Reverse Mortgage Loan Videos
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Emotion Vs Logic

The interesting thing is that when people make financial decisions, they often make them emotionally even though numbers are very logical. Two plus two always equals four, yet emotion comes into play in almost every financial decision. I’ve never seen a situation that has evoked more emotion than a reverse mortgage loan. People come up with all kinds of nasty words about them. Like they’re the loan of last resort. They’re something that preys on the elderly.  They are bad; they cause people to lose their homes to foreclosure.  These all typify that reverse mortgage loans are something to stay away from and avoid. So most people conclude that reverse mortgages are something to be avoided at all costs. They are something to be used at the end when people are broke when they have no choice. When the piggy bank is broken, and the last garage sale is done, that is when we should get a reverse mortgage. That’s the emotion that comes out. But the fact is that logic, research, and facts tell a very different story.    

 

 

So let’s look at the facts. There has been lots of research by PhDs, and MBAs in universities that have done extensive studies such as Texas Tech University.  The bottom line is that all of the studies done at these colleges, and by many of these brilliant people that have no vested interest in the reverse mortgage product, have found that the best time to get a reverse mortgage is very early in retirement. At age 62, not 82, not 92, but right at the beginning. And they did this by looking at it logically*.

 

Sources: Standby Reverse Mortgages A Risk Management Tool for Retirement by John Salter, Ph.D., CFP®, AIFA®; Shaun Pfeiffer; and Harold Evensky, CFP®, AIF®;  The 6.0 Percent Rule,  by Gerald C Wager, Ph.D.; Understanding the Line of Credit Growth for a Reverse Mortgage, by Wade D. Pfau, Ph.D., CFA   

The three buckets of wealth are their income and nest egg, their retirement money, and their home. When their home was tapped into the situation, at age 62, there was some income taken out of the house, three important things happened. The first thing is that their cash flow increased. They had more money in retirement to enjoy retirement the way they expected to. Along with that situation, with the increased cash flow, the taxes paid on their income tax returns usually went down, and they did not spend as much in taxes because of the strategic withdrawals that they made with IRAs*.  Most importantly, their portfolio longevity - the length of time that people’s money lasted - went up because they were able to use more money from their house before depleting all the wealth from their retirement accounts.   The last thing was perhaps the most surprising and the most interesting.   People with a reverse mortgage ended up with a higher net worth, not a lower net worth, when they took reverse mortgage money at the beginning of retirement, rather than at the end.  Of course, the reason that happened is that they used less of their investment accounts and more of their home equity.

 

Let’s talk about the people who already have reverse mortgages -  those are the people that are the most satisfied. In my personal experience with 1,000+ borrowers over the last decade or so, not one of them has been unhappy with their reverse mortgage. They only wish they would have gotten it earlier. The bottom line is when we look at the emotions that surround reverse mortgages and what has been published and supported by independent studies, you will find the benefits of reverse mortgages overwhelmingly more significant than the risks or the costs.

 

So take a look into it. Have an open mind, and when you talk to one of our reverse mortgage planners, just set your emotions aside for a second.  Set aside some of the things that you might have heard from your relatives, or people at work, or maybe an uneducated or uninformed professional. Then take a look at the facts, and things that have happened to make a genuine difference.  Retirement can be done in a very different way with Fairway Independent Mortgage Corporation. Ask a local Reverse Mortgage Planner for more information about how a reverse mortgage loan works. We would be happy to be your reverse mortgage lender. 

Ready to learn more?   Contact us today!

 

Video by: Harlan Accola Reverse Mortgage Director, NMLS#277693 with Fairway Independent Mortgage Corporation.

*This advertisement is not tax or financial advice. You should consult a tax and/or financial advisor for your specific situation.  

 

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Long Term Care

Mortgage Help For Seniors - Long Term Care

We try to anticipate all kinds of things that could happen; car accidents, house fires, illness or disability, etc.  But most people don’t think about or plan for the fact that 70%* of us are going to have to worry about the cost of long term care at some point before we pass away. 

 

 

There are four essential questions that you will have to answer as soon as something happens to you, such as a broken arm or leg, a stroke, or something else that might be debilitating and would cause a need for long term care.

