Laurie MacNaughton [NMLS# 506562]'s Blog

Don’t Tell Me You Missed National Nursing Home Week?

Tue, 11 Jun 2013 11:16:28 -0700

Last month’s National Nursing Home week is unlikely to ever to find itself prominent on calendars across America. Why do I say this? Primarily because the vast majority of Americans want to remain as long as possible in their own home.

Anyone surprised?

This being said, however, as a reverse mortgage specialist who deals every day with aging-related housing matters, I can attest to the fact there are issues to address when planning for aging in place.

Common considerations include:

Are homeowners able to take care of daily needs – or is in-home care required?
Are there available community resources, such as day centers, medical facilities, recreation, and transportation?
Do homeowners have family, friends, neighbors, or a faith community who can be involved in their care?

But the biggest factor is the home itself, as most homes were not built with aging in place in mind. For this reason, homeowners must ask themselves if their current home can be adapted to meet their needs as they age.

Fortunately for those of us in the greater Washington, D.C. area, close by are some of the nation’s most recognized contractors specializing in retrofitting homes to meet needs of aging occupants.

Aging in place adaptations usually involve three elements, including:

1) adding hardware such as grab bars, lever-handled faucets, and hand-held showerheads;

2) installing ramps, lifts, and extra lighting;

3) making architectural changes such as wider doorways and curbless shower stalls, and relocating master bedrooms, full baths, and laundry rooms to the main floor.

While some modifications can be done by a general handyman, larger projects, particularly ones involving actual design changes, should be done by a contractor specializing in aging in place remodeling. Specialists who carry the Certified Aging In Place, or CAPS, designation are typically the most versed on industry standards and age-related modifications.

While some municipalities offer low-cost or no-interest home modification loans to seniors, these are not universally available, and often are for relatively small amounts. Additionally, many include a monthly repayment schedule.

Reverse mortgage can fit very well into home modification needs, as there is never a monthly mortgage payment required. When the last homeowner permanently leaves the home, the loan is repaid, and all remaining equity goes to the senior or to the heirs or estate.

Reverse mortgage is never going to be the full solution to financial needs in retirement. However, when used as part of a comprehensive financial plan, it is going to be an increasingly important part of funding our ever-increasing longevity.

If you are, or someone you know is, looking into reverse mortgage, give me a call - I always love hearing from you.

Laurie

Laurie Denker MacNaughton[NMLS# 506562]∙ Reverse Mortgage Consultant, President's Club∙ Middleburg Mortgage, a Division of Middleburg Bank ∙ 20937 Ashburn Road∙ Ashburn, VA 20147∙ 703-477-1183 Direct∙ LMacNaughton@MiddleburgBank.com∙ www.MiddleburgReverse.com

Visit my informational
blog at:

MiddleburgReverseLady.com

You Can't BUY a Home With a Reverse Mortgage, Dummy

Sun, 19 May 2013 18:29:34 -0700

Every once in a while something so odd happens that you spend the next few days...or weeks, if it's odd enough, trying to process the event.

Several months ago I was in the middle of a complex HECM for Purchase transaction. It involved a knotty situation in which a builder had declared bankruptcy before completing construction of a condo, and another builder had finished the project. However, the new guy had never put some of the completed phases to record. I will sum up the details of the situation simply by saying Uncle Sam does not smile upon this business model.

After mucking about for resolution utilizing the obvious channels, such as the homeowners association attorney - whose job description, incidentally, does include this type of thing - I decided go to the top of the food chain and contact my client’s US Congressman.

Imagine my surprise when I received a mini-lecture from a congressional aide, who stated with great conviction, "You can't BUY a home with a reverse mortgage. Reverse mortgage is a refi product. So put that in your pipe and smoke it, you dumb Reverse Mortgage Specialist."

Ok, so maybe he didn't say this last part. But it was definately implied.

Well, well, well, Mr. Aide, thank you for THAT helpful input.

So CAN you buy a home with a reverse mortgage?

In a word, yes!

So how does Reverse for Purchase - also known as HECM for Purchase - work? And why do so few people know about it?

The concept of HECM for Purchase could not be more straightforward: the home buyer provides a down payment, the size of which is determined by the home buyer's age. The FHA HECM loan provides the rest.

That's it. End of story. You are in your home for the rest of your life – or as long as you want to live in the home as your primary residence – and never make another payment.

This smells fishy. How can I live in a home and not make payments?

Answer: Not making payments is very different from saying the loan is never repaid. The loan is always repaid - it's just that you don't repay it. When you are finished with the home, the home itself repays what's due.

