Reverse mortgages 101:

Many of you have been asking me for more clarity on Reverse Mortgages. I pulled this off of the Today Show Website as I found it to be the most accurate and concise information. As always, please call me at 512.731.8818 with any questions you may have regarding this information.....enjoy!

According to The Associated Press, a record 11,216 reverse money mortgages were made in March of this year, up from 9,086 the month before. With retirees’ stock investments losing much of their worth, seniors are turning to reverse mortgages to help fund their retirement. Today, thanks to new federal legislation, the elderly can get bigger mortgages with smaller origination fees, making reverse mortgages a smart, practical option for cash-poor, house-rich seniors.

What is a reverse money mortgage?
It’s a loan against your home that you don’t have to pay back as long as you continue to live in your home. In short, the lender advances you the equity you have locked up while you continue to live there, usually in monthly payments from the bank.How much money can you get?

• The older you are, the bigger the loan: The amount of cash you can get depends on your age, usually your home’s value and the reverse mortgage plan you choose. The oldest borrowers with the most expensive homes get the biggest loans.
  
  
• Take the money as you like it: There are different ways to take the money; you can take one lump sum, monthly payments over a fixed period of time, or as a line of credit to use when you want.
  
  
• You make no monthly payment: Unlike a traditional mortgage, you make no monthly payments while you live in your home, and with the new FHA’s Home Equity Conversion Mortgage (HECM), you can move to a nursing home or other medical facility for up to 12 consecutive months before the loan must be repaid.

• New loan limit raised to $625K: HUD recently increased limits on federally insured reverse money mortgages to $625K for this year. Next year it might revert back to $417K. Lender fees are now capped at $6,000 regardless of the size of the loan, so borrowers can get more money for lower fees. The government is losing money on this program and, as reverse mortgages become more popular, federal fees will go up as the loan amounts are lowered.
  
  
• You still pay property taxes: You’re still responsible for property taxes, insurance and home repairs. In fact, making certain repairs and maintaining your home can be a requirement of the loan.
  
  
• Lender can’t cancel: Unlike a home equity line of credit, the proceeds from a reverse mortgage can’t be frozen or canceled.

Who’s eligible?

• 62 years or older: Borrowers must be 62 years or older. That means each owner of the home must be 62 or older.
  
  
• There’s no income restriction
  
  
• Must have wiggle room: You must own your home outright, or have a low mortgage balance. Any mortgage balance is paid off at closing with proceeds from the new reverse loan.
  
  
• Owe the lender nothing: It must be your primary residence. Reverse mortgages are also available on 2- to 4-unit properties, condos, co-ops, planned unit developments and prefab homes. Mobile homes are not eligible.

What happens when/if someone dies?

• The loan is repaid in full, including all interest and other charges, when the last living borrower dies, sells the home or moves away. Any remaining equity in your home belongs to you or your heirs.
  
  
• Most lenders in the industry automatically allow 90 to 180 days if the heirs opt to sell the home. They’re sensitive to the market and don’t want to lose money in a rushed sale. Lenders cannot look to other assets of the borrower or the heirs to repay the loan.
  
  
• Reverse money mortgages typically have a “nonrecourse” clause, which means you and your estate will never owe more than what your home is worth.

The key questions to ask

• Is a reverse mortgage your best option? If you have the income and credit rating to qualify for a traditional mortgage, it may be a better option. If you need only a small amount for a short time, try taking a home equity line of credit. If you need a large amount, you might consider moving to a less expensive property instead.
  
  
• How long do you expect to stay in your house? The right answer is “at least seven years.” Reverse money mortgages become less expensive over time; the longer you live, the cheaper they are.
  
  
• What payout is best for you? Unless you need the money right away, it’s best to opt for installment payments since the money you take starts accumulating interest immediately.
  
  
• How will you use the money? It’s pretty much always a bad idea to use a reverse mortgage to pay for a vacation or a risky investment.
  
  
• Do you want to spend all of the home’s equity, or leave some equity for your kids? As you stay in your home, your debt can grow to equal the value of the house and your heirs won’t receive a thing.

Death of a Great Client, a Great Person, and a Great Friend

This past Tuesday morning I received a call from the wife of a great friend, great person, and a great client informing me that her husband had passed away over the weekend from natural causes. He was 44!

To maintain their privacy I’ll refer to them as Jim and Beth.

