Warning Signs That Your Parents Need Financial Help
Talking about your finances is never easy. Talking to your parents about their finances before or during their retirement can be just as difficult.
This is the situation many loved ones and caregivers may find themselves in at some point as their parents get older and they need their help managing their finances.
Most importantly, parents should feel their children are there to help, no matter what, and feel safe talking about their finances openly.
If children feel they would have a hard time talking to their parents about their retirement planning and the financial stability of their plans, here are a few warning signs to watch out for:
Ask Them About Their Health
Firstly, children should gauge their parent’s health for any signs that it may be deteriorating. If this is happening, it’s crucial to notice as soon as possible, in order to take the necessary steps to protect their parents should they fall ill in the future.
Look For Irregularities In Their Spending
Most people are used to checking their bank statements once a month when the statement comes in the mail, but when it comes to retirees, their adult children should become more involved and track spending more often than it’s customary.
Notice if bank statements reflect excessive statements or buying the same things over and over as this could signal more troubling health issues in the future. If looking at bank statements is too uncomfortable, look in their pantry. See if they have something (like rice or ketchup) that is piling up; it could be an early warning sign that something is amiss.
Talk To A Financial Planner
In addition, children should seek help, along with their parents, in determining if their parents have enough cash flow to sustain them long into their retirement. As people live longer than ever before, retirement planning should reflect the changes in the times, predicting longer survival than just a decade after retirement.
If children of retired parents notice retirement funds are dwindling fast or there is a strong possibility their family members may outlive their funds during the length of their retirement, they should seek out guidance from financial professionals as well.
In addition to medical illnesses, children also need to consider unexpected financial hardships such as freak accidents. It’s hard to think of a time when parents or family members may be ill because of one reason or another, but being prepared is part of the solution.
How Reverse Mortgages Can Help
Reverse mortgages can be part of the solution for long-term retirement planning as well, even when more traditional methods of retirement planning are in place. It can give retirees the necessary financial cushion for the unexpected expenses as well as paying off any remaining mortgage or HELOC debt so that those monthly payments can be put to use elsewhere such as a savings account.
Financial stability is always important but even more so during a time when retirees should be relaxing or volunteering or working because they love what they do or are beginning a third career, not because they need to pay their monthly bills or are struggling to do so.
This blog was written with the help of Dennis Coral, vice president and financial advisor, at SunTrust Bank Wealth Management.
Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.
Why I Started PS Financial Services
I was in training at one of the country’s largest reverse mortgage companies when the CEO said, “We don’t want every loan.” What he meant by this was, “We will deny the less than perfect borrower and/or property.”
I had difficulty with this concept because I was a front line mortgage loan originator (MLO) who put food on the table by closing every loan possible. I was working hard to bring in that business and help those families in less than ideal situations.
I’ve also helped change people’s lives: people who ran into some type of hardship in retirement whether it be physical, financial or both. Helping these people get out of their situation was incredibly fulfilling and I would fight with all my might to help them get their reverse mortgage.
Now this CEO was telling me I would have to look these retirees in the eye and tell them we can’t help them.
I wasn’t having it.
An Innovative Way to Pay Off Your Mortgage (and Plan For Retirement)
When I speak to clients for the first time, they often tell me one of the reasons they never considered a reverse mortgage is because they do not currently have a mortgage.
I let them know, off the bat, that while the reverse mortgage was created as a way to help seniors pay off their mortgage, that facet of the program is only the tip of the iceberg. The reverse mortgage, while not well known for its flexibility, is one of the most flexible mortgage programs around.
If a borrower has a need or simply wants to pay off their mortgage, then they can, and any left-over funds can be stored in a line of credit or can be received via monthly payments for a set amount of years or for life (as long as the borrower lives in their primary residence).
However, the reverse mortgage can also be used as an innovative long-term retirement planning tool. This is the part where many borrowers and their heirs find themselves at a loss because many continue too look into the reverse mortgage (MAINLY) as a loan of last resort when it is, in fact, an innovative way to plan for your retirement and/or pay off your mortgage.
Mortgage Brokers Can Ease the Strain of Getting a Home Loan
There was a time when reverse mortgages could be taken out at the local branch of the bank you’ve trusted with your money for years. However, after the boom and bust, more and more banks bowed out of originating reverse mortgages. And while many lenders have also closed their reverse mortgage departments, there have been many changes to the reverse mortgage loan as well as the landscape for homeowners.
