The Older We Get, The Happier We Are…

I don’t know if I realized this about myself before reading some research by psychologists on what they now call the Paradox of Aging, but apparently I’m getting happier by the day!  Of course, all this happiness is accompanied by some aches and pains, some forgetfulness, and general diminished cognitive abilities; all of which had me thinking previously that getting old was a downer – that I was just trudging toward the inevitable end.

So why are we happier?  As we begin to face our mortality we are more apt to appreciate relationships and direct ourselves toward more meaningful goals.  The wisdom we acquire as we accumulate birthdays plays a large part in becoming more empathetic, compassionate, decisive and better able to regulate our emotions…thus happier.

There are also physiological changes to our brains as we age.  We are less responsive to stressful imagery and respond positively to images which should give us a happy feeling.  Additionally, we no longer experience many of the stresses that those young whippersnappers in their 20’s and 30’s go through as they work at establishing themselves, and raising children.  In fact, we get to have fun with their kids and then give them back when we get tired.  Happiness.

I sure hope they are correct, with 10,000 people per day turning 65, it would be a rather sour world in a few years it they’re not.

Not all the shrinks believe it’s as simple as all this, but I’m not going to allow them to drag me down now that I’m feeling happier – in fact it just enhances my sign off line:  It pays to get old.

Your Future is Now

      The farmer knows he must become adept at one of two things:  Planting in the spring or begging in the fall.  It’s time for planting….

 

Oftentimes when I meet with clients, I hear statements like: “I don’t need the money right now; but when I do need it, I’ll get in touch with you.”   Today, I’ll attempt to show you how faulty this line of reasoning is, and how to make your home’s equity work for you now to take care of your future.      As you are hopefully aware, the HECM Adjustable Rate Mortgage (ARM) allows the borrower to elect to place their funds in a Credit Line or Line of Credit, from which the borrower can withdraw funds as needed.   Interest only accrues on the balance of funds that have been withdrawn, and it thus operates much like a Home Equity Line of Credit. Of course, with the Reverse Mortgage Credit Line, you are not obligated to make monthly payments.      Now for the huge difference: the Reverse Mortgage Credit Line grows in size as time goes by.   That’s right, I said it: the unused balance of your Credit Line becomes larger each month.  Your unused balance is not gaining interest, so you’re not going to be taxed, but it will grow just as if the bank was paying you interest.      If you look at a typical Reverse Mortgage Loan Comparison (which any lender will show you), you’ll see a figure called the Credit Line Growth Rate.   At this moment in time, the Growth Rate will be your Interest Rate plus 1.25%.  On the Reverse Mortgage Loan Comparison I created today, the Interest Rate is 4.475% and the Credit Line Growth Rate is 5.725%.   I know I’m putting some of you to sleep with these numbers, but stay with me now; this is where it gets interesting.      Our borrower, Mr. Sample, closes his Reverse Mortgage Loan at the age of 64.  He told me he is not retiring for another ten years so he doesn’t need the funds right now.  He places his funds ($230,000) in the Credit Line Account which has a Growth Rate of 5.725%.  At the end of the first year, his available Credit Line balance has grown to $243,167.50.  Not too shabby, but since the Growth Rate compounds, it grows faster and faster each month.  At the end of 10 years, the available balance has grown to a whopping $401,332.84, and all Mr. Sample had to do was make a decision for his future without waiting until he was up against the wall.

Good decisions are generally made when we’re not under pressure.  Do yourself and your family a favor and think about improving your future today.

Home Values Rising

All right Baby Boomers, buckle up your seat belts, the home equity roller coaster is about to roll. After some years of static or even declining home values in some areas, the trend is definitely headed upward.  In the metropolitan area which includes northern New Jersey, New York City, Westchester, Long Island and southern Connecticut, it’s been reported that home prices have appreciated as high as 12% in some locales.  In addition, predictions are for increases in the 5-6% range for the coming twelve months.  Most of these increases are fueled by continued low interest rates, a shortage of housing merchandise, and even some stability in the job market.

Nationwide, Senior’s home equity has soared to over $6 trillion dollars with an increase of $164.9 billion dollars in the last quarter of 2015. I don’t know about you, but I still can’t wrap my brain around those numbers – but they do show home values rising…and that can only be good.

So, what does this mean for you and me? Too many Boomers got caught up in the refinance craze in the early 2000’s and galloped toward retirement with a fat mortgage payment to handle.  Perfect clients to consider a Reverse Mortgage;  however, over the past few years, we estimate one in five people who contacted us to research a Reverse Mortgage, didn’t qualify due to a shortage of equity in the their home.  Therein is the good news of this essay:  if you were told that a Reverse Mortgage wouldn’t work for you before; the time may now be right to hit the restart button and find the smooth path to enjoyable retirement years.  Give us a call and discover The. Golden. Years.

