Helping Your Parents Live Independently: Using the home as a financial tool

Transcription

1 A guide for family members Helping Your Parents Live Independently: Using the home as a financial tool

2 S tudies show overwhelmingly that, as a society, we want to age-in-place. In other words, we want to live at home for as long as possible. With rising costs of healthcare, fuel, and general cost of living combined with the fact that we re living longer and may need some more help along the way, this can become challenging, both for the senior at home and for family members who may be lending a hand. This brings a new group to the forefront the sandwich generation. They are sandwiched between caring for aging relatives and raising their own families all while managing careers and planning for their own retirement. Some are even considered seniors, themselves! So, as a family member, where do you begin? First and foremost, communication within the family is essential and it may mean that some difficult, but very important, issues may need to be discussed. Other trusted advisors may need to be consulted with regard to financial planning, legal planning, and healthcare needs to help determine the best options for the senior and the family. Additionally, the willingness and ability for family to lend a hand, whether it s with errands, transportation, household maintenance, or financial assistance, must be determined. With family increasingly scattered across the country, and even the world, this becomes even more of a challenge. If there are gaps, what resources are available to fill them? Finally, you need to consider yourself. You may be willing to lend a hand, but your ability may be limited. No matter how much you love your family and no matter how willing you are to do whatever it takes, you still need to keep food on your table, a roof over your head, and be aware of your own emotions and stress levels. Sometimes, utilizing local resources can help you be better at helping your family while not losing yourself in the process.

3 Using the home as a financial resource Any financial decision involving the home is not one to be taken lightly, whether it s selling the home, using a home equity loan or line of credit, or considering a Reverse Mortgage. Before making any decision, it s important to get the facts, ask questions, and be sure you fully understand what you may be undertaking. If it sounds too good to be true, proceed with caution; it probably is. For most of us, our home is our biggest financial investment. And, for homeowners aged 62 and over who own it outright or who have built up equity over the years, it may be one of the most overlooked sources of extra income. Often, the equity in a home can be used to supplement the costs of remaining in the home including healthcare and medications, maintenance, taxes and insurance, assistance, fuel, everyday expenses, and more. One obstacle many seniors face is the notion that they must leave something behind for their children or grandchildren. This is, of course, a very wonderful and generous thing to do if one is in a position to do so. But it s also important to consider whether or not the same financial resources could be used to help the senior remain at home, live a better life, and minimize any financial burden that could be left to the children. Whatever the final decision is, seek advice from trusted, reputable professionals to ensure that you are making the decision that is best for you and your family.

4 What is a Reverse Mortgage? A Reverse Mortgage is a unique loan which enables homeowners, age 62 and older, to convert part of their equity into tax-free* income without having to sell their home, give up title, or take on a new monthly mortgage payment. One way to think of a Reverse Mortgage is that it is the opposite of a traditional mortgage. With a traditional mortgage, the homeowner borrows money and makes monthly payments back to the lender. As payments are made, the balance of the loan declines while the equity in the property increases. With a Reverse Mortgage, the lender pays the homeowner and the loan balance increases while the equity declines. Equity in the home is being used to supplement income. Monthly payments are not required on a Reverse Mortgage; the loan is repaid when the borrower permanently leaves or sells the home. The property must be owner-occupied and must be the homeowner s primary residence. It can be a single family home, condominium, 2-4 family home, or a planned unit development. As with other mortgages, there are different types of Reverse Mortgages available, based on the homeowner s specific needs and qualifications. The main factors which determine how much money is available to the homeowner are homeowner s age, the value of the home, and current interest rates. Depending on the type of loan, funds from a Reverse Mortgage can be received in a variety of ways as a lump sum, in fixed monthly payments, as a line of credit, or in a combination of the three. Your Reverse Mortgage Advisor will explain which options are available to you. *Please consult with a financial or tax advisor for specifics.

5 How can a Reverse Mortgage be used to help a senior age in place? There are no restrictions on how a homeowner uses the funds from a Reverse Mortgage; some ways that homeowners have used their funds include: Hospital/healthcare costs, medical equipment, medications Repay existing mortgages and/or debts; pay taxes and insurance Supplement existing income and use for day-to-day living expenses Home improvements, repairs, modifications Pay for in-home care or assistance with jobs around the home and yard Use as a financial planning tool (purchase life/long term care insurance) Many features of a Reverse Mortgage make it an attractive financial tool for homeowners and an excellent alternative to other options: No income, medical, or credit qualifications No monthly mortgage payments No repayment of the loan until the last borrower passes away or vacates the home for one consecutive year Non-recourse loan; no additional debt is left to the borrowers, even if the home has depreciated in value Loan proceeds are tax-free and may be tax-deductible upon repayment* Social Security and Medicare eligibility are not affected For protection, all Reverse Mortgage borrowers are required to undergo third party counseling prior to approval to ensure that they understand the loan program Money left over after repaying the Reverse Mortgage goes to the homeowners or to their estate *Please consult with a tax advisor for specifics.