Over the past few months I had been working with Jim and Beth on an asset optimization and retirement income plan. During this time I realized that not only were they approaching retirement with one foot on the gas pedal but had one on the brake as well. Not only that, they were severely under insured! Let me explain;

Jim and Beth have a mortgage of $312,000, two car loans totaling $72,000, unsecured debt totaling $23,500 and two children ages 8 and 12 in private schools. Beth is a stay at home mom.

The only insurance policy Jim had in effect was through his employer for a total of $100,000. Once the death benefit on this policy is received, it will payoff Beth’s Car and the unsecured debt. Beth will sell Jim’s car and most likely will do so at a slight loss.

This leaves the question of what to do with the house that is mortgaged at $312,000 as well as the future of their children as there is now no income to pay the mortgage or the private school tuition.

Had Jim taken my advice and at the very least purchased the life insurance policy I was recommending, Beth would have received the $100,000 from Jim’s employer but would have had an additional $500,000 as well, tax free! This additional coverage would have cost Jim as little as $48.00 a month!

I would have loved to seen them purchase this policy and at the very least covered their outstanding obligations but now Beth may be forced to sell the house and go back to work. In this economy and housing market, I would not want to be in that position for any reason.

Luckily, there may be enough equity in the home and Jim’s 401k to keep the children in private school once the home is sold and the 401k liquidated but then the question becomes, where do they live?

There were other ideas that I was working on with Jim and Beth that would have secured their children’s college education as well as providing a tax free income retirement plan for Jim and Beth. All of this could have been accomplished without increasing their current annual retirement contributions one penny!

I share this story not as a sales pitch but one of concern and care for you, my family and friends to ensure that you don’t end up in the same situation. Many of you know me for my mortgage services but may be unaware that those services are only about 25% of what I really have to offer my clients.

I am licensed in 27 states to implement asset optimization strategies, tax deferred and tax free retirement income plans, long term care, 401k Rollovers, stretch IRA’s, college savings plans, Term life insurance coverage, Annuities and more.

While many of you have seen your retirement accounts lose 30 to 60% over the last 2 years, not one of my clients lost a penny! Everything that I implement in an asset optimization plan revolves around Safety of Principle, Liquidity, and a Favorable Rate of Return (where your gains are locked).

Please read and follow my blog at http://jmichaelnash.blogspot.com to stay informed of the latest case designs that are being implemented and how they relate to you. If you know of any of your friends or family that could benefit from talking with me, I would be more than honored that you have referred them to me.

I may be reached at jmichaelnash@yahoo.com or at 512.731.8818

Make it a great day by protecting yourself and loved ones,

J. Michael Nash
Financial Strategist

Guaranteed Income for Life

The clients are ages 69 and 71 and currently in the middle of retirement. Right now they are relying on their IRA’s to supplement social security and a small pension. At their current withdrawal rates they are going to run out of money in less than 15 years. They have lost significant value in the IRA accounts over the last few months and have become even more concerned about out-living their retirement accounts. If the market was to have another big downturn they are confident they would not be able to continue to live their with their current lifestyle.

Along with their qualified accounts they have a house that is currently paid off. The house provides an option to generate extra income, but they currently cannot afford to pay for a new mortgage payment.

We combined Annuities and Indexed Universal Life, to meet and exceed their income goals. Now the clients do not have to worry about a market downturn or losing even more value in their qualified accounts. Things that they currently were not prepared for such as inflation and not having guaranteed income are now incorporated into their proposed plan along with a death benefit on each spouse.

Now they have guaranteed lifetime income to meet their needs and we were able to generate extra disposable income!

If you have family memebrs or friends in the same or similar situation, please have them contact me for a free, no obligation, analysis of their situation.

All the Best,

-Michael-

Case Design - Couple wants to retire but won't be able to maintain lifestyle

Case Design – Couple wants to retire but won’t be able to maintain lifestyle.

Clients ages 63 & 64 would like to retire next year but are fearful they don’t have enough in pension and social security to maintain their current lifestyle. They need to supplement their income by $2000.00 per month to achieve this goal.

Problem: Accounts are loosing value so fast they are unsure their assets will last through retirement. They are both in generally good health and can work easily until age 70 but would love to spend more time with grandchildren.

Situation: Current home is worth $500,000 which they owe $150,000 currently with a mortgage at 6.625% and are paying $1457.00 per month.

457 plan =$200,000
IRA = $46,000
Money Market = $43,000
Variable Annuity = $218,000

Liabilities are all paid of monthly.

