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Reverse Mortgages; Weatherproofing a Home; Masterpiece Garden
Aired July 16, 2005 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, HOST: Chances are, your home is your retirement fund. But you could tap into it now without having to move.
ANNOUNCER: Today on OPEN HOUSE, a reverse mortgage means money your in pocket while staying put in your home. When is it right for you?
Hurricane season is under way, but extreme weather can be a threat anywhere. We'll show you how to weatherproof your home.
Then, our weekend project, going beyond your basic vegetable garden. We show you how to create a masterpiece, next on OPEN HOUSE.
WILLIS: Hello, and welcome to CNN OPEN HOUSE. I'm Gerri Willis.
Plenty of baby boomers have their retirement money tied up in their homes. But as they reach retirement age, they don't necessarily have to put the house on the market and downsize. There is another option. It's called a reverse mortgage.
And as Chris Huntington shows us, some retirees are finding it a useful tool.
CHRIS HUNTINGTON, CNN CORRESPONDENT (voice-over): Louise Hilton worked hard for her house her entire life. Now she's making her house work for her.
LOUISE HILTON, HOMEOWNER: It's very important to me to be able to live well and to go to bed at night and not have to worry about, where am I going to get the money for my electric bill, or, you know, if I get a bill today, I can pay it today and not have to worry.
HUNTINGTON: Hilton has what's called a reverse mortgage. Instead of making payments to the bank, the bank makes payments to her. She's converting equity in her home to cash.
To qualify for a reverse mortgage, you must be at least 62 years old and own a significant portion of the home. You can continue to live there even after the money is tapped out, and the loan is not due until the homeowner moves out, sells the house. or dies.
PETER BELL, NATIONAL REVERSE MORTGAGE LENDERS ASSOCIATION: There are a lot of seniors that are living lives where they're cash constrained, where they have financial constraints, and yet they have all this wealth. So the reverse mortgage allows them to tap that wealth, and have money available for whatever purposes they may need.
HUNTINGTON (on camera): You can take your cash from a reverse mortgage as a lump sum, in monthly installments, or even as a line of credit. But a reverse mortgage is not for every homeowner.
RICK APPLEGATE, CERTIFIED FINANCIAL PLANNER: Well, the worst thing about a reverse mortgage is the high fees usually associated with initiating them. It's going to be very difficult for -- to justify a reverse mortgage to someone who is planning to live in their house for five years or less. So you want to have a long period of time ahead to offset those expenses.
HUNTINGTON: And that suits Louise Hilton just fine.
HILTON: I want to stay here the rest of my life. I thought about selling, but really, I really want to live here. I love New York. I love this house. And it's so much of this house is a part of me.
HUNTINGTON: And though she knows her heirs may never live in the house, she gets the pleasure of watching that house enhance their lives now, even helping one niece with the cost of graduate school.
Chris Huntington, CNN, New York.
WILLIS: So is a reverse mortgage right for you or someone in your family?
Joining us from Washington to help, Bronwyn Belling. She's a reverse mortgage specialist with the AARP, that's the American Association of Retired Persons.
BRONWYN BELLING, REVERSE MORTGAGE SPECIALIST, AARP FOUNDATION: Thank you, great to be with you.
WILLIS: You know, having the bank give you money instead of giving the bank money sounds like a great idea. But you say there are important considerations people need to make. Let's start by talking about costs.
BELLING: Well, a reverse mortgage involves using your only and largest asset, so it's a major financial decision, and it shouldn't be made too quickly.
BELLING: ... the loans are very expensive. Most of the fees are collected from the equity in your home. But you need to pay attention to all the costs and understand the costs before you decide whether or not to apply for one. WILLIS: All right. Well, how much would I be paying as a percentage of the home's value, say?
BELLING: Well, it's not an absolute number. The amount you can borrow, and each homeowner can borrow, depends on their age and the equity in their home, the current value of their home, and some program limits. So every person can borrow a different amount of money, based on those conditions.
WILLIS: Well, and that's one of the misconceptions, I think, of these products, is that you can borrow as much as you want. But, in fact, there are big limitations on how much money you can get, right?
BELLING: There are. The amount of money you can borrow is based on county -- either your home value, or county by county limits, established by the federal government. And those limits range from about $172,000 to about $312,000. And then you can borrow a percentage of that limit that's based on your age and the prevailing interest rates.
WILLIS: Boy, devil's in the details. These are really complicated. Now, you can obviously roll your costs into the loan. But we're looking at two, four, how much, what percentage of the total loan is going to be our cost?