  1. The first question asked would be, “Who would be your caregiver?” Most people think, “my family will take care of me.” That’s not always a quick and easy solution.  Does your family live nearby or hours/states away?  Are they employed, and if so, do they have enough vacation time to handle your needs? It also doesn’t mean that your family will be available immediately when you need them.  
  2. The second question is, “Where do you want to receive your care?” Most people want to receive care at home. I’ve never run into anybody that said I couldn’t wait to get into a nursing home. That’s not the goal. They want their care at home, and that’s something related to your ability to pay for it. 
  3. The third question is, “How are you going to pay for your care?” Money & finances are always involved when we need to pay someone to take care of us. 
  4. The fourth question is, “How will this situation affect your family”?

All four of these questions are critical issues that must be answered when a long term care event occurs.

 

Regarding the third question, “How are you going to pay for it?” There are only four ways to pay for long term care insurance.

  1. Income & Assets: Are you working and/or do you have savings or investments to cover this cost?
  2. Government: Medicare is a health insurance program and doesn’t cover long term care. (LTC)  Medicaid is an income-based program designed for low-income people.  VA healthcare might be possible, but qualifying for the medical benefits can be complicated.
  3. Family: Not many people want to be dependent upon family members, but it is an option.
  4. Long Term Care Insurance**: A reverse mortgage loan can be used to fund long term care directly, or there are a variety of life insurance products with long term care features that you can use.  

Long Term Care is a difficult subject to address and pay for, but since 70%* of Americans will need it at some point in their lives, it is a necessary conversation.  With a reverse mortgage loan used to directly pay for the care or cover some of the insurance cost**, it is something that may decrease some of your worries in retirement.  Is it time to consider a reverse mortgage loan? 

Video by: Harlan Accola, National Reverse Mortgage Director, NMLS#277693 with Fairway Independent Mortgage Corporation.

Ready to learn more?   Contact us today!

*Source: https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html  ** This advertisement does not constitute financial advice. Please consult a financial advisor regarding your specific situation.

 

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Should I Wait To Get A Reverse Mortgage Loan?

Many people think that they should wait until they’re older before getting a reverse mortgage loan because, generally, you can get a little more money as you get older. But let’s look at the factors that determine when is the best time. The reverse mortgage loan-to-value, or “principal limit factor” as we call it, is based on three factors:

  • The value of your home
  • Your date of birth
  • Current interest rates

The more valuable your home, the more money you’ll receive. So a lot of people say, “Well, the best thing to do is to wait until I’m older, and my house is worth more because then I’ll get more money.” The fact is that it doesn’t make sense in the way that you look at scenarios when it comes to your long-term retirement planning.

 

 

A reverse mortgage loan will allow you to take out more money the older you are. The amount of your reverse mortgage proceeds increases by about 1% each year.

The lower the current interest rates are, the more money available to you. The higher the interest rates are, the less money you will be able to take out.  

So let’s look at the factors behind this. First, the value of your house will probably go up, but we don’t know that for sure. We also know from 2008 that home values can go down. So it’s usually better to get a reverse mortgage now since you can always refinance if your home’s value goes up dramatically in the future. A reverse mortgage loan can also protect you if your home’s value decreases. It makes sense to lock in a specific amount and consider refinancing if the value goes up.

Now the second thing to consider is that you will get more funds available as you get older.  However, if you use the reverse mortgage to convert all or a portion of your home’s value into a reverse line of credit (ReLOC), your credit line will go up faster than the amount of money available to you from the increase in your age. The best time to start the ReLOC is as soon as you qualify for a reverse mortgage at age 62 because that starts the line of credit growth in motion.  Based on history, your ReLOC will grow by 4-6 % annually every year that you don’t use the money.

Lastly, let’s look at the impact of interest rates. Right now, we’re in a time of historically low-interest rates. Many financial analysts and economists believe it’s far more likely that future rates will go up, not down. They might stay low for an extended period, and that’s great, but that ensures you that you will get the most available money from your home’s value.  

So the bottom line is that in most cases, it doesn’t’ pay to wait. You should look at your situation.  Our loan specialists are here to help.     

 

Video by: Harlan Accola, National Reverse Mortgage Director, NMLS#277693 with Fairway Independent Mortgage Corporation.

Ready to learn more?   Contact us today!

 

 

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Ownership and Title

One thing to consider with all mortgages, including the reverse mortgage loan, is how ownership of the property is structured.  In most instances, the property title is held either fee simple or joint ownership traditionally.  However, occasionally the homeownership can be in a trust.

 

 

There are only two types of trusts - revocable and irrevocable. However, there are many different names and variations within each of these types. In a revocable trust, the grantor is in charge of the assets.  The assets of the trust are transferred to the beneficiaries upon the death of the grantor.  In an irrevocable trust, the assets are moved out of the grantor’s estate to the trust, with control of those assets given to a third party (e.g., an adult child, attorney or bank).  The grantor cannot make any changes to the trust without the consent of the beneficiaries. 

