A Better Strategy for Claiming Social Security

social security
A married couple was approaching retirement age and facing a number of major financial decisions.

Before their annual meeting with Jason Hill, founder and president of Client Focused Advisors LLC in New York, they shared one of those decisions with their adviser. That year, when they turned 66, their full retirement age for Social Security, the husband and wife both planned to start their benefits but continue to work. They would use the additional income stream to pay down the $60,000 remaining on their mortgage.

While the adviser understood the couple’s desire to be debt-free before retirement, he had a number of concerns about their plan.

“Often, people make these choices without all of the relevant information,” says Mr. Hill, whose company offers securities and investment advisory services through Signator Investors Inc. “I just wanted these clients to understand what all of their options were before they made a decision.”

Mr. Hill drew up a projection of the couple’s future Social Security benefits and walked the clients through a chart illustrating how delaying their claims would allow their benefits to increase annually over the following four years.

Jason Hill, founder and president of Client Focused Advisors ENLARGE
Jason Hill, founder and president of Client Focused Advisors PHOTO: CLIENT FOCUSED ADVISORS
The adviser also described the tax consequences of their plan. Because the couple had a combined annual income over $44,000, 85% of their Social Security benefits would be taxable.

At that point, recalls Mr. Hill, “they were eager for alternative recommendations.”

One option, he explained, was a “file and suspend” strategy. The husband, who was the higher-earning spouse, could file for Social Security and immediately suspend those payments. By deferring the distributions, he would allow his benefit to grow by 8% of the full-retirement benefit annually until he claimed it at age 70.

Meanwhile, his wife could file a “restricted” application for only a spousal benefit based on her husband’s record, but not her earned benefit. That way the couple could begin taking a stream of income from Social Security of roughly $1,300 a month, while both delayed—and increased the size of—their earned benefits. The strategy would increase their combined lifetime benefit by more than $250,000.

“Once they saw those numbers, adopting the ‘file and suspend’ was a fairly easy decision,” says Mr. Hill.

The adviser also asked the couple to rethink their intention to use the Social Security income to pay down their mortgage. With a little more than four years left on the loan, their remaining payments consisted mostly of principal.

“It was essentially an interest-free loan at that point—there was no good reason to pay it down ahead of time,” he says. “Especially when there were other vehicles they could use to actually grow that money.”

As a public-school teacher, the wife had access to a tax-deferred annuity which offered a 7% fixed return. By contributing the $1,300 monthly spousal benefit to that annuity, the couple was able to save another $15,600 year, giving them more confidence in their ability to fund their retirement.

Source: wsj.com ~ By Alex Coppola

Talking Technology with Senior Sellers

Many seniors  have not bought or sold a home in several years (or maybe decades) and it is likely that there are more than a few new real estate trends with which they are unfamiliar.

One particular trend, “going paperless” is pretty common in the overall real estate industry now. This can be a bit scary for the older generation of seniors, especially if they have not been accustomed to using computers in their personal or professional lives.

To insure that seniors understand how you are going to be using technology throughout the sales and contract negotiation process, it’s important to orient them early in your relationship. By doing so, you will decrease anxiety and increase client satisfaction.

Remember…the goal is, “no surprises.”

Surprises can create obstacles and every obstacle is another opportunity for an already tentative senior homeowner to change their minds about moving altogether!

5 Must-Have Technology Conversations for Senior Sellers

1. Define what paperless means.

“Going paperless simply means that instead of printing out every contract, form or disclosure for your signature, you may be asked to sign certain documents electronically.  This could mean:

  • Typing your name into a designated field included in a form (received via email)
  • Signing your name on a digital touchpad (laptop, netbook, smartphone, etc.)

While some seniors may have experienced this type of technology before, and are perfectly willing and comfortable using it, others are not. Frankly, the first time I was asked to sign a real estate document electronically via email I was a bit perplexed and required some guidance (I would tell them this as to normalize any concerns they many have initially).

2. Communication options (phone, email, text, instant messaging, etc.).

Good agents know that the best method (and frequency) of communication is the one that best serves the client, so getting this agreed upon early in the relationship is paramount — for both of you.

If your client wants to communicate strictly by phone, be sure that you establish some protocols for leaving and returning messages, hours of availability, and which phone numbers are best for certain times of day.

Similar discussion around email, text messaging, and other modes of communication should be had as well.

3. Method(s) you use for getting client signatures.

While you may be accustomed to using Docusign or Dotloop, senior clients may prefer the “more conventional” methods of signing contracts. You know, the good-old-fashioned pen and paper.

Seniors are constantly being bombarded with messages about identity theft, so their skepticism about all their information being stored online is natural.

If your brokerage firm insists on the use of electronic signatures, you will need to prepare your client for such methods. If after a thorough tutorial, your client continues to be uncomfortable with the electronic signature process, confer with your broker to insure that you can accommodate your client with a paper process of signing.

4. Insure their devices are compatible with the systems you use.

Even if your client is completely prepared to enter the paperless world with no reservations whatsoever, it can only be done if they have the right equipment.

Asking if they have a computer isn’t enough. What type and how old is it?

Before agreeing to a paperless process, do a “test run” using a non-official/non-binding documents to insure your client’s computer and software will do what you want it to do. More importantly, make sure they know how to operate it and can follow the process you have outlined in regard to completing documents.

5. Providing technical support.

My dad (self described “non-techy” and proud of it) has a computer, printer, smart phone, email address, and wifi. He does not, however, have the faintest idea how they work or how to pull up attachments in his email.

