STEPPING UP TO PARENT THE SECOND TIME AROUND 

It’s supposed to work the other way around, but your reality is that, in your early 70s, you have become “substitute parents” for your two granddaughters, one now 8, the other 13. While your ex-daughter-in-law, a traveling nurse, has always needed to work out of town a good portion of the time, your son had regular hours and had been able, even after the divorce, to manage with the help of a neighbor. Circumstances have changed in two terrible ways: Your daughter-in-law is on disability leave; your son was downsized and had been supporting himself with temporary job assignments, many of which require him to drive long distances.

In order to help supervise the two girls and keep their routines as stable as possible, you’ve offered to have them and their father move into your home. With your husband a retired educator, he is in a position to help supervise the girl’s studies; you can help drive them to their various activities, as well as to visits with their mother, allowing your son to focus on finding new, permanent employment. From a financial standpoint, your plan is to charge no “rent” until your son’s home is sold, and, in fact to help finance clothing, fees, etc. for the granddaughters until the situation “settles itself out”. Contributions to the college fund that your son and daughter-in law had created for the girls will simply need to be put on hold for the time being.

Amidst all the sorrow about your daughter-in-law’s condition and your worry about your son’s livelihood, you are trying to be realistic about your own financial situation. You had used a home equity line of credit to fund the big retirement remodel; you now have that loan about three quarters repaid. Your regular system of taking money out of both your retirement accounts as well as from your jointly owned investment account, along with your social security benefits, should, at least in the near term, suffice to cover the increased food and other household costs. 

As an alternate approach to this challenging family situation, consider using your housing wealth in the form of a reverse mortgage line of credit. You would continue, of course, to take care of home maintenance costs, taxes, and insurance. Once your reverse mortgage has paid off your existing HELOC loan, (and the required monthly mortgage payments* have been eliminated) future withdrawals from the remaining equity would be nontaxable.** Any unused portion of your housing wealth would grow at the same rate of as that being charged on the borrowed funds.

With the family situation so subject to change (given your ex-daughter-in-law’s health issue and your son’s employment uncertainties), a reverse mortgage line of credit can help you help them, but only for as long as – and to the extent needed.  

Your housing wealth can help you help your child- the second time around!

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. **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.orgEqual Housing Lender

BUILDING A PATH TOWARDS AGING IN PLACE 

While you and your husband have not changed your minds about spending the rest of your lives at home (as opposed to moving into a retirement facility apartment), following a series of lengthy meetings with contractors of various types, you may have changed your thinking about where this “aging in place” will in fact take place. With your three children and their offspring are spread out in different states (you travel to visit them, rather than them visiting you). Your three-story house is not only far larger than you need, but the property has far too much acreage. Even with a “facelift”, you’ve come to realize, this home is not really going to be suitable for your future lifestyle needs. 

As a next step, the two of you began looking at homes for sale, both in your present neighborhood and in the newer suburbs northward. Knowing that some friends had worked with building contractors to design a home tailored to their tastes, you’ve even considered going that route. You know your present home has appreciated considerably in value. From a financial viewpoint, in addition to your respective retirement plans (yours 403b, his 401k), you have a jointly owned portfolio and cash account. Still, you are concerned about managing all the financial aspects – not to mention the logistics of selling one home, building another, and moving.  

In your quest to age in a home of your own, but in one more suitable for a senior lifestyle than your present pace, building, as opposed to purchasing, can “buy” you the time prepare your present home for sale. A HECM for Purchase is a financing option that allows you to use a reverse mortgage to pay for up to half the total sale price of a new home.  In a single transaction and one (not two) set of closing costs, you complete your new home purchase and your mortgage. So long as you continue to live in that new home, taking care of property taxes, homeowners’ insurance, and maintenance costs, and any HOA fees, you will not be required to make monthly mortgage payments* on your reverse mortgage.

You might consider moving forward by taking two steps:

Contract with a builder and make the down payment. (Typically, you will not need to come up with the rest of the purchase price until the home is finished.) 

Get prequalified for a special type of reverse mortgage – a Home Equity Conversion Mortgage for Purchase (which you will not use until a Certificate of Occupancy is issued and it’s time to take possession of your new home).