So...when is the loan repaid?

Answer: The loan is repaid when the last person on title moves, sells, or dies. In other words, the loan is repaid BY THE HOME once the senior no longer needs the home.

But where does the money come from to repay the loan?

Answer: The home is either sold, and the proceeds from the sale repay the loan, or the senior's family secures new financing and buys the home. In fact, it's exactly the same as what would happen if there were a "forward" loan on the property: the family would either get their own financing and keep the home, or they would sell the home.

But what if the home has gone down in value and the proceeds from the sale can't repay the loan?

Answer: The home repays what it can. Any shortfall is made up by the mandatory Mortgage Insurance Premium (MIP).

But what if I want to leave the house to the kids?

Answer: You can still leave the house to the kids; it's still your house. The kids will need to 1) line up their own financing, and make their own payments, or 2) sell the house.

How long can I stay in my home?

Answer: As long as you want to. As long as you pay your property taxes, keep current on your homeowner's insurance, and maintain the home, you never have to move. You can, however, move whenever you wish.

If this program is so great, why don't more people know about it?

Answer: First, it has not been around all that long: FHA rolled it out just over three years ago. Second, despite a lot of money spent on financial education for seniors, there are still far too many people - like the congressional aide mentioned above - who are very bold in speaking very forcefully about topics they know very little about. And that is very unfortunate.

If you or someone you know needs to move into a home better suited to aging in place, call me. FHA's HECM for Purchase may very well make this possible.

I always love hearing from you, and I love answering questions about senior housing and matters impacting the financial health and long-term well being of our seniors.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President's Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com www.middleburgmortgage.com/lauriem

Visit my Informational Blog at http://middleburgreverselady.wordpress.com/

Life that Looks Like...Life

Fri, 26 Apr 2013 05:47:42 -0700

If I were to recreate a day’s conversations only one or two would be noteworthy enough to recall in detail. That’s because most conversations are chit-chatty little dialogues of small consequence.

It just happened that one of yesterday’s last conversations was also the most noteworthy.

The background

My day started off with two back-to-back appointments, one with a retired husband-and-wife medical doctor team, and the other with a widowed construction worker. Both had saved for retirement, both have little credit card debt, both own their homes outright. Neither appears to have lived beyond their means – no cavernous homes, no high-end cars, no evidence of life lived loud.

However, there was evidence of...life. Life that got more expensive than anyone could have guessed. Life that contained trials no one could have planned for. Life that plain old looks like life. The husband of the medical doctor team said, “We saved enough to live to eighty. We didn’t bet on living this long.”

The retired construction worker buried his wife after she lost her years-long battle with cancer.

The conversation

Back to last night’s conversation. I was at a party and a colleague said to me, “Someday I would like to meet just one senior who did it right – who actually saved enough for retirement.”

I replied, “Someday I would like to meet just one person with a crystal ball.” We both laughed, and the conversation moved on to other topics.

The joke

There’s the old joke of the hiker who falls off a precipice, but catches a branch halfway down the cliff. As he’s hanging 100 feet in the air three rescuers come by, but the distressed hiker refuses aid. He says to each, “There will be a miracle: God will save me.” Eventually he falls to his death and goes to heaven.

He says to God, “Why didn’t you send a miracle? Why didn’t you save me?”

God’s reply?

“I sent you three Good Samaritans. What more of a miracle did you want?”

The reality

The reality of life is that it is filled with joys and sorrow, good and bad, the expected and that which could never be expected. No one can plan for every eventuality.

I meet a lot of people who are praying for a financial miracle. For many older homeowners, that miracle is reverse mortgage.

Financial soundness cannot cure all the issues associated with aging. But it can relieve the stress of lying awake nights worrying about money. Or what to do if the roof needs repair. Or the car needs new brakes. Or if any other one of life’s unexpected events strikes at a time when income is fixed, funds are limited, and options are few.

Reverse mortgage was never intended to be a replacement for a sound financial retirement plan. However, it can play an important role in augmenting what is already in place, and slow the burn-through rate on other resources.

If you are - or someone you know is - looking into the potential benefits of a reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President's Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at http://middleburgreverselady.wordpress.com/

Is This a Good Time to Buy a Home?

Thu, 25 Apr 2013 18:43:17 -0700

I got the call around 4:00: “Is this a good time to buy a home?”

Answer: Yes!

In fact, in recent history there has never been a better time.

And why? Because interest rates have never been lower.

