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. Many retirees have spent decades building equity in their homes, but could that equity become a wise tool for stewardship in the next season of life? I am Rob West. For many people, the words reverse mortgage raise immediate concerns, sometimes because of outdated information, fear, or even guilt. But is it possible we've dismissed this tool too quickly?
Today, Harlan Akola joins us to help separate myth from reality. And then it's onto your calls at 800-525-7000. This is Faith in Finance: biblical wisdom for your financial decisions.
Well, it's always a pleasure to welcome back Harlan Akola, who leads the reverse mortgage team at Movement Mortgage, a trusted underwriter of this program. Harlan, great to have you back.
So good to be here, Rob. Thank you. Harlan, for many people the words reverse mortgage still raise immediate concerns. Why do you think this topic has carried such a strong stigma over the years?
Well, some of it is deserved because there were real problems in the past. There were bad products, bad actors, bad regulation, not enough consumer protections. But today's reverse mortgages are very different, especially when administered by the correct people and the stronger regulations and the safeguards that are designed for protecting homeowners. But once these stories get passed around for years, the people that hear them over and over believe them. And they hear misinformation from friends and family members, even their church, long before they've ever talked to a qualified professional who knows what the new scenario is.
So the emotional reaction is based more on fear. And outdated information, those two things on how they actually work today.
So, we always let people know right from the start that they don't lose ownership of their house. It's simply a lien on the property that does not require payment until the end. It's just a flexible, optional payment loan. Yeah, that's really helpful.
Now, another myth is that reverse mortgages are just bad debt. Is there such a thing as good debt?
Well, we certainly believe there is. I feel that I have good debt on my house. And most people would not have built significant wealth in their homes in the first place if they would have waited to pay cash for their first home. Many people would not even have a home if they would have never financed in the first place.
So, good debt allows you to have the proper options to be able to build wealth in the real estate that you live in. And people will often lump all debt into the same category: credit cards, car loans, high-interest loans, when they're actually very different tools. A reverse mortgage doesn't require mandatory monthly payments.
So, the borrower is not the servant to a reverse mortgage lender. And that adds tremendous safety in the fourth quarter of life. In many cases, it's simply a way for retirees to use part of the equity that they built up in their homes without losing their home or without having to sell it. That can create a tremendous amount of flexibility in cash flow in retirement and reduce pressure on. investment accounts during down markets.
Yeah, that's helpful. You've also mentioned that many Christians in particular feel unnecessary guilt when thinking about this option. Why do you think that is?
Well, you know, being a Christian myself and catering mostly to other clients that are Christians, this becomes such a huge issue amongst our community. Many believers have heard the message that debt-free automatically makes you more faithful or more responsible, and people feel guilty about that.
So there's nothing wrong with paying off debt. Most debt should be paid off as quickly as possible if it's credit card debt. Mortgage debt is different, and reverse mortgage debt is, of course, very different because it does not require a payment and cannot kick somebody out of their house. But sometimes people feel shame and they've said, I'm sorry to admit that I don't have my house paid off.
Well, 50% of people at 62 don't have their house paid off because they're simply trying to do the right thing, but they don't know that they have other options. And the reality is many retirees still carry that mortgage debt into retirement, and others may need additional income flexibility.
So the question is whether using the tool is actually wise stewardship and helpful for that. family season of life without feeling that guilt. Yeah, just about 30 seconds left. For the listener who may be realizing they've dismissed this too quickly, what's the next step?
Well, understand what you're saying though, too. Don't make financial decisions based on fear, rumors, or even guilt. Get accurate information and talk it through not only with people you trust, but also with those who are informed about the new research on reverse mortgages and make sure that your family understands your thinking. And remember, reverse mortgage isn't right for everyone, but for many retirees, it can be a very helpful part of a broader financial plan. Wisdom starts with understanding what your options are.
Well said. Thanks for your time today, Harlan. Thank you very much. Always a pleasure, Rob. Our guest today has been Harlan Akola with Movement Mortgage, a trusted underwriter of this program.
Movement Mortgage serves families in all 50 states. You can find out more at faithfi.com/slash movement. That's faithfi.com/slash movement. Back with your questions after this. Stick around.
Uh Money touches nearly every part of our lives, but scripture tells us it also reveals our hearts. Hi, I'm Rob West. In my 21-day devotional Our Ultimate Treasure, I invite you on a journey of scripture, reflection, and prayer to rediscover what faithful stewardship really looks like, not just in your finances, but in your heart. You can get your copy of Our Ultimate Treasure at faithfy.com slash shop. That's faithfy.com/slash shop.
