A Stable Retirement Seemed Out of Reach
HOMEOWNERS TAP HOME EQUITY to stay in home with reverse mortgages. Taking out a reverse mortgage early in retirement and keeping the credit line open for use in the future proves to be a popular strategic financial plan. Well before Danny and Sandy chronicled their summer romance in “Grease,” Shelia Crowson and Esco Hubbard experienced their own “Summer Nights.” The then-17-year-old Shelia worked the summer of 1969 at a concession stand in her hometown in Arkansas. Just down the street, Esco began his career as a truck driver. No matter which route his job took him, Esco always made a point to stop at the snack bar for a hamburger or hot dog – and to chat with Shelia. She couldn’t have known it then, but a simple invitation to join her and some
girlfriends for a day of summer sunning at the beach would change her life. She remembers the expansive beauty of the capri blue sky reflecting on the water so clearly that she still can close her eyes and see it. But more importantly, she recalls that beach excursion as the day her nearly 40year romance with Esco began. The pair headed west to California in 1971 and dated until Shelia completed her education to become a registered nurse. Esco was patient – a little too patient for Shelia. The indomitable southerner broke tradition and asked Esco to marry her, a union that lasted until his death in 2008.
Like so many young couples, the thought of retirement seemed like a flight of the imagination. They quickly became immersed with the rhythmical pattern of life and raising two children, Kimberly and Esco Jr. Sheila is matter of fact about the decades that passed so quickly, “We were two people trying to make a living, hustling and bustling. Then we looked around one day, and the kids were grown and gone. I thought it would be our time to be together and enjoy our twilight years. And then Esco died before we could.” Although the couple enjoyed stable careers, they didn’t plan much for retirement or discuss what would happen if one was widowed. “I wished we had,” she says, her speech still thick with the southern dialect she picked up as a youth. “I’d be sitting pretty now if we had.” Instead, the years following Esco’s death were rife with near-fatal medical conditions and chronic diseases that left Sheila battling her failing body. She stressed over how to make ends meet and yearned to have the stamina and resources to visit her remaining family, now spread over three states. The mortgage on the home in Fontana, California that she once shared with her husband became a financial burden instead of an asset. Despite the challenges, Sheila never lost her grit. She tapped into the pluckiness of her youth to pivot her previous knowledge and training as a registered nurse into a rewarding new career as a caregiver in the home health care field. Her work gave her a renewed sense of purpose but didn’t alter the fact that her monthly bills exceeded her monthly income.
...Like so many young couples, the thought of retirement seemed like a flight of the imagination...
Q A AND
SO WHY DID A REVERSE MORTGAGE STAND OUT TO SHEILA? Because, as she discovered, the reverse mortgage line of credit has a few clear-cut advantages over a traditional home equity line of credit for seniors. Borrower must continue to pay property taxes, homeowner’s insurance, and home maintenance costs. 1
Retirees Clear in New Survey: We Want to Stay in Our Homes. Retrieved May 30, 2017, from https:// www.theamericancollege. edu/retirees-clear-newsurvey-we-want-stay-ourhomes 2
Reverse Mortgage Presents Strategic Financial Planning Tool for Retirement But just like that summer so many years ago that changed the trajectory of her life, one phone call last summer determined Sheila’s ability to reinvent her life once again. After hearing a commercial conveying the relief many seniors experience after securing a reverse mortgage, she contacted American Advisors Group to learn more.
Sheila listened as an AAG reverse mortgage specialist unpacked the structure of a Home Equity Conversion Mortgage Line of Credit (HECM LOC), also called a reverse mortgage, noting how it differs from a traditional Home Equity Line of Credit (HELOC) – although the structures of both loans seem similar. She discovered that both are lines of credit secured against a home. Both accrue interest on only the amount that is borrowed, plus both interest rates are usually variable. So why did a reverse mortgage stand out to Sheila? Because, as she discovered, the reverse mortgage line of credit has a few clear-cut advantages over a traditional home equity line of credit for seniors. Sheila said she decided a reverse mortgage was an attractive loan for her when she learned that it wouldn’t require her to pay monthly lender payments. She could draw on the credit line
as needed without making a monthly loan payment.1 With the HECM Line of Credit, repayment is required only after the last borrower or eligible non-borrowing spouse leaves the home assuming they comply with all loan terms, such as continuing to pay taxes, insurance and home maintenance costs. “I decided it was right for me because it was going to help me out financially,” she says. “My kids would have some time to decide what to do with the loan and house after me, and fortunately, they are quite capable, and I know they’ll be able to make the best decisions. That cinched it for me.” More and more seniors want to remain in their current homes for as long as possible, but, according to Jamie Hopkins, an associate professor of taxation at The American College in the Retirement Income program, too few consider home equity as a source to fund their retirement. Hopkins’ recent study regarding home equity and retirement planning literacy revealed
that although 83 percent of study participants indicated a desire to remain in their homes, less than half – 44 percent – considered using home equity as a retirement planning tool, and only 14 percent had considered a reverse mortgage.2
Using a Reverse Mortgage to Fuel a Late-Stage Reinvention
For some borrowers, a HECM LOC presents significant line of credit growth potential, which is one approach Sheila considered. Taking out a reverse mortgage early in retirement and keeping the credit line open for use in the future proves to be a popular strategic plan. Because the unused line of credit grows at current expected interest rates, securing a reverse mortgage at 62 gives the line of credit time to grow – as opposed to waiting until 82 – especially if the expected reverse mortgage interest rates increase over time. After taking a short class from a HUD-approved counselor to fully understand the loan and having a series
“I decided it was right for me because it was going to help me out financially,” she says. “My kids would have some time to decide what to do with the loan and house after me, and fortunately, they are quite capable, and I know they’ll be able to make the best decisions. That cinched it for me.”