It pays to get old….

Who Are You Calling Old?

You can call me a baby boomer; you can call me a retiree; you can even call me late for dinner, but don’t call me old.  That’s the word from a poll commissioned by the Associated Press-LifeGoesStrong.com conducted in June of this year.

 The generation of baby boomers who once proclaimed that: “we’re never going to get old,” are holding fast to that way of thinking.  While younger adults call 60 the beginning of old age, about half of boomers are pushing the number back to 70, and almost a quarter of them don’t think you’re old until you’ve reached 80.  As they march into their early sixties, many are finding out it’s not so bad, and they feel upbeat about their futures.

 A decided majority of baby boomers are actually enthusiastic about aging and all its fringe benefits like watching children and grandchildren grow up, spending more time with family and friends, and having time for favorite activities.  “I still think I’ve got years to go to do things,” says Robert Bechtel, 64, of Virginia Beach, VA.  He retired last year and now has less stress and more time to do as he pleases.

 About half of the baby boomers predict a better quality of life for themselves than their parents experienced as they aged.  “I have no intentions of sitting around the house,” said Lynn Brown, 64, of Apache Junction, AZ.  “I’m enjoying being a senior citizen more than my parents did.”

 Almost all of the boomers – 90 percent – are making a conscious effort to eat better to improve their health, and more than half have taken up a regular program of physical exercises as well as mental exercises to stay sharp.  Loretta Davis, 64, of Salem, W.VA, reads, plays games on her computer and takes walks.  “I wish I had been more conscious of what I was eating earlier in life,” said Davis.  But she said getting older doesn’t bother her: “I’m just glad to be here.”

 Oops, gotta go know, I’m late for the gym….

(Cross-posted at Senior Security)

Inspiration from Late Bloomers

If you are a Senior Citizen like I am, then you have probably come to the realization that we are in for a few more aches and pains, we might forget a few things from time to time, and our eyes don’t see as well as they once did.  So this body that carries us around is getting older, even though our mind still feels vibrant much as it did when we were in our thirties or forties.  We still have a lot of living to do, and it might surprise you to hear some stories of famous people that were late-bloomers – that is, they made a name for themselves in their sixties or later.  I’m not suggesting that you need to go out and do what they did, but I do want to inspire you to live your life rather than letting the aches and pains get the better of you.

Let’s look at a couple of people who did big things late in life: 

Grandma Moses…started oil painting at the age of 75, after having to give up her hobby of embroidery because of arthritis in her hands.  Quite a prolific painter, during the next three decades, she completed over three thousand paintings, one of which hangs in the White House to this day.

Colonel Sanders…his working years included stints as a steamboat pilot, an insurance salesman, a railroad fireman, and a farmer.  Finally forced to retire at the age of 65, he used the $105 from his first Social Security check to visit over 1,000 restaurants trying to sell his idea of a Kentucky Fried Chicken franchise before someone agreed to sign on.  As they say, the rest is history.

Peter Mark Roget…after retiring from the Royal Society of Medicine at the age of 70 he began writing the world’s first Thesaurus, or book of synonyms.  Roget’s Thesaurus was first published when Roget was 73, and while alive, he presided over 28 additional printings.

Ray Kroc…Ray worked for 17 years as a paper cup salesman, then another 17 years peddling a milk shake machine known as the Multi-Mixer.  While suffering from diabetes and arthritis, Kroc bought the McDonald’s brothers fledgling hamburger fast food restaurant at the age of 59 and went on to franchise McDonald’s Hamburgers and sell over a billion hamburgers.

Winston Churchill…He lost every election he ever entered as a candidate until finally – at the age of 62 – winning the election for Prime Minister of Great Britain just prior to World War II.  His leadership along with President Roosevelt was instrumental in winning the war forGreat Britain and theUnited States.

Oscar Swahn…not as well known as the others, he won two gold medals in shooting events in the 1908 Olympics at the age of 60.  In the 1912 Olympics, he won another gold to become the oldest gold medal winner even till today.  He finally slowed down in 1920, and at the age of 72 only won a silver medal.

So, what is old?  Do you feel like giving in to age, or would you rather live life to its fullest?  I know what I’m going to do….

(Cross-posted at Senior Security)

 

Misleading the Public

Since I began specializing in the field of Reverse Mortgages (after 34 years in the world of forward or traditional mortgages), it has been my habit to read everything I see on the subject of Reverse Mortgages.  The Reverse Mortgage is such a different animal from the forward mortgage that I acquired more than a few gray hairs trying to make the transition from traditional mortgaging to learning to think in reverse.