Historically-low interest rates have given today’s homebuyers a significant boost in purchasing power. In the period from 1985 through 1999 – the years before the housing bubble hit – rates for a 30-year fixed mortgage ranged between six percent and 13 percent. Back then, 19.9 percent of Americans’ median monthly income went to paying their mortgage. In the fourth quarter of 2012, with mortgage rates in the 3 to 4 percent range, 12.6 percent of Americans’ monthly income went to mortgage payments, according to data provided by the Zillow Home Value Index and the U.S. Bureau of Labor Statistics.

And this despite the fact homes themselves cost 14.5% more relative to income.

Zillow Chief Economist Stan Humphries says:

The days of historically high levels of housing affordability are numbered. Current affordability is almost entirely dependent on low interest rates, and there's no doubt that rates will begin to rise in the next few years.

In fact, the national average home price is expected to rise by 6.0 percent this year, well above previous projections. This reflects signs of a solid housing recovery as buyers return to the market.

But it also means the time to buy is now.

HECM for Purchase

HECM for Purchase allows seniors, aged 62 and older, to purchase a home and not have a monthly mortgage payment.

How does that work? The homebuyer provides a down payment, the size of which is determined by the homebuyer’s age. The HECM loan proves the rest.

That’s it. End of story. Homeowners are in the home for as long as it’s their primary residence, and never have a monthly mortgage payment. When the last person on title permanently leaves the home, the home is either sold or the family secures new financing and purchases the home.

So if you – or someone you know – is thinking of buying, the time is now. There literally has never been a better time.

Laurie

Laurie MacNaughton [NMLS# 506562] ∙ Reverse Mortgage Consultant, President’s Club ∙ Middleburg Mortgage, a Division of Middleburg Bank ∙ 20937 Ashburn Road ∙ Ashburn, VA 20147 ∙ 703-477-1183 Direct ∙ LMacNaughton@MiddleburgBank.com ∙ www.MiddleburgReverse.com

Visit my Informational Blog at http://middleburgreverselady.wordpress.com/

Why This, Why Now?

Sun, 24 Mar 2013 06:24:28 -0700

I'm a teacher. I love to teach. I spent many years teaching high school students in private schools, public schools, as a private tutor, as a public school tutor, and as a mother.

Unsurprisingly, one of my favorite things about being a reverse mortgage specialist is that I get to teach about a financial instrument that for many seniors makes possible a life of dignity, financial soundness, and independence.

There are two questions I am frequently asked. The first is why do a reverse mortgage (officially called “HECM”) instead of a home equity line of credit (or “HELOC”). The second is whether this is a good time to do a reverse mortgage.

Why This?

So why do a HECM rather than a HELOC? The first thing of note is that a HECM is a type of home equity loan. However, with a “forward” home equity line, there are employment, income, credit, and debt-to-income qualifications that must be met. These can be tough qualifications to meet for someone deep into the retirement years – or even for one nearing retirement.

A second important difference, and one of the main attractions of the FHA reverse mortgage, is that there is never a payment required, so long as at least one person on the home’s title remains in the home. This creates a stark contrast to a forward HELOC, in which the homeowner must make a monthly payment. Drawing down a forward HELOC only to make a payment at month’s end is like using VISA to pay MasterCard – not lots of benefit there.

Though I could point to many additional advantages of an FHA HECM, I will mention only one other, namely the issue of getting “upside down.” Though home values in much of our region have been steadily on the rise, most of us are still understandably wary. We all know homeowners whose lines of credit were frozen when housing prices tumbled.

A reverse mortgage, however, is a non-cancellable line of credit, and only becomes due when the last person on title permanently leaves the home. (Property taxes, homeowners insurance, and normal home upkeep are still required.)

Why Now?

The second most common question I am asked is whether this is a good time to do a reverse mortgage.

The answer is an unqualified “Yes!” and here’s why:

Interest rates have never been lower than they are right now, and property values in much of the mid-Atlantic region have enjoyed steady growth for four straight quarters. Since a reverse mortgage is calculated on age of the borrower, home value, and interest rates, right now might well represent the most favorable conditions that have ever existed in the HECM’s 30+ year history. I'm a geeky numbers person, but you don’t have to be very good in math to know that a rise in rates, or a drop in home values, makes a long-term difference in the amount of funds available.

Remember, reverse mortgage was never intended to be a replacement for a sound financail retirement plan. However, it can play an integral role in augmenting what is already in place, and slow the burn-through rate on other retirement funds.

If you are, or someone you know is, considering a reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President's Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog athttp://middleburgreverselady.wordpress.com/