When he decided to purchase a new home this past year using a reverse mortgage, the lender was located out of state, which meant everything was done via email — electronically. Needless to say, I was dad’s tech support in this situation.

If your client  doesn’t have a trusted advisor who can help them with troubleshooting potential technology issues, make sure you or your staff is capable, patient, and willing to personally walking them through the steps.

Are you willing to do things the “old fashioned way?”

Security and trust are key for senior sellers. If you aren’t willing or able to take the time to work with a senior client who prefers the pen and paper, face to face, in person method of dosing business, it’s your responsibility to provide them with a referral to an agent who is. That may mean passing on a listing or sale and accepting a referral fee instead.

Bottom Line

It goes without saying that it is critical to have one or more conversations with potential senior clients about all the various things important to insure a successful sale.

As we know, technology can seem a little overwhelming to some seniors at first — especially if introduced to it in the midst all of the other things going on during a move.

A little bit of education on the front end will mitigate potential delays and unnecessary frustration, and will likely prevent surprises down the road.

Source: seniorsrealestateinstitute.com

Would You Be In Tears If The Buyers Tore Down Your Family Home?

family home
Jason Anderson as executor of his mother’s estate is selling the family home, still in original condition.

His sister Alice says she has many joyful memories of living in the 100 year old house at the end of Stillwood Road.

The family is worried that a new owner will knock everything down and redevelop the two acre site into a number of new building sites.

“It’s wonderful, old and it’s got a very warm and comfortable feeling. I loved living in that house,” Alice says.

“Our mother said it’s the sort of house you just seem to fall in love with.” she says slowly.

The pristine old house features five bedrooms, a six window master suite with an attached bath and vanity.

The classic home has high ceilings, timber flooring, chandeliers, original fireplaces, leaded glass windows and multiple entertaining areas.

The home also has a den, a formal dining room, a work shop, and an upstairs playroom.

Alice says the home was a great for entertaining and has hosted many milestone family functions.

There is a small original barn on the property where the family kept two shiny black riding horses named Patrick and Patricia when the children were in their early teens.

“I really hope it will be bought by someone who wants to live in it as a family home and keep it as it is. Not somebody who just wants to knock it down and redevelop the land,” says Alice.

Source: seniorsrealestatenews.com

Your Next Home: Efficient Two Storey Or Beloved Rancher?

ranch style home
Your next home: Comfort and convenience or the most cost effective building plan?

Common knowledge is that 2 storey homes are more cost efficient to build.

You get two full floor levels under the same amount of roof.

Why then are many folks going back to rancher-style homes these days?

One reason is that the wave of Boomers are aging and re-thinking their living space.

Below are some thoughts from homeowners that explain why there may be a growing trend back to the friendly feel of the beloved ranch-style home:

Margo- “My husband’s knees are in very bad shape. He has a hard time with stairs. After our adult kids have finally moved out, we plan to move into a 3 bedroom rancher with a garage.”

Dennis- “We moved to a single-level home from a split level. This is exactly what we have been waiting for. No stairs.

Everything is easier on one level: laundry, vacuuming, cleaning exterior windows and bringing in the groceries.”

Emily- “If this is going to be the house you plan to grow old in, do yourself a favour.
Choose a rancher.”

And now from your Realtor’s perspective:

Ranchers seem easier to sell, even when the market is down, because there is always demand for single-level homes. Retired folks, those of us with mobility issues and young families who want all their living area on the same floor.

Long live the rancher…

Source: seniorsrealestatenews.com

Senior Real Estate; Thinking of moving

Moving… How Do You Know When The Time Is Right For You?

If you’re a senior and considering a move, when is the right time for the right move… how do you know when it’s  right for you?

No two of us are the same, nor is every situation the same, however there are some common situations many seniors share.  Listed below are some of the more typical reasons someone would decide to move,  possibly “downsizing” a living environment.  Some may appear to be somewhat tongue-in-cheek, yet they’re also very real.

  • House is too large, too much to take care of, you’d like less responsibility, and have more time to enjoy yourself.
  • To move closer to family, see more of your grown kids and grand kids.
  • To move further from the family, just too darn  much time spent taking care of the grand kids.
  • Or, you need to move, to get the last kid out of the house.
  • Tired of continually fixing things…wanting to maintain your independence by not relying on family and friends for  repairs.
  • Maybe you prefer a more active social life, and would prefer to be around others.
  • Health issues, tired of stairs,  need or prefer to have a single story home.
  • Financial considerations, possibly free locked-up equity for remaining years while also maintaining other investments.
  • Divorce, it can happen at  any time of life.
  • Spending the kid’s inheritance and do something just for yourself for a change.  This is time for you  to enjoy the “some-days” of your life, you’ve earned it!

So if you’ve decided the time is right, explore some of your choices. Here are just a few for seniors to consider:

  • Smaller home or condo, less to take care of and worry about.
  • A “Golden Girls” home, sharing life with others.
  • A mobile home, financially affordable and little upkeep.
  • Travel time, on the road, in your motor home off to see the world.
  • Time for your Harley adventure on the road.
  • You always wanted to live in a golf community.
  • Adult/senior condominium development, for a more social environment.
  • Perhaps assisted living, that is if health issues are a concern for your or family.
  • Move in with family, this could help you, or may help them.
  • Or… you may have another choice, if so we would love to hear from you!