You will be avoiding participating in the “bidding wars” that often accompany the quest to purchase an existing home, all while “locking in” the purchase price of your future home, all with an eye towards building a path towards aging in 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

While stock market growth has worked in your favor these past two years since you retired, you are feeling far less secure going forward. You’ve been exploring possibilities for refinancing your home as a way to feel more secure about your own financial future.Widowed more than a decade ago, you are not planning to remarry, but you are very actively involved in cultural activities with friends, intending to make every effort to remain in your neighborhood. You’ve kept the house maintained and both indoor and outdoor décor updated, and hope to be able to live at home for decades to come.

A recent seminar you attended with a female friend dealt with ways to “utilize housing wealth” in retirement. Your friend liked the idea of having an equity line of credit, and, frankly having a source of extra cash sounds appealing for you as well, given the chance that the market value of your investments (as some pundits would have it) might take a “hit” in the not-so-distant future. At the same time, you understand that the equity in your home is a finite resource, and when you reach the limit of that equity line of credit, the money flow could come to an abrupt end.

Some clarification might be needed here. True, if you were to take a reverse mortgage structured as a line of credit, once the entire benefit is used up, no further draws will be permitted. At that point, you would have the choice of refinancing to take advantage of any appreciation in value that has taken place. The other important advantage is that, whatever portion of your credit line is not used will keep growing, increasing at the same rate as the interest being charged on the borrowed portion of the line.

A second approach is to take the reverse mortgage benefit in the form of a lifetime tenure payment, which continues for as long as you reside in your home, regardless of how long that is. Just as, in academic institutions, permanent employment status is granted to individuals after a probationary period, a tenure reverse mortgage payout is :”permanent” for as long as you occupy the home.

https://mutualreverse.com/david-garrison

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

When Sinatra crooned “Love is lovelier the second time around”, you’re pretty sure he wasn’t referring to a home mortgage refinance. In fact, in the years leading up to your retirement from full-time employment (six years ago now, with your wife having retired a year prior to that), year earlier), your focus had been on “retiring” your home mortgage. 

Post-retirement, having decided against following some friends into retirement community living and in favor of “aging in place”, you took out a reverse mortgage, using a portion of the equity line to restructure the home’s interior to improve navigability and safety. Other than those expenditures, you’ve not found the need to make withdrawals from your Line of Credit since then. Meanwhile, not only have you enjoyed “staying home”, you’ve noticed that real estate values in your neighborhood have continued to escalate. Although your own decision to stay put has not changed, you would like to find a way to take advantage of the increase in value of your home and are wondering whether refinancing the reverse mortgage loan is a viable move. 

An appreciation in home values in your area is certainly reason enough to at least consider a HECM-to-HECM refinance. A new appraisal (sometimes the lender might require using the lower of two appraisals) would be needed, with the possible result being a significant increase in the Line of Credit available for your use (tax-free*) for years to come. 

As you know, all reverse mortgages are non-recourse loans, meaning that, so long as you continue to occupy the home and keep up with the maintenance and insurance costs, no monthly mortgage payments** will ever be required. With no monthly mortgage payments** due, you will never be “upside down”; neither you nor your heirs will ever owe an amount greater than the value of the home itself. 

 It will be reassuring to have a larger line of credit as, on the one hand, a “buffer” against future inflated medical and daily living costs, and, on the other hand, a source to tap for travel and other luxuries.

Just as Sinatra used to croon, referring to love, you may well find that a reverse mortgage is lovelier the second time around!

https://mutualreverse.com/david-garrison

*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.orgEqual Housing Lender

While in general, you’re confident that you’ve planned well for retirement, you are concerned about the increasingly obvious rise in everyday costs of living. The two of you have always shared investment decisions, taking a conservative approach, continuing your pre-retirement 60% stock/40% fixed income model. With zero revolving debt except for a car loan, you’re just around six months shy of paying off the mortgage on your home (where you’ve decided to spend your retirement years). Just months shy of completing your first full year of retirement, you are now both receiving regular Social Security checks. Combined with pension income and very modest systematic withdrawals from retirement accounts, you’ve been able to cover lifestyle needs and maintain your “hybrid” life/long term care insurance policy. 