We can do a reverse mortgage in either situation where the property is in a revocable or irrevocable trust.  However, a review of the trust document is required.  In some cases, your attorney needs to prepare an addendum to make sure that the language complies with the terms of the reverse mortgage. 

A typical example of an irrevocable trust is a life estate.  In a life estate, title to the property is transferred to someone else, usually the children, with the original owners retaining the right to occupy the home as long as they live.  We can do a reverse mortgage when a life estate exists.  However, the children/heirs to the property must agree to the loan and be a part of the loan process, which would include participating in the HUD counseling, signing application and closing documents, etc.

Is ownership of your property held in a trust?  Just ask us about your situation and whether it would meet the requirements for a reverse mortgage.  You might find that it’s a lot simpler than you realize. 

Video by: Harlan Accola, National Reverse Mortgage Director, NMLS#277693 with Fairway Independent Mortgage Corporation.

Ready to learn more?   Contact us today!

 

*This is not tax, legal or financial advice. Please consult a tax, legal, or financial expert for your specific situation.

 

 

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Three Buckets

The Sacred Cow of Home Equity

Many people feel that paying off their home and having no mortgage with lots of equity is the Holy Grail of retirement. Several people wait until their home is paid off before they retire and then feel they are safe to do so. The truth is that home equity is good, but it is not great because it is not liquid. In the face of fluctuating home prices along with nursing home and long-term care threats, it is typically better to have your equity in cash and in a form that you can control instead of relying on uncontrollable factors.

With people losing their homes in the depression era of the ‘30s and the latest round of the housing foreclosure crisis starting in 2008, many people feel that having a paid-off house in retirement is the safest way to go. The fact is that when a reverse mortgage loan enters the picture, the rules change because there is no payment and no risk of foreclosure as long as you live in the home as your primary residence and pay insurance and property taxes and maintain the home. (Of course, you have to pay property taxes even if you don’t have a reverse mortgage.) If you can use home equity without risk of foreclosure from missing payments, then the old rule of having a paid-off home in order to be secure may no longer be the best option. The truth is that a home is a great place to store memories but not a great place to store assets.

Once you understand that home equity is good, but cash is better, then the three buckets illustrated above will make a great deal of sense. During our earning years, we take money from the first bucket – W-2 Income – and put it into the second bucket – Retirement. What we also do is put quite a bit of our income into the third bucket – our home – purchasing it, making payments, improving it, etc. When we come to retirement, it is normal and expected to start drawing from bucket #2 (and stop contributing). Our first bucket decreases into just social security and pension income. However, most people continue to put money into bucket #3 when they don’t need to. They sometimes continue to make payments when there is more than enough equity in bucket #3. They should let that bucket take care of its expenses as well as give them a cash flow that is not taxable. What they don’t realize is that with a reverse mortgage, they can take cash out of bucket #3 just like bucket #2.

In the 3 bucket image above, notice the direction of the arrows and how they change to maximize your retirement income for post-retirement income on the lower rectangle. If you adopt this strategy as proven by Texas Tech research* and Boston College for Retirement Research**, your retirement funds will give you more income and be far more likely to outlast you! This is a big mental paradigm change. However, it is very imperative for you to understand the retirement rules, from taxation to home equity and especially long-term care issues, are just very different from what happened during your earning years. Retirement is a different game and has different rules. The better you understand those rules, the better your retirement income will be.

Let us explain why bucket #3 is so valuable for your retirement. Ask a local Reverse Mortgage Planner for more information about how a reverse mortgage loan works, we would be happy to be your reverse mortgage lender. 

* Pfeiffer, S., Ph.D., Salter, J., Ph.D., CFP®, AIFA®, & Evensky, H., CFP®, AIF®. (2013). Increasing the sustainable withdrawal rate using the standby reverse mortgage. ** Ellis, C. D., Munnell, A. H., & Eschtruth, A. D. (2014). Falling Short: The Coming Retirement Crisis and What to Do About It.

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A Reverse Mortgage Documentary Produced by Kirby Bradley

Kirby Bradley, an ESPN award-winning film producer, known for Real Sports with Bryant Gumbel and 30 for 30, has recently produced a short documentary on one of the most misunderstood retirement products available, a reverse mortgage loan.  This informative documentary covers true stories from families who used a reverse mortgage in a sensible, smart, and safe way that has enhanced their lives in a life-changing way. Feel free to watch the video below or read the transcribed text below. If you're interested in learning more about a reverse mortgage, you can request your free book here or reach out to your local reverse mortgage planner.

