This Faith and Finance podcast is underwritten in part by Movement Mortgage. Movement provides residential home loans and reverse mortgage options in all 50 states. Founded in 2008 during a major financial crisis, Movement was created to love, value, and serve people and communities. Learn more at faithfy.com/slash movement. Movement Mortgage LLC supports equal housing opportunity, NMLS number 39179.
For licensing information, visit NMLSconsumerAccess.org. Um Reverse mortgages often trigger strong reactions in Christian circles, but are those reactions rooted in biblical wisdom or in outdated information? Hi, I'm Rob West. When it comes to debt and home equity, emotions can run high, especially among believers who genuinely want to honor God with their finances. But wise financial decisions require understanding the facts.
Today, Harlan Akola joins us to shed light on this often misunderstood topic. And then we'll take your calls at 800-525-7000. This is Faith in Finance, biblical wisdom for your financial decisions.
Well, we're thrilled to have Harlan Akola back with us. He leads the reverse mortgage team at Movement Mortgage, a valued underwriter of this program. Harlan, great to have you here.
Well, Rob, thanks. It's always good to be with you. When many people hear the term reverse mortgage, their first reaction is often, no way. Why do those words carry so much emotional weight for so many people?
Well, Rob, some of it is deserved. There's some history that brought out less than desirable products, people that were purposely taking advantage of seniors, simply bad actors and dishonest loan officers like there are in a lot of different industries where things are used incorrectly. There were mistakes that damaged trust. But people need to understand that today's Safe Reverse Mortgage is a federally regulated product by the Federal Housing Administration, has a ton of built-in consumer protections for a protected class of seniors. And it's very different from what most people remember.
And there's a tremendous amount of misinformation. Friends and family, quite frankly, even well-meaning church friends repeat things they've heard online.
Well, you lose your house. It's too expensive. It hurts your kids. Those concerns are largely rooted simply in outdated information or misunderstandings. And we should really go back to Proverbs 19, verse 20, that reminds us: listen to advice, accept instruction that you may gain wisdom in the future.
It's just a general reminder that understanding should come before conclusions. Not to make decisions on wrong information. Know what you're saying no to, essentially. I agree. When people think about debt, Harlan, it's easy to lump it all together, but not all debt works the same way, of course.
You mentioned the Federal Housing Administration, and I'd love for you to help us understand the difference between high-interest consumer debt and the structure of a reverse mortgage, which actually has an FHA guarantee.
Well, yes. Debt is considered bondage in many cases, and it really is. It can really hurt people when they have large credit card debt or they bought a car they can't afford or a snowmobile or a motorcycle or they simply promise too much money for the future that they don't have. And most consumer debt, like credit card debt, you have to make monthly payments or you run into bad credit situations or even a lawsuit. And that's pressure on the cash flow.
Now, a reverse mortgage, in contrast, doesn't require any mandatory monthly principal and interest payments. They're all optional as long as the homeowner lives in the home and makes sure they pay the taxes and insurance.
So the structure is so fundamentally different that it can't be classed together just like two investments can't be. put together, one more risky than the other. And if people just understand how each type works mechanically, that's the key before making a comparison and you know what kind of debt and what kind of responsibility you're getting into. And the fact that it's non-recourse just simply means that uh the only thing that is ever available as collateral for the loan is the home. And if the home happened to lose value, which most don't, you would never be personally responsible, right?
Well, that's so true. That's the biggest reason why I personally have one and my family has one is because it's impossible to ever leave a debt behind beyond the value of your house. And that's such a significant issue that most people are not even aware of. From a stewardship standpoint, someone in their late 60s or 70s that has substantial home equity but struggling with monthly cash flow and beginning to rely on high interest credit cards, talk about that situation, and that's really one that needs attention, right?
Well, it's so much so is, Rob. The majority of people now after 62 are still making a mortgage payment. In fact, more than 25% after 75 years old are still making a mortgage payment. And many of them have to take out unsecured high-interest credit card debt to take care of a water heater that goes out or a roof that needs to be replaced or whatever. And so a reverse mortgage is a better thing to do because it eliminates that mortgage payment.
And often it's 30 to 50% of their entire income at that point.
So it reduces stress. It lowers their total interest costs over the time. And quite frankly, Rob, the big thing is from a giving perspective, it certainly increases in that situation as well. Harlan, you always helpful and educational when you stop by. We really appreciate you shedding some light on reverse mortgages today.