It is no small wonder then that so many of the articles I read by self-styled experts are rife with mistakes, errors, inaccuracies, and in some cases are outright misleading.  I believe this is largely due to a lack of knowledge, though that is hardly an excuse – journalists, columnists and reporters should do the research to get their facts straight.  Occasionally, the misleading starts with the title to the article, and that’s the worst kind because even someone just scanning the pages of the publication can become misinformed with the next flip of the page.  Such was the case when I read the weekend edition of Newsday, a daily newspaper covering Long Island and New York City.  In the Saturday Part 2 section, which has articles devoted to the Senior lifestyle, there was an article entitled: “Reverse Mortgage Foreclosures.”  Now, if I were just flipping through the pages, I would be left with a negative feeling about Reverse Mortgages.  In fact, a friend of mine alerted me to the article via an early morning email to clue me in to some bad press.  Even worse, the same column on the newspaper’s online version was entitled: “Reverse Mortgages Carry Foreclosure Risks.”

After reading the column, it was obvious that the writer was referring to people with Reverse Mortgages who had not paid their property taxes and/or their homeowners’ insurance.  They were thus at risk of losing their homes, but not due to a Reverse Mortgage – due to non-payment of their real estate taxes.  There are countless homeowners around the country today with no mortgage at all who default on their property taxes and are at risk of losing their homes.  During this ungodly recession, there have been more defaults, bankruptcies and foreclosures of every sort and this will probably continue until the economy improves.  As a result, both the Dept. of Housing and Urban Development (HUD), and the lenders who hold these Reverse Mortgages, along with interested groups such as the National Reverse Mortgage Lenders Association (NRMLA) and the National Council On Aging (NCOA) are hard at work to find a solution for Senior homeowners who find themselves in this predicament.  There are some excellent ideas being discussed to offset this problem, but let’s be clear, these potential defaults are not a result of homeowners having a Reverse Mortgage on their homes.

I’ll keep you posted as the solutions to this problem are enacted.

Finally, it pays to get old.

Spotting Elder Financial Abuse

Doctors who treat the elderly have generally kept an eye out for signs of physical abuse, which are mostly of an obvious nature, such as bruises and broken bones.  The signs of potential financial risk for the elderly are much less obvious; and even when they are present, it takes a trained person to spot them.  The N.Y. Times recently reported that physicians and other health care professionals in 25 states will now be joining the front lines in the fight against elder abuse of the financial variety, thanks to a pilot project developed at Baylor College of Medicine in Texas.

Some of the signs the doctors are learning to look for are cognitive problems, overly protective caregivers, and being fearful, distressed or excessively suspicious.  These red flags do not necessarily mean the Senior is, in fact, being abused, but indicates the potential is there to become victims of unscrupulous family, friends and acquaintances.  The doctor is then encouraged to ask questions of their patient, and if there is even a hint of abuse, they should refer the patient to one of a number of agencies which will investigate in more depth.

None of us like to admit that we’ve been scammed or victims of fraud, and the elderly are no different.  A survey done last year found that 20 percent of Americans over the age of 65 had been defrauded, and most of those did not reveal this to their adult children.  Obviously, the vultures and scam artists know this and search out our parents and grandparents to steal from them.  We all need to be conscious of their vulnerability and try to protect them.  Adding their doctors to the front lines should be a welcome blessing.

Finally, it pays to get old.

Equity For The Kids

Since the end of World War II, the members of the Greatest Generation have been consumed with the hope and desire that their children would have a better life than they had.  Much of that is a result of living through the Great Depression and the war years.  If you listen to your parents and grandparents who survived those times, you’ll hear them talk about “getting by” with less, and not having any extra money or extra anything else for that matter.  Sacrifice was a part of their lives, and even when times became better, they lived in a frugal manner in order that their children would have more.  I can even remember my grandmother still saving balls of string in the 1970’s.

So, it is understandable when considering a Reverse Mortgage (which we know will increase in size over the years as the interest accrues) why our parents hesitate.  They look at one side of the equation and see that if the mortgage balance increases over time, then the equity must decrease, thus leaving less inheritance for the children.  If there were no such thing as appreciation, they would be correct.  Fortunately, appreciation is alive and well, albeit hibernating in the early part of 2011, but alive nonetheless.