Most but not all, reverse mortgages today are federally insured through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) Program. This blog and video talks about HECM loans only.

 

 

Harlan Accola: (00:04)
Hi, I'm Harlan Accola, with Fairway Independent Mortgage Corporation. You're about to watch a short documentary about one of the most misunderstood financial retirement products available, reverse mortgages. These are true stories told by real people who, at one time, didn't even like the idea of reverse mortgages. But they did their research and eventually concluded that reverse mortgages are a sensible, smart, and safe part of retirement planning for a broad range of people. I trust you'll find the stories informative and maybe even life-changing for you and your family.

Carol Tavares: (00:40)
I'm Carol Tavares, and I'm 76 years old, although I don't feel like it inside, I look like it on the outside. My husband and I were married in 1993. It was not our first time around. I had three children, and he had 1. Life is a challenge.  I've had some more severe problems in the last few years. Eric is my middle boy, and he is disabled, and he's 56. He uses a wheelchair and has been for 35 years. Then I had my mom here for a while living with me, and she passed away in June, and she was a handful. And then I have Joe, my husband, who is diagnosed with early Alzheimer's. I seem him slipping away.

Carol Tavares: (01:46)
Eric has always been my responsibility. I try and help him as often as I can. His van was in real bad shape. It was coughing and choking and not getting him where he needed to go, and if he didn't have a van, he wouldn't be able to go anywhere. He's housebound. We knew we had to do something, and I was so frustrated. I didn't know which way to turn.

Stacey Schwartz: (02:17)
Carol is quite a lively, personable individual. Someone such as Carol is in a position of having a lot of equity in their home, but no cash. She didn't have access to the cash value available in her home.

Carol Tavares: (02:34)
We have a mortgage. I was struggling to pay the house off because my idea and my dream or my thoughts were that you should have a house paid for if you want to retire. Joe wanted me to get the reverse mortgage, and I fought him every step of the way. I didn't think he understood the ramifications of a reverse mortgage, so I kept saying no, no, no. And Joe kept seeing Tom Selleck on television selling reverse mortgages, and my thought is, you're kidding me, Tom Selleck surely doesn't have a mortgage, let alone a reverse mortgage. My daughter called me, and she says, "Mom, I think you should look into it again. Things are different. A reverse mortgage is you're taking your money out of your house, and you have access to that money. If something happens to you, the house is still in your name, and your beneficiaries can still sell the house and have whatever money's left after they paid the reverse mortgage off."

Carol Tavares: (03:38)
I started thinking about this reverse mortgage, and all of a sudden, you're not going to believe this, but it hit me how old I am. I'm going to die eventually, and all that money's going to be in the house, and I'm not going to see it. Eric never eats sweets except when it comes to the lemon meringue pie. Forget it, and he could eat a whole pie. Oh, I feel so good about Eric. When I got this reverse mortgage at and I talked to him about the van, I said, "I want to help you. I want to fix that van. I want to know that you're going to get to my house at Christmas." And he got tears in his eyes. I got tears in my eyes. Oh, my God. When he goes, "But Mom," I said, "But mom, nothing. What would I be doing with this money?"

Carol Tavares: (04:29)
Okay, sonny boy, mama's going. I love you.

Eric Tavaris: (04:34)
I love you too, mom.

Carol Tavares: (04:34)
I love you more. I didn't leave myself out. The first thing I did was I got an air conditioner and I also bought myself a new king size bed and I want to have my kitchen cabinets painted white. Getting a reverse mortgage has changed my life. I feel secure. I've got the money, and I can do it, I can live. I don't have to worry about losing my house, and I don't have to worry about making a house payment. I only have to pay taxes and insurance. I'm really happy with the reverse mortgage and considering how negative I was, I can't believe it's me, but it's true.

Harlan Accola: (05:16)
I have a lot of compassion for people that don't like reverse mortgages because I hated, them and I told people, "Whatever you do, don't get a reverse mortgage. They're bad for you, they're bad for your kids, you're going to lose your house," all the misconceptions that people say to me all the time. And then one day I got an invite to go to a seminar. That three-day seminar changed my life. The truth is there's a lot to like. Everybody has three buckets of wealth. Bucket one is the money that we make and are able to make when we work, and after we stopped working, the ability to make social security, income, pension, income, whatever it is. Bucket two is the money we put aside for the future and that's money that we set aside in 401Ks, 403Bs, IRAs, all the different retirement vehicles or just regular savings plans or, of course, life insurance contracts.