My plan will;
Incorporate the annuities, the 457, and the IRA into 3 segments while refinancing the home into a 55% LTV 30 year Conventional Fixed Rate Mortgage while extracting $275,000 cash from the home. The new mortgage payment will be $1476.26 (almost exactly the same as before) while increasing tax savings as the first $100,000 of the new mortgage is also tax deductible.

I will leave the Money Market out of the equation.

Segment one will take care of years 1-5 of retirement;
$125,000 from qualified accounts will be used to purchase a SPIA (single premium immediate annuity) and will generate $2132.00 of monthly income.

Segment two will take care of years 6-10 of retirement:
$120,000 from qualified accounts will be used to purchase a 5 year Guaranteed Annuity which will yield an account value at maturity of $153,153 which will then be used to purchase a new SPIA resulting in guaranteed income monthly income of $2.614.00

Segment three will utilize the money extracted from the house which was systematically used to maximum fund equity indexed universal life insurance policy which will lead to a “Tax Free” income for life of $3525 per month AND yields a death benefit of $733,000 “Tax Free” to the children.
Not only did this plan allow these clients to meet their goals of “on time retirement” but the income was adjusted for inflation. We leave the ROTH (previously unmentioned) and the Money Market alone and for emergencies. The inevitable death benefit leaves the children better off than had the couple left the house to them as they had originally planned on doing. Now the kids enjoy $733,000 Tax Free in the form of the policy death benefit, will receive their parents home (which may be close to being paid off), but most importantly it allowed the clients to spend quality time with their children and grandchildren during their golden years without giving up any choice or control of their lifestyle.

Strategic Tax Planning

Due to an overwhelming frustration that has been building within me, I’ve started using a new tool for my clients to understand almost every area of tax planning there is. The tool was originally designed for accountants but has been modified to provide a plain English plan for saving money on your taxes and other areas of your finances.

My frustration has arisen from analyzing my clients overall portfolios and realizing how much money has been wasted by not understanding and optimizing the current and ever changing tax laws. Please note that I am not a CPA or Accountant nor am I looking to replace that individual but I can assist them in doing a better job for you and will most likely have several ideas for them to implement on your behalf.

Most of the recommendations I make to my clients help them save taxes and they enjoy these savings as much as anything else I do for them so, I decided to make proactive tax planning a bigger part of my practice.

I’ll assist you in implementing any strategies relating to insurance, annuities, strategic mortgage planning, long term care, asset protection, reverse mortgages, college savings, legacy creation, planned giving, estate tax reduction, a 401k roll over, an Ira roll over, a stretch IRA, tax free retirement income planning, term insurance and the list goes on and on.

If I can show you how to recoup losses in your IRA or 401k and protect your nest egg from future losses, would you be interested?

If I can show you how to improve your standard of living and/or your retirement income without spending another dime more than you already spend today, would you be interested?

If you answered yes to either of the above questions, you are not alone and I can help!

Please call or email me immediately to stop the bleeding! Not one of my clients that implemented a plan from my advice in the last two years has lost a penny in that plan!

This Strategic Tax Planning service is free of charge but only until April 15th. After that deadline, this service will cost $395.00 for the consultation.

Here are just a few of the reports I'll generate for you;


Prepare for Your New Baby

Tax-Smart Day-Care Choices

Avoid "Kiddie Tax"

Tax Strategies for College Savings

Tax Strategies for College Students

Tax Strategies for College Financial Aid

Tax Strategies for Supporting Your Parents

Charitable Gifts of Cash

Charitable Gifts of Property

Own Your Home for Tax and Investment Benefits

Make the Most of Home Equity Interest

Make the Most of Your Vacation Home
Prepare for Your New Baby

Tax-Smart Day-Care Choices

Avoid "Kiddie Tax"

Tax Strategies for College Savings

Tax Strategies for College Students

Tax Strategies for College Financial Aid

Tax Strategies for Supporting Your Parents

Charitable Gifts of Cash

Cha
Document "Business Intent" to Preserve Tax Breaks

Tax Choices for Startups

Strategies for Limited Liability Companies

Strategies for "S" Corporations

Strategies for "C" Corporations

Maximize Car and Truck Deductions

Buying vs. Leasing Your Vehicle

Make the Most of Business Meals/Entertainment

Make the Most of Business Gifts

Make the Most of Business Travelritable Gifts of Property

Own Your Home for Tax and Investment Benefits

Make the Most of Home Equity Interest

Make the Most of Your Vacation Home

There are actually over 100 reports I can generate with this new tool that will enhance your wealth and keep more money in your pocket!