BELLING: Well, there's a 2 percent mortgage insurance premium, and a 2 percent origination fee. And that 2 percent is applied toward either the home value or the limit, whichever is less, the county limit. And then there are standard closing costs that run about $3,000, on average. So in the Northeast, where I am, in Maryland, a typical loan on a $300,000 house might cost somewhere around $12,000 to $15,000.
WILLIS: OK, well, that's certainly not nothing. That's a lot of money. You say in some cases, there are better alternatives for people who really need to borrow the money.
BELLING: Right. Many people hear about a reverse mortgage from an advertisement or a mailing from a lender. But if they're looking to do a single thing, like take care of a home repair, or if they have problems with property taxes, or paying for medications, often there's a local program or service that might meet their needs that would be far less expensive. And that's why we urge people to get free counseling from independent agencies before they apply for a reverse mortgage, to learn more about those kinds of programs.
WILLIS: Independent agencies, like who, Bronwyn?
BELLING: HUD has a network of housing counseling agencies. They're nonprofit and public agencies approved by the federal government to provide this service.
BELLING: And they're listed online at HUD's Web site. And there's also information on AARP's Web site about the counseling services that we offer.
WILLIS: Perfect. Well, you know, these loans can be so confusing. One of the big misconceptions out there is that the bank owns your house as soon as you take one of these things out. True?
BELLING: False. And it's probably the most widely held myth about reverse mortgages. People think at the end of the loan, the bank gets the house. You're still the owner, you're still responsible for paying taxes and insurance on the house. You just have a new mortgage that doesn't require any repayment for as long as you live there.
WILLIS: And ultimately, though, your heirs may have to sell that house to repay that mortgage, right?
BELLING: Yes. Typically, if you -- when the last surviving borrower dies or sells or permanently moves away from the house, the loan becomes due and payable. And usually the repayment is accomplished by selling the house and repaying the loan, and then whatever's left over would be distributed according to the terms of your will.
WILLIS: Bronwyn, thanks so much for being with us today.
BELLING: You're welcome.
WILLIS: Coming up on OPEN HOUSE, the latest on Hurricane Emily. Plus, what you can do to protect your home from all kinds of extreme weather.
And our weekend project, get your veggies in order. We'll show you how to plant and how to care for a successful garden.
But first, your tip of the day.
(BEGIN VIDEO CLIP)
ANNOUNCER: Maintain the condition of your home by keeping moisture out. It's the number one source of damage to homes, causing problems like cracked paint and mold.
Keep indoor humidity below 60 percent by using ventilators, air conditioners, and dehumidifiers.
Check for leaks in the basement on a regular basis, especially after rainstorms.
Use exhaust fans or open the windows when cooking or washing dishes.
Fix leaky faucets and pipes as soon as you find them.
Clean and dry out wet or damp areas within 48 hours, and always keep your home well ventilated.
That's your tip of the day. (END VIDEO CLIP)
BONNIE SCHNEIDER, CNN METEOROLOGIST: Well, good morning, everyone. I'm meteorologist Bonnie Schneider in the CNN Weather Center, where we're tracking Hurricane Emily.
This is a category four storm with maximum winds at 140 miles per hour. This storm is bearing down on Jamaica, not making direct landfall, but we're seeing enough thunderstorm activity that we may see mudslides as a result.
Hurricane warnings continue for Jamaica and for the Cayman Islands, naturally, because this is a powerful storm that's headed in that direction.
Now in the meantime, if we can check out the track for you, we'll show you what's going on. Notice the storm is going to make landfall not once but twice, the first time to the Yucatan Peninsula, eventually somewhere along the Texas coast down through northern Mexico. So that's where we're looking at landfall.
This is a very active hurricane season. Certainly, we're already up to Emily. More is certainly to come. But the main thing to note is that now is the time to prepare yourself.
Let's go back to OPEN HOUSE for a look at that.
WILLIS: Whether you live in a frequent hurricane zone or anyplace that faces extreme weather, the best time to deal with it is before it strikes. You can't stop heavy winds, rain, or flooding, but you can be prepared.
So I met up with Michael Schlacter of Weather 2000 for tips on protecting your home.
WILLIS: So Michael, if you have the luxury of time, let's say you're building a house, what can you do to that house to make it safer from extreme weather?
MICHAEL SCHLACTER, WEATHER 2000: If you have a little time and a little money, I would say to use strong materials for the foundation or possibly even the walls of your home.
WILLIS: What do you mean?
SCHLACTER: That could be stone, that could be concrete, preferably steel reinforced, if you want to be extra safe.
WILLIS: And people do that in area where's there are hurricanes, tornadoes, both?
SCHLACTER: If you're in a zone that experiences very severe weather, i.e., hurricanes or tornadoes, it may be worth putting a small percentage of the value of your home into strong, reinforced walls.
