic research, and learned that home care can actually be less expensive than assisted living or nursing home care, particularly since your home is paid for. In addition, there are two of you, and you could help each other with everyday needs.

While you’ve certainly done some very comprehensive planning as you move into retirement, it would be smart to set up a contingency plan should the dollars needed to cover at-home nursing care be greater than anticipated. Using the equity in your home, a reverse mortgage loan would provide an if-needed source of funds to pay for whatever in-home medical care might be needed down the road.

Using housing wealth could help you keep your healthcare at home!

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 11th, 2022

In accordance with this way of thinking, pre-pandemic, you splurged on a number of luxury cruises and travel adventures. While there are still a number of things you’d like to enjoy, you’ve now become conscious of the danger of outliving your assets. “Longevity risk” was always a factor in your financial planning (both sets of your parent are in their nineties), and recently, you transferred some of your investment dollars into annuities with lifetime payout guarantees

The recent jump in everyday costs of living has given you pause. As just one example, even though your home is paid for and has appreciated in value, the costs of heating and cooling have risen substantially, not to mention food costs. You’re looking for more ways to protect yourselves against asset depletion without reducing your lifestyle.

Consider arranging for housing wealth to serve as your “back-loading” plan for combating longevity risk. By arranging for a reverse mortgage loan on your home, you will be creating a line of credit to be held in reserve for later retirement needs. Of course, you’ll continue to own the home and will still need to pay for heating and cooling, repairs, and taxes. Meanwhile, the equity you’ve built in the home can be tapped for needs later in your retirement.

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

January 1st, 2022

At age 65, you’re almost one full year into what you call “3/4 retirement”, having quit full- time employment at the end of February, 2021. So far, so good; with your planned monthly withdrawals and a couple of tutoring gigs, you’ve been easily able to cover all your lifestyle needs. However, you’re concerned about continuing this level of portfolio withdrawals if there are sharp dips in the stock market over the next year or so. Because you will have paid off your home by this summer, there will be one less monthly expense you need to worry about. You’ve estimated that you could cut expenses by one fourth at the most, but are hoping that won’t be necessary.

When managing your retirement budget, consider all your assets, not only your investment portfolio. Your housing wealth can act as a buffer when volatility appears to threaten the stability of your portfolio assets. If, as you fear, the stock market were to experience losses during the coming year, you could draw from your reverse mortgage line of credit until the market stabilizes. Because the proceeds from your reverse mortgage credit are not considered income for tax purposes, it’s possible that you would need to take out smaller amounts than you now receive from your portfolio withdrawals.

It sounds as if you’ve done some careful planning, but, like many retirees, are very concerned with stabilizing your income flow in the face of market fluctuations and maintaining purchasing power over the years. A reverse mortgage line of credit might provide a useful “backup plan”, with home equity serving to “buffer” the inevitable ups and downs of the market.

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

December 21st, 2021

Although your original plan had been to take on consulting gigs after retirement (planned for the end of next year), the two of you have recently become interested in owning and operating a franchise business together. You’ve been exploring businesses in fields very different from those of your present employers, more in line with your hobbies rather than your experience. Nevertheless, you’re confident that your decades of successful work (in marketing and customer service, respectively) will lead to success, particularly since you plan to get involved with only a successful national brand business.

While you have been “stockpiling” cash reserves to cover the initial franchise purchase price, much of your other invested assets is in tax-deferred retirement plans. You want those portfolio(s) to remain in place, generating quarterly and monthly income until you begin to generate reliable income from the new business. A mortgage refinance is among the tactics you’re considering (the existing first mortgage is one year from being fully paid).

Acquisition financing is one of the challenges for people contemplating becoming franchisees, and it sounds as if you have that part covered. In fact, franchisors are looking for people to support themselves until their new business “clicks”. Rather than taking out a second mortgage on your home, consider tapping into the equity you’ve already built up by applying for a reverse mortgage. You’d continue to own and live in your home, but you’d have a source of tax-free funds which you could use as needed, avoiding the need to sell off portfolio assets. Once the mortgage is in place, that asset “reservoir” is sure to be a positive in the eyes of a potential franchisor.

As you “back away” from your lives as employees and begin your new lives as business owners, your reverse mortgage will cushion your foray into franchising.

https://mutualreverse.com/david-garrison