of lengthy discussions with an AAG reverse mortgage specialist to evaluate different options for closing costs and rates, Sheila decided to apply and use the reverse mortgage to stage a reinvention. She tackled her own health challenges head on with the funds, which were disbursed in September 2016. “I finally was able to do some important things for myself, which I hadn’t been able to do for a very long time,” Sheila enthused. In addition to receiving medical care to put her back on the road to wellness, she examined what else in her life could use some TLC. “I paid off all bills, bought a new vehicle for myself and updated my kitchen with new appliances,” she said. “I’ve wanted to do those things even before my husband passed away. I didn’t think they were going to be possible. I stored some away for savings and taxes, and now I don’t have those headaches anymore.”
MOST IMPORTANTLY, SHEILA FELT FINANCIALLY STABLE FOR THE FIRST TIME IN NEARLY A DECADE:
“That alone made me feel much better. Now that I don’t have the stress of paying a mortgage every month, I feel stronger.” The timing of the reverse mortgage also gave Sheila the opportunity to travel without hesitation, first to Texas following the unexpected death of her sister. “I was able to be with my son in
Washington for Thanksgiving, and I was able to give my kids a nice Christmas,” she says. Sheila isn’t alone in her satisfaction. According to a survey conducted by researchers from Ohio State University, a majority of seniors – 83 percent – who received HECM loan counseling and decided to follow through with a reverse mortgage said they were “satisfied” or “very satisfied” with their decision.3 Now on a financially sure footing and only 62, Sheila is evaluating the next stage of her life – and thriving.
Borrower Outcomes: Generally current on taxes, high overall well-being, and satisfied with decision. Retrieved May 30, 2017, from https:// www.nrmlaonline. org/2016/03/09/ borrower-outcomesgenerally-current-ontaxes-high-overall-wellbeing-and-satisfiedwith-decision 3
Buoyed by a new career as a caregiver, Sheila is continuing her long career of selflessly helping others. As the families of those she assists will tell you, Sheila embodies the qualities of courage, compassion and ethics. In fact, Sheila’s heroism is so well regarded that SeniorServ bestowed her with the Outstanding Caregiver of the Year Award as part of the 2016 Senior Care Hero Awards. Defining why Sheila deserved the honor, SeniorServ explained, “Born out of a personal ethic, and in spite of sometimes very trying circumstances, Shelia self-sacrificially places her clients’ immediate needs above her own. As a senior herself, Shelia heroically engages in providing clients with excellent care where many others in the industry might pass the buck. Shelia, you are a senior care hero!”
NMLS# 9392 (www.nmlsconsumeraccess.org). American Advisors Group (AAG) is headquartered at 3800 W. Chapman Ave., 3rd & 7th Floors, Orange CA, 92868. AAG conducts business in the following states: AK (Alaska Mortgage Broker/Lender License No. AK9392), AL, AR, AZ (MB_0911141), CA (CA Loans made or arranged pursuant to a California Finance Lenders Law license (603F324) and Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act (4131144)), CO (Regulated by the Division of Real Estate; to check the license status of your mortgage loan originator, visit http://www.dora.state.co.us/real-estate/index.htm), CT, DC (District of Columbia Mortgage Dual Authority License No. MLB9392), DE, FL, GA (residential Mortgage Licensee #22849), HI, IA, ID, IL (Illinois Residential Mortgage Licensee; Illinois Commissioner of Banks can be reached at 100 West Randolph, 9th Floor, Chicago, Illinois 60601, (312)814-4500), IN, KS (Kansas Licensed Mortgage Company MC. 0025024), KY, LA, MD, ME (SLM11356), MI, MN, MO (4824 NW Gateway Ave, Suite 201, Riverside, MO 64168), MS (Licensed by the Mississippi Department of Banking and Consumer Finance), MT, NC, ND, NE, NH (Licensed by the New Hampshire banking department), NJ (Licensed by the N.J. Department of Banking and Insurance), NM, NV, NY (Licensed Mortgage Banker-NYS Department of Financial Services; American Advisors Group operates as American Advisors Group, Inc. in New York.), OH (MBMB.850159.000), OK, OR (ML-4623), PA (Licensed by the Pennsylvania Department of Banking 28356), RI (Rhode Island Licensed Lender), SD, SC, TN, TX (Mortgage Banker Registration), UT, VA (Licensed by the Virginia State Corporation Commission MC – 5134), VT (Vermont Lender License No. 6384), WA (Consumer Loan # CL-9392),WV, WI, WY (WY-DBA AAG Reverse Mortgage Lender/Broker License No. 2331). A reverse mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes or insurance payments, or does not otherwise comply with the loan terms. AAG is an equal housing lender. These materials are not from HUD or FHA and were not approved by HUD or a government agency. V11082016