Thanks for your time. Thank you, Rob. Our guest today has been Harlan Akola with Movement Mortgage. You can learn more at faithfi.com/slash movement. That's faithfi.com/slash movement.
Your calls are next at 800-525-7000. We'll be right back. Have you ever started a budget only to watch it fall apart a few weeks later? You're not alone. The FaithFi app is the leading Christian budgeting app, combining smart budgeting tools, automated budgeting, and personalized insights with daily rhythms of scripture, short devotionals, and guided reflection.
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Let's go over to Ohio. Larry, go ahead. Hey Rob. Hi there. Um My son's Planning on building a home.
And he bought property, he owns the property. And uh We've got it all prepared for the home build, and now he's ready to break ground.
So he's been pretty diligent in this since high school, saving, and he has We've already got the house plans. And I've been doing some material takeoff on that. We have some some figures involved here. Also, we got figures for the contractor So we know about where it's going to end up at. and he's going to end up with about uh half of a down payment of the cost of this home.
Okay.
So I was looking for a little direction from you. There is what you call a construction loan. versus a regular mortgage. And can you give me some advice on that? Yeah, I'd be happy to.
So, the half that's going against the house that's been saved, are you giving that to him as a gift, or did he save that on his own? No, he saved us. Yeah, great. And are you hiring a general contractor or are you guys doing the construction yourself?
Well, I got the prints and I did the material takeoff on it and got the pricing for all the material based on what his wants were. And uh, we've got a good solid figure there, and then we have a uh general contractor that will build a house. Got it. Uh, we know. personally and trusting.
So all that's been done. Yeah, very good. Yeah, typically, what you would do here is you'd get what's called a construction-to-permanent loan. That's going to be the most common, where it's one loan, one closing. It starts as a construction loan, which the benefit of that is, you know, it's a short-term loan.
The money is released in stages or draws as the construction progresses. You typically pay interest only during construction, rates usually slightly higher than a regular mortgage. And it requires an approved builder and detailed plans and a budget and so forth. And so that's typically the way folks go. And then it converts to a permanent loan.
You know, the rate is often locked early, and you only have one set of closing costs there. And then that regular mortgage would be, you know, amortized at 15 or 30 years with a fixed or adjustable rate. And then whatever that mortgage ends up being, you know, you have that number locked in there.
So the benefit of the construction. Construction loan is not only the interest only, which just helps with cash flow, but you realize that. Despite your best effort to get a solid bid on this thing, you know, you don't totally know what's going to be needed to build the house. And so it gives you some flexibility there. But also, it just allows the money to come as you need it.
So you're not paying interest on it the whole time you're building if it takes 18 months or whatever it is.
So that'd be typically the way that would happen. And I think that would be the direction that I would go.
Okay.
Now my question I have a question on that. If the house is going to be three hundred thousand dollars, Okay, and he has one hundred fifty thousand dollars. We give that, do we just write that to the bank and let them take the whole thing and then do our? are draws out of our money first. Is that how that works?
Yeah, exactly.
So you would get the loan for whatever amount you feel like you need, and then you would just set up the draws to sync up with when you feel like the money is available. And given that you're going to be paying more, a higher interest rate on the loan than you'd be getting in, let's say, money market or high-yield savings, there'd be no reason for you to draw the loan until you need it.
So I would say you spend down your cash that he's saved or he does. And then once you get to a place where that's been exhausted, then you would start taking the draws from the construction loan. Yeah, well, he worked with a banker, and she told him that. you know, the property's worth probably one hundred fifty thousand dollars. And then so they have no Risk.
Really, in all. Yeah. Mm. Will they write that in to the loan, the $150,000 worth of property, and then his $150,000? And then they'll spend out of that fifty.
No we'll go ahead and write them a check for the down payment, and then they'll work out of that first automatically. Yeah, typically, what would happen is they would encumber the property. You already own the parcel, correct? Or are you buying it as a part of this? No, he owns it.
Okay, so he owns the parcel.
So they would encumber the property. You wouldn't write a check to anybody. You would just secure the loan based on the construction bid minus the cash that you have on hand. And then you would set up the draw schedule to sync up with when you're actually going to be to a place where you've exhausted the funds that he's saved.
So, you don't need to write them a check. You know, they would have a lien against the property for the construction loan. But again, you wouldn't borrow any money until you needed it.