WILLIS: Now, I hear about safe rooms. People are building safe rooms in the basement. Where is the best place to put it? And is it really safe?
SCHLACTER: Well, if you don't want to redo your whole home, the more interior inside your house you can get, the safer and the better. So if you put those steel and concrete reinforced room, let's say, in the middle of your home, that could be someplace that you and your family can go to in case of severe weather.
WILLIS: And how much does it cost to put one of those in? Is it really expensive?
SCHLACTER: Well, you're probably talking about in the tens of thousands of dollars, with all the materials and construction. But with home prices in the hundreds of thousands, it's probably a reasonable ratio for people in very severe prone areas.
WILLIS: The more, you know, levels you put on your house, the less safe it is. Why is that?
SCHLACTER: If you're building a home or expanding a home, stories of two or greater are exponentially more vulnerable to severe weather damage like wind. It's like putting up a sail catching the wind. So you want to try to keep it to a ground level if at all possible, again, if you're susceptible to strong winds.
WILLIS: All right. So if you're on the coast, beware. What about generators? Everybody wants a generator, because you're worried about the storm taking your power out. Where do you put it, how much should you spend?
SCHLACTER: Well, hospitals have known for years that they need to always be running, even when the power is out. So a lot of suburban and rural communities are turning towards generators, which could be anywhere from a few thousand dollars to tens of thousands of dollars, depending on how much power you need.
You obviously want to be, being close to your home, because it can run on natural gas or a variety of fuels, not dependent on electricity.
WILLIS: So Michael, at the start of storm season, the kind of planning people need to do. You say one great place to start is the shutters. But are these the kind of shutters you're talking about?
SCHLACTER: No. We've all seen these, and they're obviously very aesthetically pleasing, but they're more decorative in nature. You really want shutters that are, first of all, not wood, steel- reinforced shutters, and ones that obviously can extend over to cover your whole window, because their purpose is to protect the windowpane.
WILLIS: And these aren't inexpensive. How much do they cost? SCHLACTER: No, probably on the order of a few hundred dollars, you can get a few dozen good steel-reinforced shutters.
WILLIS: That's a great idea.
Now, you talk about glass shattering. Now, when I was growing up, we put tape over the windows. But you say that's a bad idea.
SCHLACTER: Tape is really not going to give you much protection. It's kind of a old wives' tale that's been carried forward. Really, if you're going to spend a few dollars, you would rather get shatterproof-type glass. And if you're in a very severe whether area, perhaps even thick glass panes that maybe do or do not open, but are very secure.
WILLIS: Expensive, or no?
SCHLACTER: No. Again, I think you can get things on the order of a hundreds of thousands, depending on what kind of level you want to do.
WILLIS: OK, so it's available at different price points, obviously.
SCHLACTER: Available at different price points.
WILLIS: Now, I was always told, equalize the pressure, open the window a little bit. But you say that could be a bad idea.
SCHLACTER: Yes. Equalizing the pressure in your home is a little bit of an urban myth. Pretty much storms equalize the pressure in a matter of seconds. So really you want to create a airtight environment with the outside. Seal your windows, seal your doors, perhaps either caulking or rubber cement, wood cement on the seams.
WILLIS: Well, and you say caulking too is key at the start of the storm season. You want to go around all the windows, the doors. Can I do this on my own?
SCHLACTER: Yes, with the caulking you really want to be where the roof meets the wall joints, because you don't want to give the wind any extra leverage to pull things off. So as long as things are sealed in tight, you close your windows, you close your doors, you're going to create a nice environment to withstand a storm.
WILLIS: And the problem is really that the wind uses any opening as a lever, right, to just open up your house, either from the roof or whatever?
SCHLACTER: Right. Opening up your windows or doors during or prior to a storm is very foolhardy, because that wind will rip things right off, whether it's the side of your house or the roof. So you really want to create that airtight environment. Seal it as much as possible.
WILLIS: Michael, let's go look at the back of the house. SCHLACTER: OK.
WILLIS: So I hear about people only board up one side of their home. That creates obvious problems.
SCHLACTER: That's a little silly. Regardless of what direction the storm is coming from, or where you hear the winds are coming from, if you're going to take the time to protect your home, protect all the sides of your home. It's worth the effort.
WILLIS: Bottom line, though, Michael, you suggest what?
SCHLACTER: Bottom line is, you want to protect all kinds of windows. If you can't, make sure they are covered by steel shutters or shatterproof glass. If you have more time, have steel-reinforced concrete as your foundation. And as last-minute precautions, really keep those patio furniture and object projectiles away from the outside of the house.
WILLIS: Great ideas. Michael, thanks for being with us.
SCHLACTER: You're welcome.