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 faithfy.com/slash movement. Movement Mortgage LLC supports equal housing opportunity. NMLS number 39179.
For licensing information, visit nmlsconsumeraccess.org. Thanks for joining us today on Faith and Finance. Taking your calls and questions today at 800-525-7000. That's 800-525-7,000. Let's begin today.
We'll start in New York. Eric, how can I serve you? I'm 31 and I've got five properties right now. Please click I grabbed the houses and I went in, I renovated them myself. and I uh doubled equity in the house.
So now I'm in a position where two of the houses are finished with renovations. The other one I'm going to begin. And the other two I haven't started yet. I'm just looking for a little guidance. whether it makes sense to sell these properties and pull some of the capital out of it.
As I'm just starting, I don't have a ton of money you know, with doing the renovations and grabbing these houses or instead of selling them and profiting. whether to try to hold them and do a cash out refinance to to utilize some of the equity in the property. and rent them out. uh to try to hope for appreciation in the home values. As well as depreciation in the loan amounts.
I've been asked the question: it's, you know, what do I want to do? one thing is holding on the houses and having tenants. and the other is using my skills to create equity and profit. Yeah. I also have four kids, too.
Oh, wow. Yeah. So it's not just you that you're thinking about here. I get that.
Well, this is a classic hold versus sell decision, and there's not a one-size-fits-all answer. It really comes down to aligning the properties with your goals, cash flow, risk tolerance, and even the tax picture.
So I think the big overriding question is: this is an investment, it's an asset.
So, what is this property supposed to do for me? And if you're a long-term wealth builder, then you would start by leaning toward the hold side. If you're a short-term profit, redeploy capital, because you have a skill set that's best utilized in buying undervalued properties, improving them, and flipping them, then you'd want to lean sell.
So one side leans hold, one side leans sell. And maybe there's a middle ground too with multiple properties. A couple of factors to look at. One would be cash flow right now.
So are the properties producing strong, consistent income after expenses, after maintenance, after vacancy? If yes, holding becomes even more attractive. If it's marginal or negative, selling may make sense. Appreciation potential, whereas cash flow is now, appreciation potential is in the future.
So is this an area where there's good growth in jobs and population and development? Is it going to improve long-term? If there's strong market fundamentals, that could lean hold. If it's Perhaps peak pricing or a slowing market that would lean sell. A third factor would be something called return on equity.
This is often overlooked. As values rise, your equity grows, but you want to ask: what return am I earning on the equity I have tied up?
So, for example, if you have, you know, 300,000 in equity and you're getting $12,000 in annual profit, well, that's only a 4% return.
So, if you could deploy that equity into something earning more, then you may want to sell. And that could be passive investments like stocks and bonds, or that could be, again, your skill set in continuing to buy properties and redeploy. And then, of course, along with that is the opportunity cost. What else could that money do? Could it pay off debt?
Could it give you more liquidity? Could it buy more properties that would allow you to continue to redeploy your skills? And so, and then obviously the taxes are a big one because if you sell, you've got capital gains tax, you've got depreciation recapture, and so that can take a significant bite. And so, you could look at a 1031 exchange and you may want to talk to a CPA about that. You know, I think those are kind of the considerations.
You know, the fact that you said you don't have a ton of money, it means you might be equity rich but cash poor. If your properties have gone up in value, but your liquidity, your cash reserves are low after the renovation, that matters because you've got to be able to survive the unexpected.
So, given that, what you may want to do is sell one property to free up cash and strengthen your overall position. But hopefully, Eric, that was helpful. To you, just in terms of how you think about these properties, I would just say, kind of to put a bow on it, keep in mind really two big things. One is, as you pointed out, with a young family, if you're strapped for cash, even though you've done well with these properties and you're equity rich and cash poor, probably better for you, especially while we're in a good economy and there's uncertainty around where this economy is headed in the future. Signs point to good, but we are due for a recession.
I mean, if the economy works in cycles, we haven't had one in quite a while. And so I wouldn't want you to get in a position where you were illiquid because you had these properties that have done well, but you can't get out of them. You can't get rental income. You've got a young family. You need cash.
So probably best to focus on shoring up your financial foundation, building some liquidity. And then I think, secondly, this overriding idea of do you want to transition from a, you know, somebody who's buying and improving and flipping properties because you have a Skill set to do so, and you've demonstrated an ability to do that. Do you want to move from that to a landlord, an entirely different kind of mode of operation? Or because you've had some success while you're raising some cash, do you continue to liquidate these properties and move more into the improvement flipping side of the business, which has done well for you?