Okay, so if the house is $300,000 and he has $150,000, he's only going to ask for $150,000 loan. That's right. Yeah. He would give them the plans and the construction bid. And as long as they're an approved lender and the banker would work with you to determine, based on the amount that was going to be needed to be financed related to construction, how much to approve him for, and then you'd set up the draw schedule to sync up with when it's needed.
Okay.
So we'll we'll control his half. That's right. Yeah, the bank will have no part in that. They're going to get their lien against the property so that once they start loaning money, they've got plenty of collateral that they could make sure that they're made whole for some reason you didn't pay. But there's no reason that you'd have to give them any part of that money that you've saved.
That's going to construction until it's gone. Yeah, so we can pay the contractor when he digs a hole. We can pay him when he sets up the block, then we can pay him when he does the framing. All that, and then we can go into the loan at that point in time. Yeah, and that approval gives you the confidence to know that you can go ahead with it because you're going to be able to have the funds you need to get this all the way over the finish line.
Right, exactly.
Okay, Rob, there again, you've been helpful to me, pal. Happy to do it, my friend. Thanks for being on the program today. Lord bless you. Let's head to Virginia.
Brian, go ahead. Hey, Rob. I'm a fifty three year old federal employee, and hopefully, good Lord will, I'm looking at retiring in the next four years or should be able to. My concern is this.
So I don't work with a financial advisor currently. I don't have a will. I've done a lot of things, like I have a budget, an emergency fund, my pension. A good amount of money in my retirement and things like that. My only debt is my mortgage, but.
I don't have an expert that I'm working with. And I'm trying to figure out where to start because I want someone that can advise me on taxes and the whole nine yards, where to invest my money now and in retirement. Love it. Yep. No, you've done a lot of great work to get to this place.
An advisor could really help you take it forward from here. We'll talk about how you select that person after this break. Stay right there. We'll be right back. Are you a financial professional looking to grow your practice while offering advice that aligns with your Christian values?
By becoming a Certified Kingdom Advisor, you'll gain the biblical wisdom and professional credibility to serve clients who are seeking faith-based financial guidance. Each year, more than 75,000 people search for a certified kingdom advisor. Join our community and share your expertise with clients looking for someone who shares their faith and values. Start your journey today by going to kingdomadvisors.com/slash get certified. We are grateful for support from Movement Mortgage, who provides residential home loans and reverse mortgage options in all 50 states.
Guided by a mission to love and value people, Movement seeks to help individuals and families make informed financial decisions from buying a home to planning for retirement. More information is available at Faith5.com. Movement Mortgage LLC supports equal housing opportunity. NMLS number 39179. For licensing information, visit NMLSconsumerAccess.org.
Helping you apply God's wisdom to your financial decisions. This is Faith in Finance. Before the break, we were talking to Brian. He's 53, working full-time. He can retire at 57 because he's well-planned.
He's got his pension from the federal government. He's got all the pieces in place, having paid down debt, and just wondering about finding an advisor to help him kind of put the finer points together around retirement and estate planning. And just wondering, how does he find somebody to trust? And, you know, Brian, this is why we created more than a decade ago, it's been approaching 20 years now, the Certified Kingdom Advisor designation. Because we knew that there was, first of all, a lot of people being taken advantage of in the name of religion in the financial services industry.
It's called affinity fraud. And we wanted to be able to protect the public, but also to be able to help God's people. Find a financial advisor who is entirely competent, but who also understood the heart of God in scripture and could bring biblically wise financial advice. But we also wanted there to be really high and rigorous standards. And so that's why it requires a 50-hour university course on a biblical worldview.
It requires a proctored exam, it requires a pastor reference and a client reference and a statement of faith and a code of ethics and at least 10 years' experience and another big C designation, either CFP or CPAA or CFA or a few others. And so you put all that together and plus 10 hours of annual continuing education. And we've got nearly 2,000 certified kingdom advisors now across the country. And they don't work for Faith Vi. We're a ministry just to train and equip them.
We issued the designation out of Kingdom Advisors, our sister ministry, but they're either independent or they work at a big firm on Wall Street or, you know, they're at firms all over the country. But it allows you to interview. And find an advisor, but the starting place is to know that they've met these high standards. And so you could go to findaceka.com and do a search for a certified kingdom advisor there in Virginia. I'd interview two or three, we even provide a list of questions you could use as you're interviewing them at findthcaka.com.
But I think what you need to start with is that quarterback that would be probably a financial planner and a wealth manager, somebody that could help look over your plan, help you determine based on what lifestyle you've arrived at, your finish line for your spending. What do you ultimately need for retirement? Are you on track?
