Real Sage Advice

Reverse Mortgage-Is it for you?

One time per month I have the privilge of publishing an article at Gilbert Guide. It may seem strange for a real estate agent to offer an article about reverse mortgages when they are usually used to help seniors stay in their homes. Well, if I can help a senior stay in their home comfortable for a few more months before it's time for them to move, everyone wins. They aren't for everyone, here are some pros and cons of reverse mortgages for you to consider:

Reverse mortgages understandably have their fair share of both advocates and critics. A financial tool to help seniors pay for home improvements, stay in their home, and increase their standard of living, the downside of reverse mortgages is that the cost can be high. I recently met with a family who asked me to help them talk with their aging parent about moving. The senior and her adult children shared with me their concerns about why they thought it was a good time for her to move. The mom—let’s call her Susan—recognized she needed some help with preparing meals and housekeeping, but really wanted to stay at home. The challenge was finding the money and the services to help Susan stay home for as long as possible, and in a way that would meet her daily needs and give her family some peace of mind, knowing that she would be safe. This gave us the opportunity to talk about reverse mortgages.

First, to be eligible, you must be over sixty-two years of age, own your home, and be living in it as your primary residence. The amount you are eligible for depends on your age, interest rates and the value of your home. Most reverse mortgages are set up so the home owner can receive monthly payments.

Advantages

• The reverse mortgage can be set up as a monthly payment, line of credit or a lump sum—whatever works best for the senior.
• No matter how the reverse mortgage is set up, the home owner does not make any monthly payments.
• No monthly payment is due from the home owner unless he or she dies, moves or sells the home. At that time the loan is due in full, plus interest and fees.
• The home owner can receive monthly income from a reverse mortgage as long as he or she lives in the home as a primary residence. A home owner could potentially continue to receive monthly payments even after the loan balance is higher than the amount that the house is worth.
• Neither the home owner nor his or her heirs will ever owe more than the home is worth, no matter how many payments are received or how high the interest rates become.
• It’s fairly easy to qualify for this loan since credit scores and income are not part of the qualification process.

Disadvantages

• The closing costs are high. The senior must pay origination fees that are about double what they are for conventional mortgages and mortgage insurance. The interest rates are adjustable.
• For seniors who depend on Medicaid or other state or federal programs, it’s important to consider if reverse mortgage payments will affect their eligibility.
• The senior is required to attend counseling by an independent HUD counselor prior to receiving a reverse mortgage. These are complex loans and this is a measure of consumer protection.

Possible Alternatives

• A line of equity may be an alternative. There are fewer fees, and the money is available on an as-needed basis, but it requires monthly payments.
• Refinancing the home with a conventional mortgage may save mortgage insurance fees that a reverse mortgage would require. However, this too requires monthly payments.

As a potential consumer of any financial tool, be cautious and seek out accurate information before making a decision. If you are looking for information on reverse mortgages, I suggest you talk with a HUD counselor or someone impartial. Reverse mortgage officers may be prone to selling only the advantages since they get paid when you take out a reverse mortgage. Real estate agents may be prone to selling only the disadvantages of them, as they get paid when you sell your home. Your best bet is to find an impartial advisor such as a financial planner (whose brokerage doesn’t sell reverse mortgages), an elder law attorney or a certified reverse mortgage counselor, all of whom will be able to share practical information to help you make your decision.

Here are a few links of interest to help you get started:

Reverse Mortgage Calculator

Find a HUD Counselor

Find a HUD-Approved Reverse Mortgage Lender

Brookdale Senior Living

Just recently I visited Edina Park Plaza in Edina,Minnesota for a tour.  While I was there, I learned Brookdale Senior Living purchased the Clare Bridges (memory care for those with dementia or Alzheimers) in Minnesota, and is becoming quite a large senior housing player in Minnesota. According to their website, they have over 17 senior housing communities in Minnesota.

As a consumer when you're touring senior housing, you likely won't care if it's run by Presbyterian homes, Ecumen or Brookdale Senior living. You'll look at the location, the amenities of the building, the services offered, and price. Which, by the way, is the exact way to do it!

Like so many other senior housing communities' websites, Edina Park Plaza's website doesn't tell you enough about it's unique features or who they seem best tailored to. In fact, if you aren't familiar with Edinborough Park, you wouldn't know Edina Park Plaza is attached to it, or what that means for seniors that choose to live there.

I've written before about how age segregated housing seems like such an antiquated idea, and how I've had clients say they didn't want to live with old people! Imagine living in a senior apartment overlooking an indoor park with walking paths and a children's play area. You open your windows in January and hear the sound of laughing children. I would welcome the opportunity to talk a walk among trees and plants in January and not have to don a heavy winter coat!

The baby boomers will continue to demand creative housing solutions as they age. I'm so glad to announce there are a few already here.

 

Independent Living, Active Adult, Housing with Services, Assisted Living. What's the Difference?!?

How do you decide which senior housing community is right for you? What's the difference between 55+ housing, active adult communities, independent living, housing with services, and assisted living?

It's easiest to distinguish assisted living, at least in Minnesota. On January 1st 2007 there was legislation enacted that said you must-at a minimum-provide the following services to call yourself assisted living:

• Two meals each day
• Housekeeping and laundry service available at least once a week
• Help in arranging transportation to medical and similar appointments
• Help in arranging social services and in accessing other community resources
• Opportunities for socializing
• Either assistance with self-administration of medications or administration of medications
• Assistance with at least three of the following activities of daily living: bathing, dressing, grooming, eating, transferring, continence care and toileting
• A system to check on each assisted living client at least daily
• A system that enables assisted living clients to request and receive assistance with health or safety needs round-the-clock
• An awake person, available round-the-clock to respond to assisted living client's requests for assistance.In small settings with 12 or fewer clients, the person responsible for responding to requests is allowed to sleep if adequate safeguards are in place.
• Staff in an assisted living building must be able to reach a registered nurse 24 hours per day, seven days a week, regarding any health issue that may arise for a resident.

As for the rest of those terms (55+ housing, active adult communities, independent living, housing with services) the differences are as varied as the different senior housing complexes throughout the twin cities. Even if you purchase a senior condominium in an active adult community, they are likely to have transportation to a community event, or a regularly scheduled card game or two. In fact, many independent senior buildings offer transportation, some meals, some organized events, pull cords in the rooms in case of emergency, 24 hour security or concierge service, and additional personalized services for an additional fee.

These additional services is where the line between independent living and housing with services are blurred.  It's a marketing challenge for the senior housing communities. They want you, the consumer, to know they offer services, but they can't call themselves assisted living.

As a consumer, would you be more drawn to housing labeled as an active adult community, independent living, or housing with services?

As a consumer you want to be sure you aren't misled by these industry terms. You want to be clear about what it is you'd like to purchase (or rent), then find the senior housing that most closely aligns with your wants, needs and pocket book.

Here's the bottom line, don't get stuck on how these communities label themselves. Get the list of floor plans, services and prices for each so you can compare for yourself.