Going Solo… Or Family Ties? At times, seniors moving can be a difficult move at best.  While other times it may be an absolute necessity.   If your home is the  “family homestead” be prepared.  This could be even more emotional on everyone in the family.  Adult children may or may not be in support of your move, yet it´s good to get another  opinion.  Also, don’t rule out the help of others; a trusted adviser, a very close friend and  professional peers.  Try to understand both sides of the issue and explore your options.  Remember, your decision may not be a popular choice.   Unless you have a compelling need to make the move, it’s also o.k. to delay your decision until the time is right. If you’ve made the decision, keep first things first.

Assuming you’ve made the decision to move, what happens next?   Do you sell your home and then find another?  Good question!  Which comes first, the chicken or the egg?  Best solution:  Have a plan, know your destination prior to selling your home.

Some agents will tell you it’s best to sell first, yet without a safety net, unless you have a back up plan, it’s risky.   Depending on the re-sale demand in the market-place, it can take 6 days to 6 months to sell your home.  Although it’s not easy to negotiate this type of sale, it can be accomplished.   In the event you have a fast sale, be prepared to be flexible and have a contingency plan in place.   Southern  California home sellers enjoyed a strong market  for in the early 2000’s yet we all know that has changed. All the more reason to work with a pro, to work with a senior specialist. Work with a SRES, a senior real estate specialist.

Best advice:  Don’t be caught off guard. Have a plan and work with a Realtor who has experience all types of real estate markets, including this one!

Source: californiaseniorrealestate.com

Why Would You Take A Chance Applying For A Mortgage Online?

Why Would You Take A Chance Applying For A Mortgage Online?
Many Seniors and Boomers are starting to use the internet for major financial applications and transactions.

You used to sit face-to-face with a real banker or broker to conduct this kind of business.

You can open a checking account, buy and trade stocks, apply for credit cards, and even get approved for the loan for your new Chevy online.

(All this applying online seems to be very easy)

Here’s the BIG QUESTION about all this apparent convenience:

Would you feel safe applying for an online mortgage?

Getting approved for an online mortgage seems like a fast and easy way to prepare to go out shopping for your next home.

There are no appointments to make and no loan officers with application pads to question you.

If you are turned down for an online mortgage, you can face the shame and disappointment in your own bedroom rather than having to shuffle out of the bank with your head hanging low.

Sometimes, giving your personal info to someone online isn’t the safest way of obtaining approval for a mortgage.

When you apply online, in some cases, you aren’t actually applying for a mortgage.

In reality, you are entering personal and confidential information into a database for an intermediary company that only “promises approvals” for online mortgages.

Once they have your info they pass it on (sell it) to others companies as “leads”.

Then the phone calls and solicitations start as loan officers try to land you as a client.

No matter how convenient the idea of applying for a mortgage online may seem to you:


Do you know who these people are? Have they been recommended by someone you know and trust?

Maybe…….the best way to get a mortgage is still the old person-to-person way.

Get a “disinterested” third party to review your financial affairs

Get a "disinterested" third party to review your financial affairs
I heard an older friend of mine (Jack) say, “I’m going to spend all my money while I’m alive.”

Then with a gleam in his eye he said, “Maybe I’ll even let my last cheque for taxes bounce.”

He was joking of course but there are some strong feelings and concerns here.

It would be great if we could plan our lifetime spending to the last dollar.

Good planning would enable us to meet our long-term needs, leave an inheritance for those we love and also support our favorite charity in our will.

Looking ahead, we can even make arrangements to look after the final tax bill to Canada Revenue Agency. (CRA)

The real problem that Seniors are experiencing today is the worry that they may run out of money and become dependent on their family or (heaven forbid) government assistance.


Investment decisions and planning for the future are personal decisions.

The opinions of trusted friends, family members and a reputable financial advisor should all be mixed together and then reviewed by a “disinterested” third party.

DISINTERESTED doesn’t mean “doesn’t care”….it just means they are someone you can trust who has nothing to gain by helping make these financial decisions.

Source: seniorrealestatenews.com ~ Author: Allen Unrau

Senior Real Estate News; Grieving – Leaving the Family Home

Grieving - Leaving the family home
Many Boomers and Seniors can expect to move several times during their retirement years.

The happy moves usually occur when people end up closer to family.

Especially when they are finally in the same area as their grandchildren…. those small but powerful magnets.

Many Seniors choose to move because their current house and landscaping have become a real burden to maintain.

People who are very clear about their own changing health and physical abilities often find making the big decision to move so much easier.

But, there is a big difference between you “wanting to move” and someone else thinking you should.

Our family homes are filled with priceless memories.

Those folks who are not ready may actually be GRIEVING the loss of all they have enjoyed together in this home.

For some seniors, the home they still live in is the home where their children grew up.

Some folks may still feel a connection between their home and a spouse who has passed on.

If they leave their home, will they lose that connection and many of the precious memories?

Many Seniors and Boomers can’t even explain why their present home means so much to them.

It’s wise to choose to move when you can still handle things on your own, rather than waiting until you are forced to move by life’s circumstances.

Just remember to focus on the end result of your decision to move, instead of the process.

Making a move now should be about making your life easier and better for all concerned.

That’s where your focus should be.

But it is certainly OK to GRIEVE the process.

That means you have lived many years in a happy home. Isn’t that what life is all about?

Source: seniorsrealestatenews.com

Real Estate News; Low Interest Rates – Time to Invest?

best investment
Consider these 4 factors before jumping into an investment property.