6 What is a home equity loan? A home equity loan is a loan against the equity available in your home. Many homeowners have one, either as an installment loan or, more commonly, as a home equity line of credit, in addition to a first mortgage. A home equity line of credit (HELOC) is often opened by a homeowner as an additional measure of security for unexpected emergencies, for home repairs, to assist with tuition, or for other uses. Because it is a line of credit, the homeowner can draw on it as needed. Monthly payments are required, but as the equity is replaced, it becomes available again to the homeowner. It is much like a credit card, but the collateral securing it is the equity in the home. The rate may vary and the monthly payments may vary based on rate and the amount drawn. With an installment loan, a single lump sum is drawn on the equity in the home and regular monthly payments are required. Often this is a fixed rate loan, with fixed monthly payments. How can a home equity loan be used to help a senior age in place? If the senior family member does not have a regular source of income to make monthly payments on the loan or is not a homeowner, this may not be a good option for the senior, but family members may wish to explore it as an option, themselves, if they are providing financial assistance to the senior.

7 What if selling the home is best? Maybe it has been in your family for generations or just a short time either way, all kinds of memories and emotions can be associated with the home, often making the decision to sell a difficult one, but sometimes selling is best for everyone. Whether the homeowner is planning to purchase another home better designed for aging-in-place, is moving to an apartment or assisted living facility, or is moving in with a family member, it is important to involve an experienced and reputable real estate professional in the process. You may wish to consider working with a REALTOR with a Seniors Real Estate Specialist (SRES ) designation especially if the senior homeowner is looking to purchase another home. Agents with this designation are committed to working with homeowners over age 50 and understanding their unique needs and concerns, helping them to make wise decisions. When you are selecting an agent with whom to list the home be clear about any special needs or requests you may have especially if you have a senior family member residing in the home. For instance, agents like to show homes when the owners are not present. If your family member relies on someone outside the home for transportation or needs a place to go while the home is being shown, communicate this clearly to allow for proper notice before a showing. No matter who you select, be sure that the agent is professional, ethical, and that you feel comfortable working with him or her. Seek recommendations from family and friends who have bought or sold recently and take the time to interview your candidates.

8 Why choose Mount Vernon Mortgage Corporation for a mortgage? At Mount Vernon Mortgage Corporation, we understand that our clients may have different goals, needs, and emotions associated with the mortgage process. We are committed to helping senior homeowners and their families make the decision that s right for them by discussing their needs, wishes, lifestyle, and other financial and estate plans before we present their options to them. This allows us to explain the merits of different options, based on the homeowners needs. Because we offer a full range of all types of mortgage programs, we can provide the choices that are best suited to the homeowners needs. We understand that financial security means something different to everyone and that there are many different approaches that can be taken to achieve financial security; some will involve a mortgage program and others will not. If a mortgage program is not in the homeowner s best interest, we will be sure to discuss this. We endeavor to educate homeowners so they can make informed decisions and we welcome other financial decision-makers and advisors to be involved with the dialogue. We want homeowners to be completely comfortable that the choice they make is the right one. Mount Vernon Mortgage Corporation is local, serving the needs of Massachusetts homeowners since We have earned our reputation for putting the client first, educating homeowners about their options, and applying the highest ethical standard to all that we do. We would consider it an honor to work with you as you make this important financial decision.

9 Useful resources Massachusetts Executive Office of Elder Affairs provides services across the Commonwealth through Aging Services Access Points (ASAP), Councils on Aging, and senior centers South Shore Elder Services, Inc. is an ASAP for 11 communities on the South Shore, providing services, assistance, and education to older people and their caregivers Asian Info Line: To be directed to the local ASAP in any community, call AGE-INFO from a telephone in that community and you will be connected. Councils on Aging exist in each city or town and work specifically within the communities in which they are located. On the South Shore, contact your local Council on Aging: Braintree Council on Aging Cohasset Elder Affairs Hingham Department of Elder Services Holbrook Council on Aging Hull Council on Aging Milton Council on Aging Norwell Council on Aging Quincy Council on Aging Department of Elder Services Randolph Department of Elder Affairs Scituate Council on Aging Weymouth Department of Elder Affairs

10 How to contact Mount Vernon Mortgage Corporation for more information We would love to talk with you or meet with you! If you would like to speak with one of our mortgage professionals, please do not hesitate to contact us. Phone or toll free at Online Mail Mount Vernon Mortgage Corporation 440 Washington Street Weymouth, MA We want to do the best we can for you. Therefore, if you wish to meet in person, it is best to call ahead for an appointment.

11 Committed to helping senior homeowners achieve financial security. 440 Washington Street Weymouth, MA Massachusetts Licensed Broker MB1492 Copyright Mount Vernon Mortgage Corporation