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

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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 

TAKE IT FROM YOUR UNCLE — REVERSE MORTGAGES FUND FINANCIAL GOALS

“Reverse mortgages emerging as retirement planning tool for high-net-worth homeowners,” a recent KDH news headline reads. Dionne Warwick might ask, “What’s it all about, Alfie?”, but the answer is far from puzzling. While in earlier years, KDH explains, reverse mortgages were associated with retirees facing financial hardship, today, affluent homeowners use them for strategic financial planning.

It is to be noted that, over the past six years, in this Shift Into Reverse blog, we’ve been mainly referring to federally insured reverse mortgage loans, there are also proprietary, so-called “jumbo” reverse mortgage loans available for use by high-net-worth homeowners. As “private” loans, these “jumbos” allow homeowners younger than 62 to leverage their home equity, and also allow access to a larger percentage of housing wealth.

At a recent family gathering, you got into a conversation about financial matters with your 58-year-old nephew, who proceeded to “pick your brain” about retirement planning strategies he and his wife have been contemplating. Knowing that, years ago, you and his aunt had taken out a reverse mortgage, your nephew wanted to learn more about your experience. While he may be too young to qualify, you’re enjoying the fact that as a highly successful entrepreneur who is far, far wealthier than you have ever been (and owns a home valued at multiples more than yours); appears to value the advice of his eighty-three-year-old uncle…. 

What you shared with him is that, for you, freeing up the equity in your home allowed you to finance the rather extensive repair/remodeling that enabled the two of you to “age in place”; you were able to accomplish that goal without interrupting or reducing the cash flow from your portfolio. Your nephew, in contrast, is not contemplating retirement any time soon, but is wanting to have access to financial resources for business purposes. He wants to increase his exposure to what he describes as a “historically exciting business investment climate”.

Not all reverse mortgage candidates “need” financial help; as is true of your nephew, financial secure borrowers are looking for liquidity and flexibility. Your nephew might qualify for a proprietary or “jumbo” reverse mortgages (which are private loans not insured by the Federal Housing Administration), which allow for homeowners over age 55 to access their home equity. What’s more, while the current limit on reverse mortgages is just over $1.2 million, jumbo loans for qualifying borrowers can be as high as $4 million. 

Your nephew will need to speak with a reverse mortgage professional, but you can share with him that, just as has been true on your own reverse mortgage loan, jumbo reverse mortgages are non-recourse, meaning that borrowers will never owe more on the loan than the appraised value of the home. What’s more, unlike the case with your loan, where you needed to pay mortgage insurance premiums both at closing and as an ongoing annual cost, jumbo reverse mortgage borrowers do not pay insurance premiums.

“Take it from your eighty-three-year-old uncle”, you can say – “as a high net worth, not-yet-retired, homeowner, you nephew might wish to explore the many uses for jumbo reverse mortgage funding…”

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 DAD AND DAUGHTER HELP EACH OTHER

After your wife’s passing more than a decade ago, you made the decision (you were 71 at the time) to spend your remaining years in the familiar surroundings of your home. While all your children stay in close touch, your sons and their families live quite far away; your daughter, a healthcare worker, has always been nearby. The oldest of your three children, divorced these many years, your daughter has struggled financially. Yet, among the siblings, she’s proven the most devoted to your welfare. 

Over the past couple of years, your health has been on somewhat of a downward path, and, while you’ve been able to remain independent, it has become more challenging to manage home maintenance and upkeep. Driving is still possible, but it’s become evident that you’re going to need some help, at least a couple of days each week, to relieve your daughter, who has been helping with the shopping and food preparation.  

Through church, you attended a talk about reverse mortgages. You’ve been considering that idea for yourself, given that your home is mortgage-free and, judging from a recent sale in the neighborhood, has grown substantially in value over the years. Tapping into that value, you realize, might be the only way to afford home health care. 

Meanwhile, though, your daughter has suggested moving in with you, which would save her having to pay apartment rent. Your home is certainly large enough, she points out, to afford the privacy she’d need. With her help, she adds, you would not be burdened with paying for expensive home healthcare.

While, on the face of things, the idea of having your daughter right there is very appealing, you want to be sure you’re not putting your own needs ahead of her future security. She would need to be guaranteed the right to remain in your home in the event your health deteriorates to the point of having to move to a hospital of nursing home. Does a reverse mortgage still fit this situation, you’re wondering?

If your daughter is 62 or older, she can become a co-borrower on a HECM reverse mortgage, which would guarantee her the right to remain living in the home if you were not longer able to stay there (either because you’ve had to go to a medical facility or you’ve passed). However, because the reverse mortgage loan calculation will be based on the age of the youngest borrower, the available loan amount is going to be significantly reduced. If, on the other hand, you decide not to have her as a co-borrower on the reverse mortgage loan, when the time comes that you have not been able to occupy the home for more than a year, your daughter would need to pay off the balance in order to remain in the home.

According to Psychology Today, nearly one in eight adults in the U.S. is caring for an aging parent, and “family caregiving is increasingly recognized as a normal phase of the parent/child life cycle.” Finding and paying for home health care, the authors note, is a real challenge. With your daughter a healthcare professional (and willing to live in your home), it certainly sounds like an arrangement worthy of serious consideration (with both an estate planning attorney and a reverse mortgage professional). 

With reverse mortgage funding, your home equity can help you and your daughter help each other.

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.org

Equal Housing Lender