Interest rates are at an all-time historic low, and if you’re thinking of buying an investment property, it may seem like the ideal time to jump into the market.

The average annual interest rate in 2000 was 8.05% with 1 point, according to FreddieMac.com. By contrast, January 2015 boasted an average interest rate of only 3.67% with 0.6 points.

That’s a substantial discount, and it translates to lower monthly payments and significantly less interest paid overall. (These rates apply to owner-occupied dwellings, but they tend to reflect a similar trend in interest rates on investment homes.)

Does this mean investment properties are a great deal right now?

Not quite. You should consider several other factors when making your decision.

Factor #1: Cap rate

If you’re eyeing the interest rate, it’s safe to assume you’re thinking about holding a rental property rather than flipping houses.

(Interest rates make less of a difference when you’re holding a house for only six months or less, and banks don’t issue conventional 15-year or 30-year loans on flips.)

When you’re buying a rental property, your primary consideration isn’t the interest rate, it’s the overall return. To calculate this return, you’ll need to find the capitalization rate, or “cap rate.”

Here’s how you calculate it:

1. Your monthly rent. In this example, let’s say you’ll charge $1,000/month.

2. Add your operating costs (this includes expenses like insurance, utilities, and repairs, but not the principal and interest). Let’s say this comes to $550/month.

3. Subtract your operating costs from your rent to calculate your monthly “net operating income” (NOI): $1,000 – $550 = $450.

4. Multiply by 12 to calculate your annual NOI: $450 x 12 = $5,400.

5. Divide your annual NOI by the total purchase price of the property (let’s say it cost you $100,000): $5,400 / $100,000 = 0.054, or 5.4%.

This theoretical investment property will give you a 5.4% return on the asset value. This is OK — it could be better — although ultimately, your personal goals and risk tolerance determine what you’d consider a “good” return.

Note that the interest rate is not a part of this calculation. The cap rate helps you evaluate the attractiveness of the property itself, not the attractiveness of the financing you might be able to secure for that property.

Why? First and foremost, you want to know whether the property is worth the investment of your time. That’s determined by the relationship between the acquisition cost, the ongoing operating expenses, and the revenues.

If a property is a good investment, then you start searching for strong financing. Considering financing before you’ve found the ideal property is like putting the cart before the horse.

In fact, low interest rates might potentially push some housing prices up, making your cap rate on a property worse. Which leads to the next point …

Factor #2: Housing prices

Let’s say that John and Linda Smith decide they want to spend no more than $2,000 a month on their mortgage. The four factors that determine their mortgage payment are the principal, interest, property taxes, and homeowners insurance.

Assuming the taxes and insurance stay the same, a lower interest rate means the Smiths will qualify to get a bigger principal (which is another way of saying they can buy a more expensive house).

But here’s the rub: the Smiths aren’t the only people in this situation. Plenty of others will find themselves in the same boat if interest rates go down — enough people that the price of houses may start to rise based on the increasing demand.

A low-interest-rate environment might actually make for a better time to sell rather than buy a house, if it turns out those low interest rates result in higher home prices.

Conversely, when interest rates rise, there’s a chance home prices might stagnate or even slightly decline, making it a better time to buy than sell.

Of course, this is an oversimplified example. Lots of other factors impact housing prices, including employment, wage growth, the underlying price of materials, and more.

But this particular example illustrates the fact that low interest rates don’t necessarily correlate with a discount on housing. In other words, low interest rates don’t automatically mean you’ll be able to buy a house “on sale,” or even get a great deal.

Factor #3: Housing appreciation

If you’re planning on holding on to this investment property for a few years, you’re probably also hoping for price appreciation. But a low-interest-rate environment doesn’t necessarily lead to future price growth.

Everything from employment to material costs influences the pace, direction, and severity of home price fluctuations. To use a dramatic example: home prices plummeted in Detroit during the past 30 years, while they rose rapidly in San Francisco in the same time span.

But every neighborhood has its own microclimate. Some neighborhoods appreciate faster than others or are better poised for growth, while others may have hit their peak or are on a downturn.

Real estate is inherently local, and these types of details are likely to have a far deeper effect than a 1% or 2% fluctuation in average mortgage interest rates.

Remember, the key here isn’t just how great a deal you can get on a house now; it’s how strong of an investment it will be for you over the long run.

Factor #4: Things aren’t what they used to be

While rates may be enticingly low right now, bear in mind that securing a mortgage is more difficult than it was during the real estate investing boom of the 1990s.

The subsequent crash has made lenders much warier and the requirements placed on borrowers much stricter. Unless you’re in a solid enough position to buy an investment property with an attractive ROI, the low rates won’t do you very much good.

Should you take advantage of today’s low rates to buy that investment property (or sell and trade up your current investment property)?

Maybe. (And maybe not.) The only way to answer that question is by focusing on the quality of the property itself rather than on that attractive interest rate.

Source: trulia.com/blog ~ Author: Paula Pant

Senior Real Estate News: Don’t Allow Yourself a ‘Maybe Pile’ when Getting Ready to Move

senior moving
Source: seniorrealestatenews.com ~ Author: Allen Unrau

To let go of the things we have worked for and collected over the years means we must face the fact that we are entering a very different living situation.

Many of us cling to our personal possessions to avoid dealing with other complicated issues, like stress or fear of the unknown.

For many Seniors, only their spouse’s death or a late-life divorce rank as more stressful than moving from their familiar home into an institutional setting.