Presently, according to an article published by The Guardian, a little over 60% of all home loans are taken out through a broker.
This information is not surprising, given the amount of changes to various mortgage loans, including reverse mortgages, have gone through the years. It’s no longer enough to fill out a form, hand it to an “order taker” and wait for the “yes,” “no,” or “we need more information.”
In the last year alone, the reverse mortgage industry has gone through at least four major changes. While these changes have made the loan safer for both borrowers and the FHA, it also requires extra education and preparation so that borrowers who are thinking about getting a reverse mortgage, have the most up-to-date information.
Planning for Retirement the Smart Way…With a Reverse Mortgage Loan
The recent announcement of the financial assessment, which is to be implemented on March 2015, has sprung a slew of news stories describing the potential benefits and risks of the reverse mortgage loan.
Despite the fact that positive press was up in the months of June and July, there is still a negative stigma associated with the reverse mortgage, and I am not talking about the fear of losing your home this time. In fact, what called my attention in the article, Reverse Mortgage Loans: Are they worth the risk?, was something else: closing costs.
Reverse Mortgage Financial Assessment Will Take Effect on March 2015
The Department of Housing and Urban Development has finally announced that the financial assessment will come into effect on MARCH 2015.
While the financial assessment was previously announced as an upcoming change last October, it was not implemented in the past year. Next March, however, the financial assessment is poised to be one of the biggest changes in the reverse mortgage industry while adding another safeguard for future borrowers.
Reverse Mortgages Loans Can Help Seniors Retire Comfortably
The most difficult part of educating seniors and their caregivers about the reverse mortgage is the fact that they have heard and/or read so many negative news that they cannot fathom any positive news about the reverse mortgage loans.
In a sense, it seems impossible to them that any positive can ever come out of the reverse mortgage. Thankfully, the tide of change is coming swiftly for the NEW reverse mortgage program, where, not only is the reverse mortgage industry poised to benefit from, but seniors, their caregivers, their heirs, their financial planners, etc. as well.
For example, let’s say a couple did everything right in order to make it a comfortable retirement, however, their mortgage payment is higher than they ever imagined and burning a hole in their pocket every month.
A reverse mortgage is a potential avenue for seniors whose monthly mortgage payment has been unmanageable and would rather put their monthly income to better use than their mortgage payments, especially if they have already retired (probably later than expected).
Changes to the Reverse Mortgage Loan Has Positive Effect
Amid the news that the positive press for the reverse mortgage loans have surged in the past months and FINRA’s declaration that the reverse mortgage is no longer a loan of last resort, individual financial planners are beginning to see the advantage of the reverse mortgage loan as a long term retirement planning tool as well as an alternative way of paying off one’s mortgage and using those funds for other uses.
In the past, misuse of reverse mortgages lead to borrower defaults when they were unable to pay their property taxes and insurance. In addition, because most borrowers received their funds in a lump sum, there were instances where little was left over for unexpected expenses.
In an effort to make the program safer for borrowers, changes were made to the program to make it a more advantageous, long-term retirement planning tool and NOT a loan of last resort.
What’s the Largest Asset in Your Retirement Portfolio?
According to an article published in Reverse Mortgage Daily, housing assets continue to be the largest dominant force in many senior retirement portfolios, revealed a report from the Mortgage Bankers Association’s Research Institute for Housing America.
This isn’t particularly shocking news, even after 2010 when housing prices bottomed out. Houses are still the greatest asset in a senior’s retirement portfolio because they remain the biggest investment many Americans will make during their lifetimes. It’s worth more than stocks, social security and a car all-together.
In addition, a study has revealed that older Americans who own homes are more financially secure and generally experience fewer impediments to good health than their peers who rent. The best reason for this is that seniors who own their homes are able to modify their properties according to their health needs, if these needs ever should arise.
The Reverse Mortgage Industry Teams Up with Financial Planners
There’s been a push for financial planners to team up with lenders as soon as the reverse mortgage changes were implemented. Personally, I think financial planners will provide a big boost to the reverse mortgage program. The program has changed, in a way that has made it more suitable for affluent seniors looking to plan their retirement fund for the proverbial rainy day.
However, while working with financial planners may be the next frontier for reverse mortgage professionals, and the industry in general, that’s not to say that all financial planners will be one size fits all. In fact, lenders should take heed and pair up with financial planners who have their same interests in mind, while offering their clients an alternative to previously established retirement planning funds.