Rightsizing with a Reverse Mortgage

Moving into a new, smaller home with a reverse mortgage can be an ideal way to “rightsize” your life.

See my latest email on rightsizing and download the Q&A for more information:

https://bit.ly/2yGqlxP

Turning millennials into homeowners with reverse mortgages

As more parents are helping their children become homeowners, reverse mortgages are being recognized as a way to accomplish this but with fewer roadblocks.

It’s becoming more challenging for first time homeowners to quality for much money with interest rates increasing and the benchmarks getting higher.

A reverse mortgage is a way to get this younger generation into news home quicker without costing them or their parents any cash and enables the parents to keep their investments and have a guaranteed flow of income to support their lifestyle.

https://bit.ly/2KBJNNd

Supplementing social security in retirement. A reverse mortgage could be an ideal solution.

Social security supplements around 40% of a retiree’s average income in most cases, leaving two options for your retirement years – reducing your standard of living significantly or finding ways to create additional income from other sources.

There are a few strategies to supplement social security including a reverse mortgage. Reverse mortgages can provide a strategic solution to create income leveraging the equity on your home.

Check out this overview on 5 Income Strategies to Supplement Social Security highlighting reverse mortgages as a smart method to create income stream without touching your retirement nest egg:

https://bit.ly/2IzY3W5

Managing the timing and sources of your income in retirement

Managing your sources of income in retirement is never easy and is completely difference from managing the income you received during your working years.

As a retired person, you can receive income monthly, quarterly, annually and in some cases not on a regular basis. And most likely you’ll receive income from investments that you’ll need to monitor, manage and protect to ensure that they last. It can be overwhelming at times.

Here’s an overview on the different types of retirement income, some practical advice and ideas for potential retirement income, such as leveraging your home equity with a reverse mortgage: https://bit.ly/2rW1eRM.

The new normal: Carrying debt at age 75 and up

According to some new research from the Employee Benefit Research Institute the percentage of older individuals with debt has been increasing over the past 10 years, in particular for those 75 and over.

The group issued a new analysis of Federal Reserve figures showing that close to 50% of retirees ages 75 and up now have some loans outstanding – up from 25% back in 1992 – with the most significant debt increases coming among lower-income seniors.

The median debt owed by this age group ($20, 900) is below the average debts owed by Americans at younger ages. Yet debt can be a significant issue for the 75+ community considering the lack of opportunities to boost their incomes.

This article examines what’s causing this debt trend, the consequences and points out some solutions including reverse mortgages to help lock in some steady income during retirement years.

https://bit.ly/2Iy8Nse

HUD raises costs on reverse mortgages

The Trump administration announced Tuesday that it was raising the premiums for most reverse mortgages and lowering the maximum amount that can be borrowed in an effort to stem the tide of losses to the Federal Housing Administration (FHA) insurance fund.

FHA’s overseer, the U.S. Department of Housing and Urban Development (HUD), said the reverse mortgage program has been a big net loser for the insurance fund over the years, and is perilously close to needing a bailout from taxpayers. Effective Oct. 2, it was restructuring the annual premiums and lowering the principal limit factor, which determines how much a person can borrow.

HUD officials said the change will result in a net increase in costs for most borrowers, and could potentially reduce the initial volume of reverse mortgages by 10 to 20 percent annually. The upfront premium will be increased to 2 percent. Currently, the upfront charge is either 0.5 percent or 2.5 percent, depending on how much is drawn in the first year. The annual premium will be reduced to 0.5 percent from 1.25 percent.

Also the maximum loan limits will be reduced.

Reverse mortgages, which are formally known as home equity conversion mortgages (HECMs) can be taken as a lump sum, line of credit or through monthly payments. HUD officials presented the theoretical case of a 62-year-old borrower, with a reverse mortgage at 5 percent. For each $100,000 in home equity, the borrower will now be allowed to borrow $41,000, which is down from $52,400.

Reverse mortgages, which represent a fraction of the overall FHA loan guarantees (there were fewer than 50,000 in fiscal 2016], have been a source of volatility for the insurance fund. Borrowers are projected to incur more losses in future years than they pay in premiums. HUD said the program has already resulted in a net cost of $11.7 billion to the FHA MMI fund since fiscal 2009. The economic value of the program at the end of the last fiscal year was estimated at negative $7.7 billion, the agency said. This number has bounced around, however. In fiscal 2015, by contrast, the HECM program was valued at a positive $7.4 billion.