Don’t fall into the “maybe pile” trap when sorting your possessions.

Only handle any item once.

Be decisive.

Moving items in and out of “maybe piles” always takes more time and certainly causes everyone more stress.

Don’t think that you will ever sort those items out again.

Everyone knows that once they are boxed up and sent to “storage” they are not likely ever to see the light of day.

Which means, they will be taking up valuable storage space from then on…..either in a family member’s basement……or in an expensive secure storage locker somewhere.

Get a good rest the night before and be prepared to be firm with your “yes-no” answers when your daughter asks, “Do you want to keep these pot holders you got from Aunt Dorothy?”

Mortgage rates fall; 30-year fixed at 3.75 percent, Freddie Mac says

Source: ModBee.com ~ BY E. SCOTT RECKARD

Mortgage interest rates fell for the first time in four weeks, with Freddie Mac’s survey showing lenders offering conventional 30-year fixed-rate loans at an average of 3.75 percent, down from 3.8 percent a week ago.

The 15-year fixed-rate home loan, a way to build equity and pay off debt faster, was averaging 3.03 percent compared to 3.07 percent, according to the survey, released Thursday.

A downward revision of fourth-quarter economic growth figures and a decline in consumer prices contributed to the easing of rates, said Len Kiefer, the deputy chief economist at Freddie Mac.

Rates for fixed 30-year loans have remained below 4 percent since late November, remarkably low by historical standards. They are now at levels last seen in May 2013, Freddie Mac said.

However, high prices and tight supplies in many housing markets have offset the benefits of cheap money for those who can qualify for loans.

Nationally, sales of previously owned homes fell in January to their lowest level in nine months and sales of new homes have plateaued.

In a more upbeat report, a trade group said Thursday that mortgage credit availability increased slightly in February.

A Mortgage Bankers Association index was at 118.6, compared with a baseline of 100 in March 2012, when lending standards were drum-tight. The number rises when credit loosens.

The MBA’s chief economist, Michael Fratantoni, attributed the latest easing to increased availability of jumbo mortgages and of Fannie Mae-backed loans requiring down payments of only 3 percent.

Freddie Mac is to begin backing mortgages with just 3 percent down this month, Fratantoni noted.

Freddie Mac asks lenders each Monday through Wednesday about the terms they are offering on mortgages of up to $417,000 that can be backed by Freddie and Fannie, the finance giants that jointly guarantee about 60 percent of U.S. home loans.

The borrowers in Freddie Mac’s survey are assumed to have 20 percent down payments and to pay about half of 1 percent of the loan amount in upfront lender fees and discount points. Payments for such services as appraisals and title insurance are not included.

The survey provides a consistent gauge of mortgage trends, but actual rates adjust constantly and are influenced by many factors.

In addition to borrowers’ credit histories and debt loads, the factors include whether the borrowers opt for zero-cost loans at higher rates or pay extra to lenders initially to lower the rates.

Homes of Retirees: I Want It My Way

senior living
Source: Forbes.com ~ Author: Richard Eisenberg

Pretty much everything you think you know about the homes where today’s retirees live and want to live is wrong, based on the results of the new Merrill Lynch/Age Wave survey, “Home in Retirement: More Freedom, New Choices.”

Living in sunny-weather abodes after long-distance relocations? Generally not. The survey found that among people 65 and older who moved last year, 83% chose to remain in the same state. (This finding echoes a Better Homes and Gardens Real Estate survey last year.) And just 48% of retirees told Merrill Lynch they live in a place with “pleasant climate/weather.”

Living in downsized homes — condos, rental apartments and houses smaller than where they lived before? Only sometimes. “About half of people we surveyed didn’t downsize at all when they moved,” said AgeWave president and CEO Ken Dychtwald, who calls this “the downsize surprise.”

In fact, 30% who’ve moved since retiring upsized their homes, mostly to make room for family members to visit or to live with them.

Renovating for aging concerns (things like widened hallways, ramps and bathroom grab bars)? Nope. Fewer than 10% of retirees who plan to stay in their home in retirement and have renovated did so to make it easier to get around their homes if their health worsens or installed a ramp, lift or elevator to avoid climbing steps. Among retirees who’ve renovated, the most popular improvement was “creating a home office” (35%).

Cynthia Hutchins, director of Gerontology at Merrill Lynch, said “most people plan to work in retirement and a home office helps them do that.” The average retiree, she noted, “is not thinking about what it’ll be like when I’m ‘old old.’ They want to be relevant and connected.”

Said Dychtwald: “What we see with boomers is a desire to shape-shift to make their homes match their dreams and desires. I’ve never seen anything quite like it.”

Living around only people their age? No thank you. Roughly two-thirds (67%) of people 65+ said they prefer neighbors of diverse ages and generations; by contrast, just 53% of adults under 35 said that. Turns out, only 7% of retirees today live in age-restricted communities.

In a blog post I wrote last year, Better Homes and Gardens Real Estate President and CEO Sherry Chris told me that retirees “want diversity now; they want to live with people of all ages.”

Living in homes they’ve settled for? Quite the contrary. Two thirds of retirees surveyed said they’re living in “the best homes of their lives.” And if they don’t like the homes they’re in, “they’ll find a place they like better,” Dychtwald said.

“I was taken by how delighted people were, saying they were living in the best homes of their lives,” said Dychtwald. “They’ve crossed what we call the Freedom Threshold.”

