Millions of older homeowners are unaware of their hidden wealth as pandemic savings dwindle and inflation surges.
Continue readingThe Hidden Wealth Effect & Senior Home Equity
The hidden casualties of inflation
The cost of unprecedented economic stimulus is inflation and older Americans and retirees are often its unseen casualties…
Continue readingSenior housing wealth grows as inflation surges
We are likely headed toward an era of historic inflation in the United States. Not the news one wants, especially if they’re retired. However, there’s one safe haven for millions of senior homeowners; their home.
Continue readingThe question every older homeowner should be asking…today
Washington Post: “Should you tap into your home equity to fund your retirement?”
It’s perhaps the most important question every older homeowner could be asking. Should you tap into your home equity to fund your retirement? That question is the title of a recent column written by David Mount in the Washington Post. Mount presents a fair and factual representation of reverse mortgages. However, we will also examine his approach as to when one may be appropriate.
Should they take their winnings off the table?
Taking their winnings off the table:
Are seniors over-invested in their home?
Let’s say in January 80% of your assets were invested in hotel and entertainment stocks that made you a healthy chunk of change. For sake of argument, let’s say these stocks consistently out-performed your expectations. Then came March and the arrival of the novel coronavirus. If you found yourself holding these positions after the pandemic broke you probably got clobbered in the market.
Much like being over-invested in one or two companies, many are over-invested in their home. That’s a point Hometap Equity Partners CEO & Cofounder Jeffrey Glass made in a last month’s RMD virtual event HEQ- the future of home equity in retirement. If the bulk of a client’s wealth was tied up in one stock a financial professional is likely to strongly recommend diversification. “If that were a stock, and you had 60-90% of your net worth tied up in one stock, no matter how much you love that stock, any financial advisor would tell you you’re over-concentrated, particularly since you’re over-concentrated in an asset that’s illiquid,” While Glass’ was speaking in the context of alternate equity products, his analogy nevertheless rings true.
So what about housing wealth?
Lifelong Mortgages: The New Norm?
Younger borrowers are taking longer mortgages- then comes a reverse?
When debt is king and aging populations are exploding across developed countries, more are finding themselves with a mortgage throughout their adult years. Lifelong mortgages may soon become the rule rather than the exception. Overall baby boomers are not doing too badly when compared to younger generations, but they have challenges as well. Fannie Mae reports over 51% of baby boomers are still paying a mortgage. CNBC columnist Bob Pisani writes that 45% of baby boomers born between the years 1946 to 1964 have zero savings for retirement…
While we can debate the exact percentages one trend is emerging. Fewer older American will be paying off their homes before retirement, or for that matter before they die. That should come as no surprise as only…
What they’re not telling you
HECM originators: the silent objection for many older homeowners is using up their home equity
When you sit down with a potential reverse mortgage borrower, you know they didn’t invite you over for a cup of coffee. Before they clicked on your ad, picked up the phone or sent in a card there was an underlying need or concern that motivated them. The most successful originators don’t dive into how a Home Equity Conversion Mortgage works but instead ask them what they would like to accomplish. A wise approach that cuts through the minutia of the loan and isolates underlying motivations. Despite their intentions, there may be one silent objection they are not sharing- their apprehension in using home equity…
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Their Nest Egg is Gone. Now What?
We looked at some of the country’s oldest retirees, who found their callings and joy late in life and want to keep working for pleasure as well as profit.
But what happens when you’ve saved and planned for retirement — and then the rug beneath your feet morphs into a magic carpet of debt and disintegrates?
That’s what happened to one Boomer couple, now 66 and 71, who had all their ducks in a row for a rosy retirement. A triple threat (serial job loss, serious illness, and the financial markets collapse) combined to effectively eliminate their savings.
To repair the damage, the couple invited their son and his family to move in while they tried to sell their house and move to a more affordable location. Too bad they didn’t know about or perhaps didn’t consider, a reverse mortgage, which might have been the ticket to a smoother ride through the rapids. Now, even with the husband once again employed, they are saddled with massive credit card debt.
Some financial pundits hold the opinion that owning a house itself is the culprit, and advise seniors to pay off their mortgage and rent in retirement. Yet this suggestion undercuts everything many older adults have imagined and planned for their entire lives: living out their days secure in the knowledge that their longtime home will see them to the end of life in comfort and security.
Clearly, housing is the overarching expense in retirement as it is in our younger years, as confirmed by a recent Employee Benefit Research Institute report. Yet it’s not the only concern — or expense. While paying for a roof over their heads remains a constant 40-45 percent chunk of expenses in retirement, medical costs rise sharply. By age 90, the report states, “health care expenses account for more than 20 percent of the households’ entire budgets.” End-of-life health care costs can be astounding, even with Medicare: those in the 95th percentile of health care spending in 2011 spent almost $30,000, while those in the 25th percentile spent less than $1000.
Preparation and adaptation are key. Whether or not a dream job is on the cards for a senior, knowing they will be able to remain in their home is essential. Awareness of the evolving reverse mortgage option and how this might benefit their nest egg is smart recourse when creating a retirement planning toolkit — especially since the mass affluent are already using HECMs strategically to support their portfolios in a down market.
Is it Equity or Value? That is the Question
Common explanations that may create confusion
A wise person once said, “Words are free. It’s how you use them that may cost you.”At some point in our careers, most of us have been guilty misusing keywords when describing the features and benefits of the federally-insured reverse mortgage. I most certainly have done so, even on this show. As our collective gasp fades let ’s examine some of the common HECM vocabulary that is often used freely but is inaccurate. After all this helps each of us communicate clearly and accurately without eroding the trust of borrowers and other professionals.
It’s all about value. The most misused term in our industry is equity. After all, the formal and proper name for the federally-insured reverse mortgage is the Home Equity Conversion Mortgage. Seems straightforward enough but is it accurate?
Retirees Conflicted on Home Equity
Despite challenges many reluctant to tap equity in retirement
Older American homeowners find themselves beset by a variety of retirement landmines- exploding medical costs, uncertain markets and income security. Despite these challenges, retirees remain conflicted about tapping their home equity.
Mortgage and financial professionals are well aware that the baby boomer generation is less adverse to mortgage debt than the generation that preceded it. A recent New York Times article cites the seismic shift of how older American’s managed mortgage debt. The Federal Reserve reports that home-secured debt held by those aged 65-74 was only 18.5 percent in 1992, 32 percent in 2004 and 42 percent in 2004 as reported by the 2013. The percentage of those holding mortgage-related debt into retirement is expected to continue to rise as an estimated of 10,000 baby boomers turn 65- each day.
Despite the widespread acceptance of leveraging debt among boomers, retirees financial needs and uncertainty about tapping into home equity remain. The conflict between the need to fund aging in place and tapping into home equity through a mortgage is addressed in Jamie Hopkins recent column in Forbes.
“American retirees are facing a laundry list of retirement challenges. The only certainty is that