Harlan Accola: (06:01)
What we've also done is taking hundreds of thousands of dollars and dumped it into bucket three. That's our home equity. What's interesting, though, when we start looking for where do we pull money from, bucket one is usually not big enough. So we turn to bucket two where we've got our savings account. What we don't realize is all of that equity that we had in bucket three, we can turn that into cash also. What's wrong with using it? But for most people, they block that off and say, "No, that's stuck," and they're going to leave it in the walls of their house and not touch it.  One of the biggest single things that I hear over and over again, which is, "I want to give my house to my kids free and clear." It's almost laughable because most children are never going to use the house or move into it. It's really strange, but everybody wants to give their home to their kids.

Harlan Accola: (06:46)
So the odd thing is that if we were going to give our kids a Christmas present and we knew they were going to take it back to the store, we'd probably give them cash or a gift card. But in the case of a house, everybody wants to give their house to their kids and their kids are going to take that equity and convert it into cash just as quickly as they can. The best time to use a reverse mortgage is at the beginning of retirement, not at the end*. If you do a reverse mortgage at the beginning of retirement, instead of waiting until you're 82 or 92 when you run out of money, what happens is that you'll end up with a larger legacy, you pay less in taxes, and you have more cash flow while you're alive.

Harlan Accola: (07:24)
A reverse mortgage is kind of like you're guaranteed not to lose. So FHA mortgage insurance guarantees that no matter when you pass away, no matter how big the bill gets, no matter what happens to the stock market or the interest rates or any of those things, you will never owe more than what the house is worth**. You will never have a bill left for your children, and you will never have to make a payment no matter how long you live, except for taxes, insurance, and maintenance. So if it's good, it goes to the children. If it's bad, the bill goes to FHA. You don't know if you're going to win for sure, but you're guaranteed not to lose.

Robert Smith: (08:01)
My name is Robert Charles Smith. They call me Robert or RC. The most momentous event happened when I met my bride. We got married at 19 years old. So we've been married for 64 years. Still sleep with the same woman. So anyway, that's what happened.

Judy Smith: (08:33)
Well, the most important thing for us is to support different charities. We're supporting 5 or 6 missions, several at home, our church.

Robert Smith: (08:44)
Let's bless you before we leave. We support five missionaries around the world, Costa Rica, Taiwan, Sri Lanka, and Indonesia. So bless Tim and bless all of his workers. In your name, we pray. Amen.

Robert Smith: (08:57)
Amen. We moved from Northern California to Oceanside in 2017. We bought this place here, 120,000 down, and then we had the monthly payment, $1,800 a month. Then we said, "Wait a minute, what if we had a reverse mortgage? Why do we want to have money in the dirt that we can't get our hands on and can't be useful to us?" And that if we could pull the money out, then all of these missions are going to be able to receive a check every single month. So that's exactly what we did.

Karline Stanley: (09:34)
90% of the senior population can benefit from a reverse mortgage***. You could have clients who are with a net worth of $10 million, and there's an absolute benefit to having the reverse mortgage. So, for Robert and Judy, they fall into the category of having done a good job of setting up for retirement. They have all their ducks in a row as far as their assets saved up to where they won't outlive their savings. Their ability to put the reverse mortgage in place freed up a significant amount of money, $1,800 a month, that they can now use towards their mission work.

Judy Smith: (10:11)
So what we thought was, this is fun. We can give away money now.

Robert Smith: (10:18)
What I would say to someone that is suspicious of reverse mortgages, it has all the protections that you need. If you'd like to make a payment, make it to yourself, for goodness sake. Take the $1,800 and run down here, and I'll help you find the broker. Or give it away. Give to people that need it.

It’s often wise to take the time to learn something new. Ask a local reverse mortgage planner to help you understand the facts and features of a reverse mortgage loan.

 

Harlan Accola Reverse Mortgage Director, NMLS#277693

Stacey Schwarts, Fairway Loan Officer NMLS# 243801

Karoline Stanely, Fairway Co-Branch Manager, NMLS#265513

*This advertisement is not tax or financial advice. You should consult a tax and/or financial advisor for your specific situation.

** There are some circumstances that will cause the loan to mature and the balance to become due and payable.  The borrower is still responsible for paying property taxes and insurance and maintaining the home.  Credit subject to age, property, and some limited debt qualifications.  Program rates, fees, terms, and conditions are not available in all states and subject to change.

***Source: Dr. Wade Pfau

 

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