By that, he means that when the retirees were younger, they often had to live where they could get their kids to school or commute to work. “Now they’re free from those anchor points and can live where and how they want,” said Dychtwald.

Added Hutchins: “The Freedom Threshold supports the idea that people are now living longer in retirement.”

Retiring Near Family

And they’re often moving to take advantage of that. A striking 64 percent of retirees said they’re likely to move at least once in retirement. So much for aging in place.

The No. 1 reason retirees have moved, according to the survey: Wanting to be closer to family (29%). As a New Jersey dad whose two twentysomething sons are living in L.A., I can relate. And nearly half the retirees who said they won’t move (48%) explained it was because family was nearby. Move or no move, Dychtwald said many retirees want to turn their empty nest “into a welcoming home where the kids and grandkids can come and stay and have fun and make memories.”

How to Retire In Your Best Home

I asked Dychtwald what he’d recommend to pre-retirees who want to make where they live in retirement the best homes of their lives.

“This is the beginning of a new chapter and, for many, it’s a fantastic chapter — particularly for the first 10 or 15 years. So think of what matters to you, now that you have independence,” he said. “What are your priorities for a home? Do you want a living room? Do you want to live in an area where you can take quiet walks? Do you want to be close to restaurants? Then, get as as many of those things as you can; rather than stay on autopilot and pine over days gone by.”

Maybe you’ll downsize; maybe you won’t.

Dychtwald said the survey’s findings show him that for your best lifestyle in retirement, “you can change where you are, you can appreciate it or you can go someplace else and match the life you want to be living.”

One more thing: Try to pay off your mortgage as soon as you can. Losing that expense, the Merrill Lynch report notes (and I second) can create greater financial security and peace of mind.

Low Down Payment Home Loans: Which is Best for You?

Source: zillow.com

helping hand

Thanks to shifts in the lending landscape, the dream of buying a home is becoming a reality for many Americans. The Federal Housing Administration (FHA) recently made a drastic 0.5-percent cut to mortgage insurance fees, making this 3.5-percent down payment loan option much more affordable for home buyers. And just before that, Fannie Mae and Freddie Mac rolled out loans that require down payments of just 3 percent.

Given these new developments, how can you determine which low down payment loan is right for you? The first step is understanding the associated fees.

The fine print: FHA fees

The FHA doesn’t make loans, but rather insures loans that lenders make. They do this using a fund that’s maintained by borrower-paid mortgage insurance. You pay this mortgage insurance as an additional fee on top of your monthly mortgage payments.

The amount of the fee fluctuates because federal regulations require the FHA to have enough money in its insurance fund to cover loans that might not get paid back. As FHA loans grew in popularity after the 2008 financial crisis, more loans didn’t get paid back, leading to fund losses that forced the FHA to raise mortgage insurance fees five times: from .55 percent of a loan amount in 2010 to 1.35 percent in 2013.

Now, with the FHA’s fund deemed more stable as housing has recovered, the agency has cut the fee from 1.35 percent per year to .85 percent per year (paid monthly) for 30-year fixed loans up to $417,000 with as little as 3.5 percent down.

This is great news for home buyers, but it’s critical to note three other FHA budget considerations:

  • You’ll also pay 1.75 percent of your loan amount up front in cash or by adding this extra fee to your loan amount.
  • If you’re getting a 30-year fixed with 3.5 percent down, you’ll pay the .85-percent annual fee as long as you have your loan.
  • The annual mortgage insurance isn’t tax deductible.

The Fannie and Freddie route

FHA isn’t the only low down payment option. Fannie and Freddie just announced a program requiring as little as 3 percent down.

These loans require non-FHA mortgage insurance — called private mortgage insurance (PMI). It costs about 1.05 percent per year (paid monthly) for 30-year fixed loans up to $417,000 with 3 percent down. There is no additional up-front fee, you can eliminate the mortgage insurance in as little as two years by paying your loan down to 78% percent of your home purchase price, and your mortgage insurance may be tax deductible.

Comparing low down payment loan options

Now that we’ve got a handle on the fee structures, let’s compare FHA vs. PMI loan options. We’ll use the example of a $300,000 single-family home purchase using a 30-year fixed loan and a 3.5-percent down payment. Remember, FHA allows 3.5 percent down and PMI allows 3 percent down, but we’ll do both loans at 3.5-percent down to compare monthly costs accurately.

 FHA Loan  PMI Loan
 Loan Amount  $294,566 *  $289,500
 Rate  3.5%  3.75%
 Payment  $1,323  $1,341
 Mortgage Insurance  $205 **  $253 ***
 Homeowners Insurance  $100  $100
 Property Taxes  $300  $300
 Total Monthly Cost Before Homeowner Tax Deductions  $1,928  $1,994
 Total Monthly Cost After Tax Deductions  $1,580  $1,633
* With 1.75% upfront FHA fee added   ** At FHA’s new .85 percent rate  *** At PMI rate of 1.05 percent for 3.5 percent down

Even after adding FHA’s 1.75-percent upfront fee to your loan amount, the FHA loan costs $66 less on a total monthly cost basis, and also costs less (by $53) after homeowner tax deductions. This is because the FHA’s mortgage insurance rate cut takes makes its fee lower than PMI fees for this 3.5-percent down payment.