A quick look at some recent history is in order here.  I am using figures for the New York Real Estate market derived from the House Price Index (HPI) which is “designed to capture changes in the value of single-family homes in the U.S.” and is published by the Federal Housing Finance Agency (FHFA).  In the last 20 years, New York homes have appreciated by a total of 111% including 4 years where values went down.  This gives us an average of 5.55% per year.  If we look at only the past 10 years, area homes have appreciated by a total of 68%, for an average of 6.80% per year.

Now, without going into so much detail that your hair will start to hurt, let’s look a basic example of a Reverse Mortgage borrower.  John and Mary Smith take a Reverse Mortgage on their $400,000 home at the age of 67.  Their initial loan balance (on the Reverse Mortgage) is $259,200, leaving them equity of $140,800.  Using a conservative appreciation rate of only 5%, at the end of 10 years, their equity has increased to $165,199 even after computing the interest accrual on the mortgage balance.  Going out to 20 years, their equity is $148,722 after factoring in the interest accrual – still higher than the day they started, even with the interest accruing.

The bottom line is that John and Mary lived a much better life during the years after they closed on their Reverse Mortgage, and were still able to leave their children with a great inheritance.  Something to think about.

Finally, it pays to get old.

(Cross-posted at Senior Security)

Equity Over There, Or Equity Right Here

The subject of equity is a part of virtually every conversation about Reverse Mortgages – at least the ones of which I have been a part.  Most people have an idea of what equity actually is; in that it is something of value expressed as a dollar figure.  As it relates to a discussion of a Reverse Mortgage, most potential borrowers think of the equity in their home as the difference between the home’s market value and the balance due on any mortgages and liens.  In other words, the dollar amount that could be converted into cash if the home were sold.  In this way of thinking, they are one hundred percent correct.

We often hear the comment that as time passes, the Reverse Mortgage will “eat into the equity of my home.”  This is less true than it may seem on the surface.  While the Reverse Mortgage will increase in size due to the accrual of interest and mortgage insurance, thereby displacing some of the equity as it exists at that moment, there are other forces acting on the valuation of the homeowners’ equity at the same time.  In the realm of real estate finances, a snapshot in time does not tell the complete story.  The valuation of real estate is on a time continuum; that is, it varies [mostly] up and [occasionally] down due to market conditions.  Thus we need to step back a bit and look at the whole forest rather than one tree.  While it may be true that on the day your Reverse Mortgage monthly statement arrives in the mail, your equity has diminished by one month’s worth of interest; your home is most likely travelling on its path to increased value – and as it goes on this route, your equity increases.

Finally, as we look at the word equity in the dictionary, there are other words with similar meanings.  It now becomes easy to see that Equity = Capital = Wealth, and we can then visualize another concept – something I call Pocket Equity.  Before you close on your Reverse Mortgage, many of you will still be paying monthly payments on your mortgage(s), Home Equity Loans, and maybe a few credit cards.  So, it follows that the equity that was in your pocket (or bank accounts) diminished with each month’s payments, and was now in possession of your creditors.  While you are concerned with the equity in your home, you are reducing your Pocket Equity and probably not living the lifestyle your deserve.  After closing on the Reverse Mortgage, you can still watch your home’s equity move up with the increased value of the real estate, and at the same time, watch and feel the increased equity in your pocket without having to make those monthly payments.

Finally, it pays to get old.

(Cross-posted at Senior Security)

A Storm Brewing? Perhaps Not…

For the past few months, we’ve been hearing a rumbling in the distance about the possibility of “credit underwriting” for Reverse Mortgages.  With dark clouds approaching and faint cracks of thunder, the Reverse Mortgage industry braced for a downpour that could prevent some borrowers from qualifying for the very products which have rescued seniors, in the past, from financial disaster including saving them from foreclosure.  The word now from the Federal Housing Administration is that they are working on something called “financial assessment” rather than “credit underwriting” according to an article in Reverse Mortgage Daily.

“We are focusing our efforts on the ability [of borrowers] to repay recurring costs,” said Vicki Bott, deputy assistant secretary for single-family housing with the Federal Housing Administration.  Apparently, lenders will be charged with determining that the borrowers have sufficient income to pay their property taxes and homeowner’s insurance along with normal living expenses. 

The rules are being written, and according to Ms. Bott: “The goal will be to ensure that any senior does have the ability to pay the property charges so they will not be in a position to default.”  Thus, it seems the focus will be on debt vs. income – which has not been included in the approval process heretofore.  A report by the Office of Inspector General last year found a growing number of loans in default for non-payment of taxes and/or insurance; which remains the responsibility of the homeowner after the closing of the Reverse Mortgage.

Lenders remain concerned about what form this new rule will take; at least until they’ve had a chance to review it.  Let us hope that it will be to the benefit of all parties.