WILLIS: When it comes to protecting your home from extreme weather, it pays to think about your insurance coverage.
First off, check out your coverage deductible. Some homeowners in Florida got a rude awakening last year when they found out that their hurricane deductible was a percentage of their home's value, rather than a small flat fee.
You'd also be smart to ask your insurance agent whether your current homeowner's policy covers what your home is valued at in today's market. The housing boom may have improved the value of your single biggest asset more than you realize.
And finally, flooding can be a problem during any storm. In fact, floods and flash floods occur in all 50 states. So if you live along the coast, or in a flood plain, you'll also want to get flood insurance. Coverage is available from the Federal Emergency Management Agency, but sold by licensed insurance agents, and it's not a part of your regular policy.
Keep your home and your family safe and your investment protected.
Coming up on OPEN HOUSE, our weekend project. Wait till you see this garden. Plant a beautiful vegetable garden of your own, with help from a pro.
But first, your mortgage snapshot.
WILLIS: Think it's too late to plant a summer vegetable garden? Well, think again. As farmers can tell you, the South often has at least two planting seasons, and in the North, certain vegetables, like lettuce and beans, can be planted as late as six weeks before the first frost.
So, recently I met up with Susie Bales, the author of "The Down to Earth Gardener," to get her tricks of the trade at any time of the year.
WILLIS: Oh, Susie, this garden is beautiful.
SUSIE BALES, AUTHOR, "THE DOWN TO EARTH GARDENER": Thank you.
WILLIS: But you know, you must spend a lot of time working on this. I know people are so concerned about a garden that would be a lot of work if you've never done it before. What's your suggestion in terms of the best vegetables to plant?
BALES: Well, there's many vegetables. But nothing is hard if you know how to do it. First of all, Swiss chard will grow in almost anything. It's one of the most nutritious vegetables.
WILLIS: We have Swiss chard. What else do you...
WILLIS: Tomatoes. Are they easy to grow, though?
BALES: Very easy.
WILLIS: How many tomato plants do I need for a family of four?
BALES: I would say about 10. But what you would do, because they're not all ripe the same day...
BALES: ... you get some that are called indeterminate, that just keep going all season.
WILLIS: You talk about low maintenance, but what do you really mean here?
BALES: What I really mean is, put all your energy into making a nutritious soil, using a raised bed, adding lots of compost and mulching. This is shredded bark mulch. And if we take it and put it on this, it looks beautiful too.
WILLIS: But you recommend, for the typical vegetable garden, how much compost?
BALES: Two or three inches, at least.
BALES: Yes, save your leaves. Don't put them out to be picked up. You can shred them, put them right back.
WILLIS: There aren't necessarily a number of vegetables that are perennials, but some will reseed. What are your top three for reseeding?
BALES: Parsley is wonderful, but you have to leave a few plants in, let go to seed. Leeks will reseed, and they have a beautiful flower head. Of course, the Egyptian onion is fabulous, because it drops its seeds all over. Lettuce even reseeds.
WILLIS: You like these garden, what are they called, garden rugs, (INAUDIBLE)...
BALES: Garden blankets. And they're...
WILLIS: And how do you use them?
BALES: ... very lightweight. And they speed germination and speed growth. So you just put it, after you put your seeds in. This is a bed of carrots that has been planted. And you can cut it to size. And you spread it down, and then you hold it in place, just like that, with these hooks.
WILLIS: How does this make me a more efficient gardener? How does this improve my investment?
BALES: It speeds germination, and you can use them year after year. You get these blankets, they're the size of double beds. You can cut them up to any size you want. And they cost about $6. It's a great investment for the money.
WILLIS: In terms of watering the plants, what's the most efficient way to do it?
BALES: The most efficient way is to do it once or twice a week, and do it really deeply. You want to train the roots that they have to go deep in order to get water. If you're watering every other day, or every day, then the roots are going to grow sideways, and they're going to stay shallow at the top of the soil. And the first time you get those days in the 90 degree, it'll burn up the roots.
WILLIS: Proper weeding will also help, because weeds can rob roots of water and space.
Coming up on OPEN HOUSE, a look at next week's show. We'll be right back.
WILLIS: Coming up next week on OPEN HOUSE, how about selling your home in just a weekend, without paying commission? Believe it or not, it can be done, and we'll show you how.
Then, the national median home price, $207,000. We'll take a look at what that gets you in the real world.
Plus, we want to hear from you. Send us your comments, your questions to OpenHouse@CNN.com.
Thanks for watching OPEN HOUSE. We'll see you here next Saturday.
Coming up, "DOLANS UNSCRIPTED," with a look at the major changes within the Homeland Security Department.
But first, the day's headlines.
Have a great weekend.
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