However, if you were using a down payment of 5 percent, the PMI fee drops from 1.05 percent to .54 percent, and the PMI total monthly cost options become slightly lower. If you take this 5-percent down PMI route, ask your lender about “lender paid mortgage insurance” which builds mortgage insurance into your mortgage rate, thus making it a tax deductible fee and saving you approximately $100 more per month after your homeowner deductions.

Both FHA and PMI options are viable for home buyers with steady income but not a lot of savings. Your lender can work with you to find the most affordable option based on your credit score, reserves left over after your down payment, and your expected time in the home.

The Pros And Cons Of Seller Financing

mortgage rate
Source: Forbes.com ~ Contributed by Trulia

Cutting out the middleman typically represents progress. Can you imagine depending on a telephone operator to put your call through? (Come to think of it, going through an operator might save us from making those calls we really shouldn’t make.)

But back to the point: Who wants to deal with a third party when you don’t have to?

That’s part of the philosophy behind seller financing. There’s a certain appeal to cutting out banks and mortgage lenders and having the seller finance the transaction — but there are risks involved.

That said, both sellers and buyers can benefit. “Where else can you receive a rate of return in the 4 to 7% range with almost no risk?” asks Jesse Gonzalez, president of North Bay Capital Inc. “Your investment is backed by a tangible asset.”

What exactly is seller financing?

The seller is also the lender in a seller-financed transaction. But the seller doesn’t just hand over money to the buyer in the form of a loan as banks and mortgage lenders do. In this scenario, the seller allows the buyer make payments instead

Sometimes, as was the case with Mary Pitman from Vero Beach, FL, you can first be a renter.

“I had a proven track record of paying on time and taking care of the house,” says Pitman who successfully went from renter to owner through a seller-financing deal.

Pittman, when pitching the idea, told her landlord that he would be collecting about the same amount of money but would no longer have the expenses of property tax, homeowners insurance, and maintenance, which falls to the buyer under seller-financing deals.

The details

Typically, the buyer signs a promissory note to the seller. The promissory note lists the interest rate, the repayment schedule, and default consequences.

Seller-financing arrangements are usually short-term ones. (Most sellers don’t want the hassle of collecting payments for the next 30 years.) A typical deal might be for the loan to be amortized for 30 years with a balloon payment after five years. “Balloon payment” refers to the repayment of the outstanding principal sum, made at the end of a loan period.

Pros for buyers:

  • Seller financing lets people who might not be able to secure a mortgage buy a home. A seller might OK you even if a bank or other traditional lender turned you down.
  • The closing process is faster and cheaper.
  • The down payment can be whatever amount you and the seller agree upon.

Cons for buyers:

  • The interest you pay might be high.
  • Just because the seller is not a bank doesn’t mean he or she won’t run a credit check on you. You could be turned down if you’re a credit risk.
  • You need to ensure you can pay the balloon payment.

Pros for sellers:

  • If you’re having trouble selling, offering seller financing makes your home stand out, potentially getting it sold faster. Simply add the words “seller financing available” to the listing to let people know.
  • You may be able to sell the house “as is,” instead of making costly repairs that might be required by traditional lenders.
  • You could get a better interest rate than you could get from other investments.
  • If the buyer stops making payments, you get the house back and can keep the down payment — plus any money that was paid.
  • You can sell the promissory note (usually at a discounted amount) right away to an investor, if desired. That would give you a lump-sum payment.

Cons for sellers:

  • You typically need to own the home free and clear. If you still hold a mortgage, you must get approval from your lender before going forward with the deal.
  • The buyer could stop making payments at any time. “Most of the time, when buyers default on the loan, they feel bad and just walk away,” says real estate professional Barb Getty of Indianapolis. But if the buyer doesn’t leave, you need to go through the foreclosure process. “I had to do this once, and it took three months and $700 in fees,” she explains.
  • You might “incur repair costs, depending on how the buyer cared for the property,” if you need to take back the house, says Cindy Welu, a real estate professional from Minneapolis/St. Paul.
  • Taxes could be complicated.

Some tips

  1. Whether you’re a buyer or a seller, consider it mandatory to work with a real estate attorney (in addition to a real estate agent), who can write the sales contract and the promissory note.
  2. Sellers should run a credit check and check references.
  3. Sellers should require a down payment, which gives buyers a stake in the home, making it less likely they will walk away. Chad Corbett, a real estate agent from Roanoke, VA, suggests that buyers put down 10% “if you want the seller to take you seriously.”
  4. Corbett also suggests that sellers “talk with a CPA about the tax benefits of selling with owner financing vs. selling outright.”
  5. Buyers with poor credit should focus on raising their credit score so they can refinance before the balloon payment is due.

The Many Benefits of a Seniors Real Estate Specialist®

senior RE
Older Americans can recall a time when gas stations provided full service, with window washers and gas attendants to pump your fuel.

They recall a time of service with a smile—and you don’t find much of that in today’s mobile-dominated environment, where text messages pass for conversation and e-signatures have replaced the ballpoint pen.

That’s why service providers who understand the needs of the older generation are important to these consumers.

Seniors Real Estate Specialists are REALTORS® who have additional training to work with older clients. If we compare a real estate license to a bachelor’s degree, the SRES® designation is the agent’s major.

SRES® candidates must successfully complete additional coursework to understand such topics as reverse mortgages and the federal Housing for Older Persons Act (HOPA) as well as how Medicaid, Medicare and Social Security impact real estate decisions.

They also are educated to create a customized approach to each situation: older homeowners planning life after retirement, transitioning from retirement with a companion to life alone or contemplating selling the family home.

