Making Sense of Reverse Mortgages Information you need to make a good decision!

October 29, 2013

How Reverse Mortgages can Benefit Older Divorcing Women

Filed under: divorce,financial planning,Reverse Mortgage — Scott Larson @ 9:20 am

Forbes.com has an interesting piece in their Personal Finance column by Jeff Landers about “Grey Divorce”  and it’s impact on older women.  There are significant differences that have to be addressed due to the amount of time left to “recover” financially, when compared to a younger cohort.

When considering whether to keep a house affordability is a primary concern, and if a woman is in a position to set up a reverse mortgage when she reaches 62, it may impact her decision whether or not to fight for the house in a divorce situation.  It is only a small part of the divorce decision, but once again a reverse mortgage could be useful tool in the right situation.

One other thing to consider is how the memories will impact the decision to stay.  Having been through a divorce myself, and also when I lost my father, a decision had to be made regarding real estate.  You need to consider if the memories are positive, or if they impact negatively on your willingness to stay in the home.  If the decision is to stay, a reverse mortgage may be a tool to help.

To read the Forbes.com article, click here

October 22, 2013

Reverse mortgages as a financial planning tool

What’s the first thing you think of when your hear the term “reverse mortgage”

Bad?  ripoff?  Wow, Fonzi has gotten old…

What you should start thinking of is financial planning…

The Wall Street Journal recently published an article highlighting a use of a reverse mortgage that I have been recommending for years.  As we learned from the financial crisis, even though you may need money, it is not always the best time to sell your assets. Whether it is stocks or real-estate, the markets move independently of your needs.

For a wealthy, or even not so wealthy, retired borrower, this can obviously present a problem.  Your assets need to last as long as possible and you would like to wait for the market to recover before selling your assets…

You are 62 and you were just laid off.  Social Security is available to you but you know that if you can wait until age 65 that your social security will be substantially higher…

You don’t mind selling the assets, but you want to shift the tax burden of that transaction into next year…

You want to balance out your interest payments with the sale of an asset without harming your cash flow

These are all examples of where a reverse mortgage can be used as a financial planning tool to help buffer the winds of financial change.  Setting up the reverse as a line of credit allows a senior to make a choice of where to draw the assets they need, without impacting their cash flow.

“Retirement is really about cash flow,” says Martin James, a certified public accountant in Mooresville, Ind. in the WSJ article

Traditionally financial planners recommended a home equity line of credit for this purpose, but many homeowners were taught a hard lesson when their credit lines were cancelled by the bank, in spite of perfect payment records, or even though they carried no balance!  One of the benefits of a reverse mortgage is that the line of credit cannot be cancelled.  Then add an additional benefit of no payments being required and you have an incredible planning tool.

This has been studied by financial planners at Texas Tech University.

The researchers used what they called a “standby” reverse-mortgage strategy, meaning the reverse-mortgage line of credit served as a source of readily available cash when retirees’ portfolio values dropped below the level where they could meet their goals.

Using a portfolio worth $500,000 and a home value of $250,000, among other assumptions, the researchers found that using a reverse mortgage’s line of credit significantly improved the chances the portfolio would last through the retiree’s lifetime, because it reduced the risk of having to sell investments when they had fallen in value.

We’ll cover this more later, but maybe now the first thing that crosses your mind when you hear reverse mortgage is… Maybe I should learn more…

To read the WSJ article click here

 

October 14, 2013

The Caregiving dilemma – losses and rewards

Filed under: caregiving,Reverse Mortgage — Scott Larson @ 4:21 pm

CNN posted an article that outlines what many of us have or are dealing with. Caregiving for your parents… you can take a look at the article here.  One of the decisions that I made is that I couldn’t do it…

We all have to look at our gifts and see if they match with the needs of our parents.  Mine did not match up to true caregiving.  That’s not to say that I was not there… I was… felt like all the time.  There are wonderful gifted people that have that set of gifts, and they are hugely important.

Caused me some distress for a while – shouldn’t I be there for Mom?  And the answer was yes… but that does not mean that you have to do everything.  Balancing that is part of the art of dealing with parents (with everything really), and part of my balance was hiring a caregiver so that I could be there long term in a way that blessed her, and allowed me to survive.