So just think and pray about those things. We appreciate your call today, though. Let's head to New Jersey. Michael, go ahead. First, I just want to thank you for all you do in terms of ministry and Motivating us to become good stewards of the Lord's money.
Thank you, Michael. I appreciate that. My question is, so I'm sixty four are still working. And this year for our Roth IRAs, Because of our income level, we're limited that we can contribute. Yeah.
And I know there's a like a backdoor option where you can. Contribute to a non-deductible. Yes. How do I do that? And can I?
Make that contribution to an existing traditional IRA, or does does it have to be completely separate? Yeah. Great question. And you're exactly right. The backdoor Roth IRA is a completely legal workaround to fund a Roth IRA if your income is too high.
So basically, you contribute to a traditional IRA, and you'd put an up-to-the-max for the year. And the contribution is non-deductible, so it's an after-tax contribution. And then you convert the money to a Roth shortly after contributing. And since you've already paid tax on it, there's little to no tax due on the conversion. And the Roth IRA income limits apply to direct contributions, but conversions.
Have no income limits. And so you're going around the side door there. And now the big gotcha is what's called the pro rata rule. And this is where people can get tripped up. If you already have money in pre-tax IRAs, the IRS looks at all of your IRA money combined.
So you can't just convert the after-tax portion cleanly.
So, part of your conversion could become taxable.
So, if you had 100,000 and an existing IRA pre-tax, and you had 8,000 in a new after-tax contribution. Only a small portion is tax-free. Most of the conversion is taxable, but it can work best when you have no other pre-tax IRAs or if you move it into a 401k first. But I love this idea, and you can use an existing traditional IRA for a backdoor Roth, but that's where that tricky aspect comes in.
So check with your CPA on it. Folks, we've got room for additional questions in the remainder of the broadcast. Call right now, 800-525-7000. We'll be right back. Stay with us.
We are grateful for support from Praxis Investment Management. Since 1994, Praxis has offered investment products designed to meet practical needs for everyday investors seeking to steward their assets consistent with their desire to promote positive social and environmental impacts. Praxis aims to bring a faith-based approach to ETFs, mutual funds, multi-fund portfolio solutions, and money market accounts, reflecting their 500-year-old Anabaptist Christian faith tradition. More information is available at PraxisInvest.com. There's war in the Middle East, but the opportunity to reach people with the gospel has never been greater.
Here's Dawood from Heart for Lebanon. Families are terrified, even when the ground is shaking. Our hope is in Christ. Our mission is to lead people away from despair and toward the hope of Jesus. Bring emergency aid and the hope of the gospel to a family in.
Impacted by the war. Text the word faith to 98656 or visit faithfund.com/slash Lebanon. Helping you apply God's wisdom to your financial decisions. This is Faith in Finance. All right, we're going to go back to the phones.
We'll get to as many questions as we can before we round out the broadcast today. To Tampa, Rebecca, go ahead. Yes. I want to know that They're on a mortgage and a small loan. Yeah, small Extra payments.
A mic. would be about the same as making one yearly payment Uh to principal only, does it make a difference? It does. You know, the sooner you pay toward the principal, the better, because every month that goes by, that you're not paying interest on the amount that you reduced through that principal reduction payment is good for you.
So, all things being equal, if you were to send $100 a month starting in January versus $1,200 all at one time in December, you'd be better off doing the $100 a month.
Now, if you could do the $1,200 in January, that would be better than $100 a month for the year. You see my point here.
So, the sooner we can make that payment to principal, the better. And if we do that systematically, either through an annual principal reduction payment or through a monthly small amount to principal reduction, both of those are going to work for you. But if you're really just looking to crunch the numbers and figure out which is better on paper, paying it off sooner rather than later is always better. Is that helpful? NAS, thank you.
Okay, you're welcome. Let me also mention, Rebecca, if you're comfortable on the internet, there's a lot of great mortgage calculators out there. If you just type in, you know, principal reduction calculator, you'll find a lot of free calculators where you can put in your loan amount, the balance that you have today, the interest rate, the scheduled payment, and then you can start playing with the calculator to say, how much interest would I save if I pay $25 a month? How much would I save at $50 a month? How much would I save if I do $1,000 right now?
And you can see that play out in the amortization schedule will tell you exactly what the benefit is. And you may find that that's the incentive you need to do a little bit more just because you see how quickly those numbers add up. Let's head to Tennessee. Tom, I believe you have a testimony for us. Go ahead, sir.
