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From the Financial Hotline

By: Financial Hotline
Fall 2023 (Vol. 41, No. 3)

Q: I want to purchase a home for my elderly parents but since I already have a home mortgage, the lender said I have to purchase as a second home. Are there any options to get a mortgage with the same benefits as a personal residence?

A: You might want to consider a Family Opportunity Mortgage. It can be a good option when purchasing a home for your parents, adult children or disabled child. A second home usually comes with higher down payment requirements and higher interest rates. The Family Opportunity Mortgage is a conventional loan that allows down payments as low as 5% and interest rates comparable to a primary residence loan. Generally, you would need a minimum credit score of 620 and a 45% debt-to-income ratio to qualify. Your family member does not have to be on the loan application.

Q: If I pass away first, will my wife be able to collect my social security along with hers?

A: No, you cannot collect double social security payments. However, she would be eligible to collect the larger of the two benefits. If the surviving spouse is at or over full retirement age, they can receive 100% of the deceased’s benefit amount. If they are between 60 and their full retirement age, they would receive between 71.5% and 99% depending on their age. A disabled spouse (50 or older), an ex-spouse, or a spouse caring for a minor or disabled child may also be eligible to collect.

Q: My ex-husband and I divorced after 13 years of marriage. He passed away in 2014. Is it too late for me to look into collecting on his benefits?

A: No. There isn’t a time limit. If you are age 62 or older, were married at least 10 years and did not remarry before age 60, you may be eligible for up to 50% of his benefit amount.

Q: I just received a windfall of fifty thousand dollars. I own my car but I have a lot of debt and zero savings, investments. What should I do first?

A: First, check with your tax professional to see if you will owe taxes. If your unexpected cash is from a gift or inheritance, you probably won’t owe anything. Here are some steps to consider next:

  1. Establish an emergency fund. It’s a good idea to keep six months of essential expenses. So if your necessary bills total $2,000 per month then your emergency fund balance should be at least $12,000.

  2. Pay down or pay off high interest debt.

  3. Save for retirement. Open or contribute to your retirement plan. Maximize any employer match programs. You may not be able to pay off all your debt, but focus on areas where you can eliminate or reduce a payment amount and then use those funds to make larger payments on other debts. Once you eliminate those debt payments, you will have money to put into retirement and other investments.

Q: Is there a formula that can help me determine the value of an existing small business?

A: As there are many different types of businesses, you may find many different ways to establish value. As a general rule of thumb, small businesses that are run by owner sell for between one and three times the Seller’s Discretionary Earnings (SDE) which starts with the business year end net profit. The SDE usually includes the owner’s salary as an adjustment and can vary based on multiple criteria such as market risk, location, the intangible assets, and how dependent that business’s success is on the current owner.

A larger business or one that you would require a manager to run may incorporate the EBITEA method. This is short for earnings before interest, taxes depreciation and amortization. This method gives you a good idea of the core profit of a company and its available cash-flow. EBITDA is calculated using these elements found in the income statement:

Net Profit + interest + income taxes + depreciation and amortization = EBITDA

Q: I got scammed by an email promising lower prescription drug costs. Where can I go to get legitimate assistance with lowering my costs?

A: Try the Medical Assistance Tool (MAT) at MAT is not its own patient assistance program, but rather a search engine for many of the patient assistance resources that the biopharmaceutical industry offers.