If your choice is to do it yourself – Go for it!  But make sure that you take care of yourself.  In-home agencies can be hired for respite care, or many assisted living communities will take your parents for a “vacation” in their facility to allow you to get away.  Make sure that is part of your plan.  Also take a look at caregiving.org for other ways to make sure your plan is sustainable…

October 11, 2013

Three Horsemen of the Retirement Apocalypse

Filed under: Reverse Mortgage — Scott Larson @ 9:06 am

Time Magazine (remember them?) has a story out saying that the three pillars of retirement
Social Security, employer sponsored plans and personal savings have all weakened over “recent years.”

Hmmm… Ya’ think?  They have some interesting perspectives on what might happen, but it doesn’t appear that their recommended “out of the box” thinking includes reverse mortgages…

Th Time story can be found here and Blackrock’s report on retirement needs can be found here (more on that later)

February 24, 2010

Annuities

Filed under: Annuity,Reverse Mortgage — Tags: , , , — Scott Larson @ 4:41 pm

Annuities are in the news again after President Obama has suggested that an annuity might be an appropriate choice for some people.  As with any financial investment when they are appropriate they work well. As I was working with a Fidelity account today they had an article that showed how an annuity can be a way to accomplish some more complex financial goals such as replacing savings that you would like to be able to pass on to your heirs.But as the Fidelity/Wall Street Journal states

Buying an annuity confronts families with a dilemma: Should a parent take smaller monthly payments so that their surviving spouse or children can get some sort of inheritance?

Most people opt for the smaller payment. But in some cases, there are better strategies to help the heirs come out ahead, including pairing an annuity with an insurance policy.

But annuities come with complex features and fees that you won’t often find in investments like mutual funds. You can purchase riders to guarantee payments for your heirs, for example, or to adjust your monthly payment for inflation. It takes careful analysis to figure out if an annuity makes sense for you and, if so, which features to purchase.

Many states, including California, have laws which provide a “financial  fire wall” between reverse mortgage lenders and annuity providers.  These are designed to keep an aggressive salesperson from overwhelming a senior and making large commissions from selling inappropriate products. 

To read the whole article click here

February 16, 2010

THROW THE BOOK AT HIM!

Filed under: Reverse Mortgage,Uncategorized — Tags: , , , — Scott Larson @ 3:58 pm

This is a story that will probably be reported as a problem with reverse mortgages, but the only connection is that some of the money was generated from a reverse mortgage.  From SFGate.com

A 25-year-old former customer service representative with a San Francisco branch of Bank of America has been charged with swindling $61,000 from a 96-year-old woman who entrusted him with her finances…

Saul Cornejo of Daly City was being held on $50,000 bail after pleading not guilty Thursday to charges of felony elder abuse and grand theft.

This is actually a banking problem, but it highlights some of the dangers that seniors and their relatives face from people that are in a trusted position.  Thank goodness for her niece!

The niece did some checking and discovered that her name had been removed from some of the accounts and that statements had stopped coming to her aunt, prosecutors said.

She then went to Bank of America officials and San Francisco police, who found a total of $61,000 missing from her aunt’s accounts and from the proceeds of a reverse mortgage

Elder abuse can take many forms and should be watched for carefully.  People that abuse our seniors, regardless of the form it takes, should be prosecuted to the fullest extent of the law!  Hardly a controversial position, but it absolutely needs to be stated over and over again. 

This also points out that going to the “big  bank” is not a guarantee of safety.  Please make sure that you check out the people you are working with and that they are open and honest in their dealings with you.  That is part of what this site is about, to give clear, unbiased information to help you see if your originator passes the “smell test.”

February 8, 2010

Reverse Mortgage Alternative!

Filed under: Reverse Mortgage — Tags: , , — Scott Larson @ 7:07 pm

In the Wall Street Journal this weekend in the Family Values section, Kelly Greene writes a good article on private reverse mortgages. 

Families where at least one adult child has amassed a nest egg have another option—buying the house outright, or using some of that money to set up a private reverse mortgage. Either way, the family avoids paying lending fees and may even get a few tax breaks

When Wayne Tew, a credit-union president in Las Vegas, realized that his parents needed money, he bought their house and leased it back to them, freeing up their cash for a new car and travel.

The kicker of course is having a son, daughter, or wealthy relative that has the ability to do this. 

To read more, click here

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