A drag on the MMI fund
HUD officials say that the program is being propped up by the premium payments of younger borrowers of traditional forward mortgages. Reverse mortgages are a reason that HUD has not been able to lower the premiums on a traditional FHA loan. In a fact sheet distributed to reporters, HUD said that if it didn’t make the changes, it “would require an appropriation from Congress for FHA to endorse new reverse mortgages in FY 2018.”

The overall value of the insurance fund in fiscal 2016 was at at healthy $27.6 billion. The MMI’s capital ratio also increased to 2.32 percent, which is above the 2 percent minimum established by Congress. The fund has required only one bailout in its history, a $1.7 billion appropriation from the U.S. Treasury in fiscal 2013. This cash infusion was largely due to HECM losses, HUD said.

“Today, younger, lower-income homeowners with traditional FHA-insured ‘forward mortgages’ are routinely bailing out the HECM program through the mortgage insurance premiums they pay, placing a significant burden on the overall health of FHA’s Mutual Mortgage Insurance Fund,” the fact sheet said. “We can no longer tolerate putting American taxpayers and future generations of seniors at risk. Quite simply, the HECM program is losing money and can no longer remain viable in its present form.”

FHA insures almost all reverse mortgages, which are available to homeowners 62 and over. With a reverse mortgage, a homeowner can borrow against the value of a home. The loan doesn’t have to be repaid so long as the borrower remains in the home. A reverse mortgage carries fees, interest, and the borrower is required to pay property taxes and maintain the home.

The terms of a reverse mortgage depend on the amount of equity in the home, and the age of the borrower. Generally speaking, the younger the borrower, the less that can be borrowed and the higher the loan cost. The actual maximum loan limits are based on tables that factor in age and equity.

The reaction to HUD’s move was mixed.

The nation’s largest mortgage trade group, the Mortgage Bankers Association, praised the move as a way for the program to remain financially viable.

The National Reverse Mortgage Lenders Association (NRMLA) said the changes will increase the costs and reduce the benefits for most borrowers.

“We believe that there are alternative options for better managing the HECM program to reduce its overall costs and will continue to advocate for such beneficial changes to the program,” NRMLA President Peter Bell said. Bell did note that HUD’s action showed a commitment to the program and also to stabilizing the insurance fund and avoiding Treasury draws.

This story is excerpted from ScotsmanGuide.com.

Join Me to Support a Community Gem: The Rianda House

READY. SET. GIVE!

As we celebrate Older Americans Month, it is a perfect time for our Rianda House fundraiser, Rally4Rianda. This month, in particular, we take the opportunity to thank and recognize the enormous contributions our seniors have made to our nation — they’ve made it stronger through their experience, knowledge, and willingness to share with others. We are blessed to have them and to be able to learn from their wisdom.

I invite you to support the Rianda House with me. I firmly believe that taking care of our parents’ and grandparents’ generations is a core part of building our community. A donation of any size will help bring life to older adults right here at home.

Rianda House provides physical, social, and cultural activities and services for seniors that improve their lives. Last year, 876 older adults, ranging from 50 to 100 years young, participated in the Rianda House’s classes and activities, including:
•    Fit for Life exercise classes to maintain balance and strength.
•    Care Giver support groups and resources.
•    Life Long Learning, including art, current events, and brain-fitness classes.
•    Satellite health and wellness programming in Calistoga.
Consider giving this year through their Online Giving Campaign, which runs through May. Any size donation makes a difference and is 100% tax deductible.

“There is a fountain of youth: it is in your mind, your talents, the creativity you bring to your life and the lives of others.  When you tap into this source, you will truly have defeated age.”  — Sophia Loren

CLASSIC CARS | ART SHOW | CELEBRATION, SUNDAY, MAY 21

The highlight of the campaign is the 3rd Annual Rally4Rianda Classic Car & Art Show & Community Celebration.

Things get rolling with a “Cavalcade of Classic Cars” that starts at the Calistoga Gliderport at 10:30 am and proceeds south on Highway 29 to Tre Posti in St. Helena.

It’ll be a festive afternoon filled with beautiful classic, luxury, and concept cars; art; food; wine; Mad Fritz craft beer; and lively music by the St. Helena Community Band.

Sunday, May 21st | 12:00 – 3:00 pm
Tre Posti Event Garden
641 Main St., St. Helena

Admission is $5.00

Thank you for considering joining with me to support one of our community’s finest gems: the Rianda House.