Sounds like you probably are. Help you think about how to take advantage of the funds you'll have coming in in this retirement season and to use those in the most tax-efficient way possible to the extent you need wealth management, you know, investment management. This person could typically serve in that role. Make sure you're not, you know, spending any more on taxes than you should. Also get you connected with a godly estate planning attorney to make sure you've, you know, the next steward is chosen and prepared and you've got a will in force.
And if you need a trust, that that's there, not to mention the power of attorney and the healthcare surrogate and the living will and all the other pieces.
So, you know, I think that's probably your next step. And then you've got that person to kind of journey alongside you as you head into this next season of life, just to make sure you're really well planned. But give me your thoughts on all that and any follow-up questions you have. That makes complete sense to me, and I appreciate the input as far as actually what goes into their certification. Do you happen to know if they're typically fee-based at this point?
Because I don't have a huge amount to invest with them, how that normally works. Yeah, it does vary just because, again, they're not employed by us, so there's not kind of one set way that they get compensated.
However, I will tell you, many of them, yes, are you in some cases, even fee-only.
So, if you just need a financial plan, you can just pay, you know, either by the hour or by the engagement for financial, comprehensive financial planning. And you'd want to talk about that as a part of the interview and discovery process as you're talking to these advisors. But, you know, often the most common way that somebody in this position would get paid is based on the assets under management. But in the case where you're not looking for investment management, you've got these guaranteed income sources and you just want somebody to be there to give you the plan and maybe check in with once a year or something. You absolutely should be able to do that on a fee basis.
Oh, that's great, because that gives me the language to use when I talk to them and ask those questions. And I guess my last thing is, I keep hearing this, whether someone's a fiduciary or not. Is that something that you recommend? I would make that as a part of your interview process, and yes. And that's just a simple term that means they are bound by the obligation to put your interests above their own.
It's less of an issue when we're not talking about products or investments being sold because there's not really any way for them to put their interests above your own. But I think just as a best practice, I would work with a fiduciary, and you can ask that question as you make that interview process.
Okay.
Thank you so much, Rob. I appreciate it. And God bless you. And you as well, Brian. All the best to you.
Thanks for calling. Miami, Florida is where we'll finish today. Alex, go ahead. I wanted to know when would you consider it a good investment for you to upgrade or remodel your house, your home, if you have to take roughly twenty five percent, it would cost twenty five percent of your investment, your retirement investment. to do that Would you Invest that money in your home.
Yeah. It would increase the value for a home. Sure.
Well, I think there's two considerations there. The first is it's less about the percentage, and it's well, it's more about the starting value. Right, so if you had over-accumulated and you've got more than you think you'll need to sustain you for the rest of your life. Then it's not a big deal to take 25% of that and put it toward improvements. If you don't feel like you've saved enough, putting 25% into your home, even though it's going to improve the value, you typically, depending on what the renovation is, you're only going to get back somewhere between 40 and 80% of what you put into it, typically.
And so, you know, you're going to lose money on that equation and it can't generate an income because it's your primary residence. Whereas that money still in your retirement accounts invested not only has the ability to appreciate instead of depreciating by putting it into your house because you don't get the full value back out, but it can't earn an income like it can when it's in stocks and bonds, dividends or interest. And so, I think for that reason, it really comes down to how much do you have in the way of assets and how well prepared are you? Because if you're right on the edge, I would say, no, it's probably not the season to just take 25% and put in the house. You'd probably be a little more judicious about how much you pull out and win.
Just to make sure you keep this money growing for you, earning income, and helping you to cover your lifestyle expenses alongside Social Security or whatever else you have. Does that make sense? It definitely does. Thank you very much.
Okay, God bless you, Alex. I would say, just in closing, perhaps put together that retirement budget. Maybe you've already got it. I would look at what guaranteed income sources you have: Social Security, whatever else. And whatever's left, you have to solve for with your assets through a withdrawal rate.
And if you have to take more than 4% to solve that, then you're probably not quite there in terms of what you at least need on paper. To be able to fund your lifestyle. If you're well beyond that and you can, you know, you don't need to take anything every month, or you're taking less than 4%, you probably got a little bit of cushion there, and maybe you can put that into the house. I hope that helps. God bless you.
Thank you to Tahira, Amy, Omar, Taylor, and Rihanna. We'll see you tomorrow. Faith in Finance is provided by Faith5 and listeners like you.