I look forward to hearing from you!

Mortgage Market Interest Rates Update

Commentary: Mortgage investors seem to be dividing into two distinct groups. One group is fretting that disinflation within the economy may soon morph into deflation, a condition which erodes profits and makes debts of all kinds harder to repay. The other group is becoming increasingly concerned that the unprecedented fiscal stimulus and the Fed’s policy of buying more assets and pumping money into the financial system will reignite inflation.

I don’t think it matters much which group you choose to align yourself with – the 800 pound gorilla in the living room is Uncle Sam – who is currently on-track to borrow a record $2.5 trillion dollars in the fiscal year that ends September 30th. That amount of new debt issuance doesn’t just exceed the previous record of roughly $650 billion – it obliterates it by multiples.
The old rule of supply and demand states that in a competitive market place once supply exceeds demand (the point of equilibrium for you Econ 101 purist) -- price will fall. Like the law of gravity – the law of supply and demand is unbendable. Granted, there may be short periods of time when the level of supply and demand is being recalibrated during which price may temporarily rise – but ultimately the law must be obeyed. In our world when the supply of treasury obligations exceeds the global demand level prices fall – causing interest rates (including mortgage interest rates) to rise. From this point forward expect rallies to lower mortgage rates to be short-lived -- especially in comparison to the period of time mortgage interest rates will spend trudging to fractionally higher levels.

In my judgment it will take an event -- like a major swoon in the stock markets -- to create enough “flight-to-quality” buying interest to support a move to the 4.5% 30-year fixed-rate level for conforming mortgages. A bounce from current DJIA lows into the 8000 to 8400 price area followed by a plunge back through the 7300 level will, in my judgment, set up one final down-leg for the stock market into the mid- to low-6000’s range. Should this event occur (most likely within the next 30-days) look for a large part of the dramatic amount of capital that will be fleeing stocks to find its way into the conforming mortgage market -- temporarily creating a environment of steady to fractionally lower rates. There is no need to front-run this projection – if this event actually occurs -- the impact on your investors’ rate sheets will be abundantly clear.
Looking ahead to next week the macro-economic data will take a distant back-seat to the record breaking issuance of $94 billion of Treasury obligations in the form of 2-, 5- and 7-year notes. On Tuesday (10:00 a.m. ET), Fed Chairman Bernanke will be on Capitol Hill presenting his semi-annual testimony on monetary policy before the Senate Banking Committee. Investors will listen intently to Mr. Bernanke’s comments for any mention of the Fed’s possible intervention as a direct buyer in the Treasury markets. If the Chairman continues to remain mum on that issue – Treasury yields will likely rise – dragging mortgage interest rates higher as well.

Be patient … be disciplined … and play it by the numbers. There are a number of very volatile cross-currents washing through the credit markets right now.

new case study

The client is a 70 year old female living off of social security and income from a small part time job. She has assets available that she uses for emergencies or to pay for large expenses. Her biggest concern is that her current assets are going to run out of money and she will have to survive only on her social security. She would like to stop working and have extra income to be able to visit her children and grandchildren. Along with needing a long term retirement plan to supplement her social security, she also needs immediate income to live more comfortably.

The client has a house with a fair market value of $400k with no current mortgage. There is an open HELOC available, but she does not have the cash flow to pay for a new mortgage payment. She also wants to be able to pass down her house to her children mortgage free. Her current assets include a $250k Money Market account and a 401(k) for $100k. Due to the recent market she has experienced a loss in these funds and fears they are not going to be enough to get her through retirement.

For this client we were able to provide an immediate income in years 1-10 of $28k. Along with the immediate income, starting in year 11 she would be able to receive income of $32k that will last into perpetuity. She felt comfortable that her assets were now set up in a structured retirement plan with safety and guarantees that will allow her to live a comfortable retirement. A death benefit of $398k was provided that increased her total estate and legacy that would be left behind to her children. We were able to not have any additional out of pocket costs and her children will still be able to receive the house mortgage free.

Unfortunately, since other financial planners have been reading my blog and stealing my strategic designs for their own use, you'll need to contact me directly to see what we did to assist this client.

J. Michael Nash
Financial Strategist
The Michael Nash Group
1911 Rio Grande
Austin, Tx 78705
(512) 494-0300 office
(512) 494-0301 fax
(512) 731-8818 mobile
"Good, Better, Best! Never let it rest! Never let it rest until GOOD gets BETTER and better gets BEST!"