 

—Cynthia Kee

‘Tis the season to appreciate

Happy Holidays!
I just heard a lovely and touching song, “Make Me A Channel of Your Peace” which reminds me of the human phenomena that inspires us during the holiday season. We have an opportunity to dig a little bit deeper and try a little bit harder to just be kind to one another. Parties, perfectly wrapped presents, and bright shiny lights are exciting and celebratory, but to be kind, is simply one of the best gifts of all. The lyrics are about seeking to understand each other rather than be understood, to console rather than be consoled, to forgive rather than be forgiven, and from the bottom of our over flowing and grateful hearts, to share and show love. What a beautiful sentiment.

Housing decisions in retirement — should I stay or should I go?

I’m happy to announce the release of Dr. Wade Pfau’s book on Reverse Mortgages:
How to use Reverse Mortgages to Secure Your Retirement. Dr Wade Pfau holds a doctorate in Economics from Princeton University, and is currently a professor of Retirement Income in the PHD program at The American College of Financial Services. “A rare, unbiased analysis of how reverse mortgages can fit into a prudent regiment income plan form one of the nations leading researchers. Both consumers and financial advisers can benefit form a fresh look at this often-dismissed option” Mary Beth Franklin, nationally recognized expert in Social Security Strategies. If you or anyone you know is interested in reading this book, it would be my pleasure to send a complimentary copy to you.

Buy a Home with a Reverse Mortgage
By Rachel L Sheedy, Kiplinger’s Retirement Report

Most seniors take out a reverse mortgage to help them stay in their existing home as they get older. But Myra Simmons, 67, took advantage of a little-known product: She used a reverse mortgage to finance a new home.

Myra’s 83-year-old husband, Billy, was having trouble using the stairs in their two-story townhome in Fort Meyers, FL. The couple sold their home and used a ‘reverse mortgage for purchase’ to move into a one-story house nearby. “Now, I take what would have been my mortgage payment and put it in savings,” says Myra, who works for the local county sheriff’s office.

The Home Equity Conversion Mortgage (HECM) for Purchase was created by Congress four years ago to streamline home-buying transactions and cut costs, says Peter Bell, president of the National Reverse Mortgage Lenders Association. Before, seniors would buy a new home, incurring closing costs, and then take out a reverse mortgage on the new home, triggering new closing costs. The HECM for Purchase rolls this into one transaction and one set of closing costs.

For there to be equity to cover the accrued interest, the HECM for Purchase requires that you pay about half of the home’s sales price with your own cash. The reverse mortgage picks up the difference. “Essentially, the money you’re putting in is your equity,” says Ted George a certified financial planner in Scotts Valley, CA.

To pay your half, you can use money from savings, the sale of your other house, or a gift from a family member. But the money cannot be borrowed.

Reframe the Game
By Amara Rose, HECM World
Retirement. It’s no longer a “retreat” from life (if it ever was). As we’ve explored multiple times, people are retiring later or downshifting from full time to part time employment, or moving into a consulting role or some other line of work, rather than simply leaving the job market altogether. And those who do fully retire from the work world are still fully engaged in life — sometimes so busy they wonder how they ever fit a job into their day.

Here are some suggestions gleaned from a retirement workshop for how we might reframe “retirement.” Ideas take their inspiration from sports, advertising, and plain old ingenuity.

Reverse mortgage professionals who enjoy creativity, consider these concepts:

• Act 2
• Between Jobs
• Bonus Years
• Continuum
• Creative Aging
• Downshifting
• Encore
• Field of Possibilities
• Growing Bolder
• Inspirement
• Life 2.0
• Living More
• My Time
• Next Chapter
• Next Stage
• Post-grads
• Prime Time
• Protirement
(it’s not for beginners!)
• Rebalancing
• Re-engagement
• Refirement
• Regeneration
• Repotting (in new soil)
• Retreads
• Rewirement
• Sage-ing
• Seasoned
• Success to Significance
• The Creative Age
• The Gifted Years
• Third Half
• Third Quarter
• Unstoppable

‘Tis the season to appreciate.
It has been such a great pleasure for me to associate with each and every one of you this year. Though many changes have taken place by way of HUD/FHA updates to policies, a reverse mortgage still remains a viable financial program with great benefits.

A deep and heartfelt thank you to all of the patient and understanding clients who went through these challenges with us. It is my sincere joy to be involved in this process with you and to witness first hand, the increase in quality of life and peace of mind that the program brings to so many. I’m looking forward to serving you in 2017.