Yes, uh I heard about Christian credit counselors on your program. And I'm 72, and since about 2011 or 12, I've had disabling back injury. I don't want you to think I just totally wasted my money through the years. I did help support my mother and my sister, but. I didn't do my finances with good judgment.
So I ended up with about thirty one thousand dollars of credit card debt. And I was feeling really down about it and thinking, well, this is just going to be impossible to get rid of this, pay this off. But I thought, well, I may as well call Christian Credit Counselor just to see what they have to say.
So then Everything worked out real smoothly from that point. And um I'll have my debt paid off in five years, which They just kind of seemed like a miracle to me because I, you know, I thought this there's no way I can pay this stuff this off, you know. And I was even thinking about bankruptcy, but and I thought, well, any but anyhow, They set this up, and I've actually got about $225 more of. Usable income.
So that's very handy to have. It feels good to be able to giveaways. I like giving away Bibles to people and so it's it's good to have uh that money to use. more wisely than it did in the past.
So I'm very thankful for your program and it's extremely helpful in it's embarrassing to have to admit that you've, in a sense, been a big dummy. But they were so encouraging and Made it very clear that there's an awful lot of other people in the same boat or in the same sinking boat. But So, anyway, I just wanted to say thank you for letting me know about them, and I really appreciate it.
Well, Tom, I appreciate you sharing your story. Praise the Lord that He has allowed you to be on this path and be able to get to a place where you're financially healthy. You've got a good financial foundation under you. I love your generous heart, and I can't wait for you to be out from under this debt because I would imagine God's going to really use that to allow you to be thoughtful about how you budget and plan moving forward so you don't ever get back in that situation again, but also so you have more margin to be able to give generously as the Lord leads and give your Bibles away and all the things that just pleases the Lord. And so, that's phenomenal, Tom.
I'm so thankful for the testimony that you shared. You know, our friends at Christian Credit Counselors have been a longtime partner and have worked with thousands of our listeners. And let me just say to Tom's point: if you're in a position, folks, where you're overwhelmed by credit card debt, they can lower your interest rate. They can get You're on a debt management plan that will help you pay off your debt up to 80% faster and get on a track like Tom's on to get out from under this once and for all. And if you want to learn more, the easiest way is just to jump on the web and go to faithfi.com/slash CCC, which stands for Christian Credit Counselors.
Faithfi.com/slash CCC. Tom, I appreciate you sharing your story, my friend. Thanks for being on the program. Thank you. All right, Lord bless you.
Mississippi's where Diane's located. Go ahead. I'm sixty one. I'm married and I'm going to retire at sixty seven. And I have a old employee trust fund of $8,378 at 7.5% interest, and my husband wants me to put it in my Traditional IRA, and I have $3,823 in it.
And I want to know if that's a good idea. It's a great question. And the key question is around that 7.5% that you mentioned. Is that guaranteed? Yeah, I have it last year and the year before and year before.
Okay. Yeah, I mean, because if you're getting that and it's very stable. Then I wouldn't move it. I mean, 7.5% is excellent, especially today, which is going to be hard to replicate safely in an IRA.
So you'd likely be moving to market-based investments, which means more risk. Or lower fixed returns. And I don't have any problem with investing. We talk about it all the time. I think it's a wise way to build wealth.
But if you've got a way to earn seven and a half percent and it's stable, I'd keep that trust fund and just let that thing continue to grow.
Now, if it's not guaranteed or it starts to move around or it's risky or it's tied to some company performance that concerns you, well, then yeah, you may want to go ahead and roll it to an IRA, get more control, get more investment options. But the IRA is just a container, it's not an investment.
So moving to an IRA doesn't automatically improve returns, certainly doesn't guarantee better performance. It only helps if the investments inside the IRA are better.
So, I think at the end of the day, instead of asking, should I move it to an IRA? The better question is: is what I have better than what I could reasonably get? Elsewhere. And if not, because your seven and a half percent return is fairly stable, then I'd be hesitant to move it if that makes sense. Yes, thank you.
Okay, thank you for your call today. I appreciate it, Diane. And if you or your husband have additional questions or there's some aspect of this I'm missing, don't hesitate to call back.
Well, that's going to do it for us today, folks. I have an amazing team that does an incredible job each day of making sure. We can bring you this broadcast and do it with excellence. Dan, Tahira, our call screeners, plus Taylor and everybody here at Faith By. Come back and join us tomorrow.
We'll see you then. Bye-bye. Faith in Finance is provided by FaithFi and listeners like you.
