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SENIOR SCENE — May-June, 2013
FINANCE
The last, best thing about reverse mortgage BY TAMMY ENGEL CONTRIBUTING WRITER
“Begin with the end in mind.” It’s really applicable to reverse mortgage, and to selecting the plan that makes the best use of a senior homeowner’s equity. With the Home Equity Conversion Mortgage, the federally insured version of reverse, you get the choice of two basic plans — fixed rate or adjustable rate. Too many people jump to the assumption that the fixed rate plan is better. They lived through the interest rate fluctuations of the 1980s and saw what happened then. With the fixed-rate HECM, you are assured an interest rate throughout the life of your loan, but you are required to take all of the reverse mortgage proceeds at the close of escrow. Think about it: You are paying the full interest rate on the full balance from “go.” It makes your loan balance grow the fastest, and the bank loves you for taking this option. They’re making piles of money off you. And it’s up to you to wisely manage whatever money you get, because there won’t be any more proceeds from the loan. Consider the adjustable-rate alternative: You get to choose to take cash now, to take a monthly income stream forever, or to leave some proceeds as a line of credit to be used later. Your start rate is lower than the fixed rate, and since you are not taking all the proceeds now, your balance grows more slowly. Yes, your rate will increase over time, but you also get more available credit over time. That last piece is tough to wrap our minds around, so call me if you want those details.
Here are two recent incidents that convince me more than ever that choosing the adjustable rate plan can be so much smarter. Both these clients took their reverse mortgages with me in 2006. Mrs. M’s daughter called to tell me her 93-year-old mother had taken ill and is in the hospital in Bakersfield. She had initially signed up for the monthly draw on her loan, and had some line of credit left. With a phone call, we were able to stop the draw, convert those funds to the line of credit, and max that out to her checking account. As a result, the family now has sufficient means that mom can come home with fulltime care and spend the rest of her life amongst her friends and her familiar surroundings. Mr. R phoned me with the news that he has been sent home and “there is nothing they can do.” He, too, has the adjustable reverse with a monthly draw and some left on his credit line. We made the same phone call as above, and now he can afford to have hospice care at home. Had they taken the fixed-rate option, there might not have been any money left over for when it matters most. If you’re considering reverse mortgage, let’s have a detailed consultation about how either program might help you have your best, last days. TAMMY ENGEL is a Tehachapi-based mortgage advisor, and can be reached at 822-REAL with your questions about purchase, refinance, and reverse mortgage. Referrals available on request.
How to control online spending Buying online is a convenient way to make any number of purchases. Nowadays, shoppers can purchase everything from books to boats online, making it easier than ever before for consumers to connect with their favorite retailers. But the convenience of online shopping also makes it easy to overspend. When shopping online, consider the following tips that should help curtail spending. • Understand online marketing. Perhaps it's so easy to shop online because it's so easy for marketers to target customers via the Internet. Before "liking" anything on social media sites like Facebook, recognize that doing so is inviting marketers to inundate you with advertisements. • Beware of "limited time only" deals. Online retailers attempt to entice men and women to buy products by offering "limited time only" deals through their websites. While they might offer good
deals, consumers who aren't looking to buy a vacation package or a new wardrobe should ignore these offers no matter how enticing they might be. • Include online spending when establishing a monthly budget. Online spending is often so convenient that many people fail to account for it when establishing their monthly budgets. Come the end of the month, if you have considerably less money than your budget suggests you should, peruse bank statements to see just how much of that money went toward online spending. It might be a lot or might be a little, but take it into consideration when laying out next month's budget. • Recognize it's real money being spent. Buying online requires real money. Instead of swiping a card at the store, you simply click the mouse a couple of times and you've made a purchase. This disconnect facilitates overspending.
Make estate planning easier; don’t let your photo I.D. expire BY MATTHEW MARTZ TEHACHAPI NEWS
While having a driver's license or state-issued I.D. card is common for most Americans, more than 21 million people in the U.S. lack proper photo identification. According to a 2006 study by New York University's Brennan Center for Justice, about 11 percent of adult citizens do not possess a current government-issued photo ID, including nearly 8 million — or one in five — citizens 65 or older. As people age, they often give up their license and don't replace it with a state-issued ID that some states offer non-driving residents. Additionally, seniors over 65 are also are more likely to not have birth certificates because they were born before recording births was a standard procedure. Increasingly, this trend often times makes estate planning for seniors a lot more diffuclt, as docu-
ments that require notarization need current photo identification. The governing body that regulates California notary publics is the Secretary of State, who determines what forms of photo identification are allowed. According to the Secretary of State’s Notary Public Handbook 2010, one way a notary is required to certify the identity of the signer is with paper identification documents, which are current or have been issued within five years. Those documents include an identification card or driver’s license issued by the California Department of Motor Vehicles, a United States passport, a U.S. Immigration stamped passport issued by a foreign government, a driver’s license or identification card issued by another state, a Canadian or Mexican driver’s license, a United States military identifica-
tion card, a California Department of Corrections inmate identification card, or an employee identification card issued by an agency or office of the State of California, or an agency or office of a city or county in California. All I.D. cards must contain a photograph, description of the person, signature of the person and an identifying number. If photo identification cannot be provided, a notary must identify the signer by the oath of a single credible witness whom the notary and signer personally knows, or by two credible witnesses whom the notary does not personally know. However, the notary first must establish the identities of the credible witnesses by the presentation of paper identification documents as listed above. So, to keep estate planning simple and easy, seniors are encouraged to keep their photo I.D. current.