Thank you…

—Cynthia Kee

Ways to use a reverse mortgage

Nine surprising ways to use a reverse mortgage
By Mary Beth Franklin, Investment News

Reverse mortgages allow homeowners age 62 or older who own their home outright or who have a small mortgage balance to convert the equity in their primary residence into a liquid, tax-free asset. Borrowers can take their money in a lump sum or as a monthly payment, or set up a line of credit. Interest accrues on borrowed funds. Unused lines of credit continue to grow at the same compounded interest rate as the cost of money.

Financial advisers who dismissed reverse mortgages in the past may want to take a second look. Consumer protections have increased and set-up fees have been dramatically reduced. Leading researchers believe reverse mortgages could solve some of the income challenges of retirees who saved too little to finance a retirement that could last decades. Click through to find out the various ways to use a reverse mortgage — some of them may surprise you.

1. Pay off an existing mortgage
Using a lump sum from a reverse mortgage to pay off a traditional mortgage balance instantly increases a retiree’s monthly cash flow and reduces portfolio withdrawal needs. “It really improves the odds for retirement success to not carry a mortgage into retirement,” said Wade Pfau, professor of retirement income at The American College of Financial Services.

2. Replace a home equity line of credit
Unlike a HELOC, a reverse mortgage can never be reduced, frozen or cancelled, and there are no monthly loan repayment requirements. A reverse mortgage is not due until the borrowers sell the home, move out permanently or die. The estate or heirs can never owe more than the house is worth, even if it is less than the amount borrowed.

3. Protect your portfolio
“Should your portfolio decline significantly in value, borrow from the line of credit for your needs, then repay the loan when your portfolio recovers,” said John Salter, associate professor of personal financial planning at Texas Tech University. Interest payments are tax-deductible if retirees itemize their deductions on their income tax returns.

4. Fund future long-term care or income needs
A 62-year-old couple with no long-term-care insurance may want to set up a reverse mortgage line of credit. With a home worth $625,000, their initial line of credit at current interest rates would be worth $327,375, according to Tom Dickson, founder of the Financial Experts Network. Left untouched, the equity line would be worth $613,365 in 10 years and $1,149,143 in 20 years, said Mr. Dickson, a co-designer of the reverse mortgage modeling now part of MoneyGuidePro. The couple could tap the loan for future long-term care costs, as long as they remained in their home, or to serve as a deferred annuity if they needed additional income in the future.

5. Create a Social Security bridge
Supplement income with monthly payments from a reverse mortgage either for a set number of years (term) or for as long as you live in your home (tenure). Term payments can provide an income bridge to allow a retiree to delay claiming Social Security until benefits are worth the maximum amount at age 70, said Shelley Giordano, author of “What’s the Deal with Reserve Mortgages?” (People Tested Media, 2015).

6. Manage taxes
Proceeds from a reverse mortgage are tax-free. Tapping a reverse mortgage can decrease withdrawals from taxable retirement accounts, reducing income taxes and the amount of Social Security benefits subject to income taxes. For higher-income retirees, tax-free reverse mortgage payments can reduce their modified adjusted gross income that can trigger higher monthly Medicare premiums.

7. Pay Roth conversion taxes
Sometimes the only thing preventing a retiree from converting a traditional retirement account to a Roth IRA is the amount of income taxes owed on the converted amount. Tax-free proceeds from a reverse mortgage can pay Roth conversion taxes all at once or over several years, reducing future income taxes and possibly reducing future Medicare premiums.

8. Buy a new home
A reverse mortgage can be used to purchase a new home. Rather than using all of the proceeds from a home sale, downsizers can use some of the sale profits and take out a reverse mortgage to make up the balance, resulting in a new home without monthly payments and additional cash to add to savings for future needs or to supplement current income.

9. Gray divorce strategy
Older couples can use a reverse mortgage to divide a marital housing asset in a divorce. In one scenario, the spouse remaining in the home can take a lump sum distribution from a reverse mortgage to buy out the other spouse. In a second scenario, the marital home can be sold and each ex-spouse can use some of the proceeds from the home sale and each of them can get a reverse mortgage to buy their respective new homes, according to Shelley Giordano, chair of the reverse mortgage industry’s Funding Longevity Task Force.

9th Annual Turkey Trot

I invite you to join the Claremont Sunrise Rotary in giving back to the community with an enjoyable and family-oriented 5K run on Thursday, November 24 for their annual Turkey Trot. The event has become a regional event drawing participants from all over Southern California. Using individual chip timing, each participant’s time is accurately measured regardless of where they are in the starting pack. With funds raised from the race, the club has provided over 800 local youth sports scholarships, and support other service activities.

Find out how you can participate!
claremont-ca-rotary