Taking a realistic view of your portfolio choices going forward, your instincts tell you to skew more heavily towards fixed income, reducing the chance of big drops in the stock market. At the same time, you’re afraid to become more “conservative” at a time when your costs of living are undeniably rising. You’ve been reading predictions from different “gurus” and are in a quandary about which would be the next best steps to take. 

One asset you’ve apparently overlooked in the planning is the equity built up in your home. (Given the rise in real estate values, that equity has probably grown substantially.) A reverse mortgage might become an element in your long term “portfolio planning”, with the un-borrowed portion of your housing wealth used as a surrogate for the “fixed income” part of your asset allocation strategy. The growth earned on the un-borrowed portion of a Home Equity Conversion Mortgage line of credit would be a “surrogate” for the “fixed dollar” portion of your portfolio, because the unborrowed portion of your credit line will grow at the same rate as that being charged on the loan itself.  

While the reverse mortgage itself is a form of debt, it’s reassuring to know that it is a non-recourse loan. With no monthly mortgage payments* due, you will never be “upside down”: neither you nor your heirs will ever owe an amount greater than the value of the home itself. Once the reverse mortgage financing has been set in place, you might feel comfortable increasing the allocation to stocks in your investment accounts, in turn increasing your chances of keeping up with rising living costs.

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

Your neighbor (like yourself in her late seventies) recently confided that she is in the process of what her dentist is calling a “rebuild” of her mouth. The six-nine-month long series of procedures, including extractions, surgeries, and dental implants, will improve not only her appearance, but enable her to enjoy eating again. Seeing this friend’s self-confidence so visibly improved, you decided to have her dentist do an assessment of your own mouth and propose a treatment plan. When you reported that you’d left the encounter excited by the possibilities but horrified were horrified by the cost, your neighbor confided that she was using reverse mortgage withdrawals out of the equity in her home to fund her dental work.  

While you like the idea of having a ready source of funds, not only to rebuild your own mouth, but to cover any other large medical costs that might arise in later years. Your home has been mortgage-free for a decade and you know it has appreciated considerably in value. Your biggest hesitation in moving forward comes from the fact that you’ve taken pride in having worked hard to become – and stay – debt free. Although neither of your children is in need of – or expecting – financial help from you, the thought of taking on a new, hefty debt obligation is daunting. 

A reverse mortgage is about converting an otherwise illiquid asset (it sounds as if it also your largest) into one that addresses a need – or at least a significant improvement in well-being. The potential dental “rebuild” aside, ask yourself – what alternatives are available to you to help defray future medical and dental bills? To what extent would those costs be covered by insurance, including Medicare, supplemental health insurance, and Long-Term Care insurance? 

Of course, your friend’s situation may well be different from your own. Is it her intent to “age in place” in her home?  Is that your intent for your own home? 

Yes, a reverse mortgage is definitely a debt, and all debt needs to be carefully considered – and carefully managed. It’s reassuring to know that Home Equity Conversion Mortgages (or HECMs), unlike other forms of debt, are non-recourse loans, which means you will never be “upside down”, owing an amount greater than the value of the home itself.  With a reverse mortgage set up as a “line of credit”, you can make tax-free* withdrawals. Whatever portion of your home equity that has not been withdrawn, meanwhile, will be credited with interest at the same rate as that being charged on the outstanding loan balance.  And, so long as taxes and insurance are paid, you may remain in your home as long as you wish.

When, almost forty years ago, reverse mortgages were created, it was specifically to allow older Americans like yourself a way to meet and manage current and future financial contingencies.

Remember the line, “Smile, you’re on Candid Camera”? As is true for your neighbor, your line might be “Candidly, a reverse mortgage can help fund your new smile!”

https://mutualreverse.com/david-garrison

*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.orgEqual Housing Lender

Your plan had been to work at least until your so-called Social Security “normal retirement age” of 67, but here you are, barely 62, victim of a pandemic-based downsizing. You have been applying for jobs and will certainly find a way to earn some money, but there is little prospect of continuing your former standard of living. You’ve considered taking early Social Security to avoid the cash crunch, but learned, much to your horror, that the reduction in your monthly benefit would be in the four figure range!