They are the center of a network of specialists like estate planners, elder-care attorneys and CPAs who can offer invaluable guidance to seniors deciding how best to manage this stage in their life.

An SRES® is not just a REALTOR®; an SRES® is a trusted adviser to older Americans.

Those age 50 and older will represent 45% of the U.S. population next year, according to AARP. That demographic shift means the real estate industry must adapt to the needs of those who intend to remain in their homes as they age and those who want other options.

This demographic shift will impact the economy overall and housing in particular.

During this phase of life, real estate should be handled with a holistic approach. Senior clients often come with other generations of family members to consider. SRES® designees are trained to navigate the delicate dynamics of adult children caring for older parents, for instance, while also allowing the elder parent to maintain their dignity.

If you are over age 50 and considering a new home purchase, selling your family residence, or transitioning into a care-based facility, here are five ways an SRES® can help:

  • For seniors opting to age in place, an SRES® can refer a specialist who can evaluate your home, find problem areas and suggest home modifications. The aging-in-place remodeling market is valued at about $25 billion annually, according to the National Association of Home Builders. Having someone to help you navigate appropriate repairs could save you money.
  • An SRES® may be able to direct you to community, government and private programs designed to provide additional financial assistance. Many seniors may qualify for programs that can help them save money, but they do not apply because they don’t know the program exists. SRES® designees are trained to save you time and point you in the right direction.
  • An SRES® may be able to refer you to a local geriatric care manager, senior groups and agencies within the community that provide in-home assisted living services.
  • An SRES® can help guide you to a reverse mortgage counselor to discuss the pros and cons of this financial tool.
  • An SRES® is trained to be patient with their senior clients. They can refer clients to de-clutter specialists to prepare the home prior to listing. They can also refer to tax specialists who can prepare the estate prior to selling.

When it comes to caring for seniors, REALTORS® who have earned the SRES® designation are the real estate industry’s answer to the question, “Where do we start?”

Start with an SRES®. Mark Roan, REALTOR SRES

Source: realtor.com ~ By Chrystal Caruthers

How to retire early without giving up what you love

Tim Tamminga retired at age 58, with about $2.1 million saved for him and his wife Sandra.

Tim Tamminga retired at age 58, with about $2.1 million saved for him and his wife Sandra.

There’s no magic formula to retiring early. The things that will get you there are pretty simple, really.

Ask Tim Tamminga who retired last year at the age of 58. While a lot of Americans don’t have nearly enough saved for retirement, he was able to put away $2.1 million for himself and his wife Sandra over the course of his 30-year career in IT.

And he didn’t make himself miserable doing it.

Tamminga now spends his time exercising, reading, cooking and fixing up their new home.

Here’s how they did it:

1. Moved to a cheaper area. The couple recently purchased a home in Grand Rapids, Michigan. They relocated from the pricey Bay Area, where groceries alone can cost about 23% more than they do in Michigan.

They ditched their $3,300 monthly rent and paid about $210,000 in cash for what Tamminga says is a “much nicer house in a a much nicer neighborhood.” They turned one room into a home gym, borrow books from the public library rather than buying them, and often see shows at the local community theater.

Tamminga doesn’t mind the colder weather, since he doesn’t have to go outside to get to work. And they have family nearby.

2. Saved. A lot. Tamminga prioritized saving as soon as he entered the working world. He immediately contributed enough to his 401(k) to get the full company match and increased the amount he put in each year. Then he turned to mutual funds, carefully selecting those with the lowest fees.

He saved at least 25% of his income, putting away as much as $50,000 annually in a good year. That’s more than the 15% financial planners typically suggest.

“That was our goal, and it really didn’t diminish our lifestyle in any way,” Tamminga said.

With a little more than $2 million, some of which is still growing in investments, Tamminga estimates that they’ll have enough to spend $60,000 a year until they reach 95 (they’re way under budget so far this year). And they’ve saved an extra $150,000 to help their two kids with their college costs, ensuring they won’t graduate with any debt.

3. Lived beneath their means. They consider themselves frugal, and don’t eat out much.

“It’s sort of a lifelong habit that’s very much in sync with our lifestyle,” Tamminga said.

During his career he traveled a lot for work, so he enjoyed staying in to cook when he was home. But that didn’t mean the family of four gave up vacations altogether.

“Some of the things we might have done more were the exotic vacations. But we did some really cool and memorable things, like a scuba trip to the Caribbean a few years ago,” he said.

They weren’t coupon clippers and never scrimped on groceries, always buying fresh fruits and vegetables. They buy meat in bulk and freeze individual portions.

Tamminga says they “hate debt,” and haven’t taken on any except for mortgages. He drives a Lexus, which he paid for in cash 11 years ago.

4. Signed up for Obamacare. One problem with retiring early is that you’re likely kicked off your former employer’s coverage and can’t collect Medicare until age 65.

The Affordable Care Act was a clutch for the couple. Choosing a plan on the public exchange was easy, Tamminga said. Their income is low enough that he and his wife qualify for a subsidy.

Without it, they’d have to get private health insurance which can be more expensive. A health insurance calculator from the Kaiser Family Foundation estimates that the couple save about $500 a month.

Still, not everyone is comfortable kissing their paycheck goodbye years before Social Security can start rolling in at age 62.

“I think a lot of people don’t retire early because they’re afraid. We know very few people our age who have done it,” he said.

Source: money.cnn.com ~ By Joshua Keen