You do have a 401k plan, but it was impacted in the course of the divorce (in order to keep the home, which has only a modest mortgage balance remaining, you needed to reduce your share of other assets). In any event, you’ve learned, now that you’re no longer part of the company, you cannot tap the 401k through a loan; any withdrawal would be fully taxable. There could possibly be an inheritance in your future, but you can’t rely on that and need to find ways to bridge the financial gaps now. Although your credit record is good, without being able to demonstrate a reliable current income source, you’re not sure you’d qualify for a second mortgage or home equity line of credit.

In order to bridge the financial gap between now and Normal Retirement Age, consider using the equity in your home as the stopgap funding source. In a government-insured reverse mortgage line of credit, the equity in your home will serve as the loan collateral. Not only will there be no obligation for you to make regular monthly mortgage payments,* but you can begin taking “draws” to supplement your income. 

Over the course of the coming five years, depending on your success in finding part time or full time work, you can decide at any point to stop making withdrawals and even to begin optional repayments. So long as you keep up with property taxes, insurance, and regular maintenance of the home, you will not ever be obligated to make monthly mortgage payments.* Meanwhile, your 401K balance can continue to grow tax-deferred, while your Social Security benefit is “growinng” to its “normal retirement” size.

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

“As advisors, we’re often programmed to believe we are fiduciaries of the capital clients give us,” Tai-Chim Tung observes in Advisorpedia. “That’s certainly true,” she says, “but a big part of being an advisor is the actual business of advice..”.

As a financial professional, one uncomfortable aspect of this “actual business of advice” is that, while you’re often asked, nowadays, about reverse mortgages, (representing a “product” not offered by your broker-dealer or parent company). Even as your own reading and study are describing the use of housing wealth as a “critical tool for retirees looking to protect their lifestyle and legacy,” you’re fearful of discussing reverse mortgages with your clients.  

After all, you’re thinking, as the principal financial advisor for many of your clients, you are the one who has the most detailed understanding of their past and current financial situation, their investment profile, housing intentions, and their general health situation. If anyone is in a position to address their questions about financial options, it’s you. You’re dedicated to “prioritizing the best interests of each client (FINRA’s Suitability Rule and SEC’s Regulation Best Interest), and would not like to steer clients away from options that might prove appropriate for them. At the same time, you’ve no desire to violate the policies of your broker-dealer.

While you certainly must proceed cautiously when talking with clients about the products and services outside the purview of your broker-dealer, the topic of government-insured reverse mortgages belongs on your need-to-know list. Careful not to either recommend or “critique” reverse mortgage financing, (and explaining that this is outside your area of expertise), you  might suggest to certain clients that they seek the advice of a reverse mortgage specialist.  

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

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

You feel at once blessed and proud, because in taking stock of your lives since retirement, the two of you have succeeded, through your own endeavors, in building assets you inherited from parents and grandparents into a nice, if not newsworthy, estate. 

You live on a property that’s been in the family for generations, now updated and remodeled, where you’re hoping to spend the rest of your days. With no children of your own, you have funded college costs for several nieces and nephews. However, you have agreed that, in your estate, you will not leave assets to individual beneficiaries; your plan stipulates that, upon the second of your deaths, the primary beneficiaries will be three different charitable organizations (one of those will inherit the property itself.)

Although the current value of your joint estate is in the low seven-figure category, you are far from needing to be concerned about estate taxes. More important to you is keeping control of your financial assets in order to maintain your own (not overly lavish) lifestyle and being assured of adequate “rainy day” money for even the most extreme of healthcare needs throughout both your lifetimes. 

You appear to have given very careful thought to the way in which you hope to share whatever wealth remains at the end of your lives. In terms of ensuring adequate coverage for your own healthcare needs, a reverse mortgage on your primary residence might offer a solution, with the line of credit serving as your “rainy day fund.” With that resource in place, you can move forward with your charitable gifting. (The interesting aspect of a reverse mortgage is that, to the extent you do not draw down the line of credit, the arrangement includes a growth feature, with the untouched balance continuing to increase by the same rate as the interest being charged on the outstanding loan balance). Someday, when the home passes to the charity you’ve chosen, they may choose to pay off the loan and keep the home.

Meanwhile, having a reverse mortgage “fallback fund” in place for unforeseen medical needs tomorrow can allow you to move ahead with those charitable gifts today.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

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