Author: Sara Cornwall

7 Worst HECM hReverse Mortgage Myths

reverse mortgage advisor connecticutReverse Mortgage was created to give our retiring generation a way to keep their homes and manage the ever increasing costs of life after working long and hard over the years. It is an option that could be just right for you. All applicants are required to participate in HUD approved counseling to ensure all their questions and concerns are addressed. Working with a reputable reverse mortgage specialist will also be critical in the process, as this person should be your advocate – even telling you when a reverse mortgage may be wrong for you.

In the meantime, it’s important to unravel the myths floating around about what a reverse mortgage is and what it does.  Here are a few myth busting facts:

 Myth #1: Reverse mortgages are only for poor people.

Fact: Many retirees use reverse mortgage as a way to fulfill their desires for retirement, or to help grandchildren with college, or even to move into their dream home.

Myth #2: It’s free money.

Fact: It is a loan specialized for those 62 years old and older that does not need to be paid back until the last borrower passes away or leaves the home permanently.  If anyone attempts to market a reverse mortgage as “free money”, beware as it is likely a scam.

Myth #3: You lose your home.

Fact: The title of your home stays in your hands.  You are always the owner.

Myth #4: It is not a safe program.

Fact: Reverse mortgages are FHA insured and fully guaranteed – regardless of how you receive the payout.

Myth #5: My equity is safe if I don’t use a reverse mortgage right now.

Fact: Your equity is dependent upon the housing market, which is always changing.  Utilizing a reverse mortgage line of credit is a great way to guarantee your reverse mortgage equity is not affected by housing booms and busts.

Myth #6: I must be a homeowner or use my current home to obtain a reverse mortgage.

Fact: Reverse mortgages can be used to purchase a home, even if you have never owned a home before.

Myth #7:  If I’m married, my spouse will lose the home if I pass away.

Fact:  Married couples can both be on the loan if both are 62 or older.  There are many ways to ensure both spouses are not at risk.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

How A Widow Can Buy A Home Using A HECM Reverse Mortgage

reverse mortgage advisor connecticutIt’s a scenario all to familiar for the elderly in Connecticut…

A spouse passes away leaving behind a widow.  The remaining partner wants to move closer to family.  But there’s a catch – although the widow’s current home is owned outright, they would typically need to sell it before they could purchase another.   And they wish to move to an area where the median home price is much higher than the home available to sell.

Reverse mortgage for purchase may be an excellent option for this widow.  Let’s look at the scenario in detail:

Predicament #1: Widow needs to sell current home before purchasing a new home.

Solution: With a reverse mortgage for purchase, this widow would not need to sell the home immediately.  Any personal funds or assets used to purchase the new home could be replenished when the current home sells – and the funds from a reverse mortgage would supplement the initial funds needed.  This would allow her to move and get settled immediately.

Predicament #2: The cost of a home in the area the widow is moving is much higher than where she currently lives, meaning the proceeds from her current home sale will not cover the entire purchase.

Solution: When utilizing a reverse mortgage for purchase, her out of pocket cost would be substantially supplemented.  For example if she anticipates selling her current home for $200,000 and purchasing a home for $300,000, the reverse mortgage may cover the $100,000 difference allowing her to live mortgage payment free and best of all – near her family.

Reverse Mortgage for Purchase (aka: HECM for Purchase) is an FHA insured program for seniors 62 and over.  Although borrowers will not have a mortgage payment, they are still responsible for property taxes, homeowners insurance, HOA fees, and other general household expenses such as utilities and upkeep. 

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

Will A Reverse Mortgage Affect Social Security, Medicare & Pension?

reverse mortgage advisor connecticutA very common concern among older adults and their adult children when considering a reverse mortgage is how it will affect social security, medicare, and even certain pensions.  For many seniors, these benefits are a large part of their income. Fortunately, because the funds from a reverse mortgage are NOT considered taxable income, a borrower’s benefits will not be affected when taking out a reverse mortgage.

On the other hand, borrowers who have Medicaid, TANF, Food Stamps or SSI may see those benefits affected by these additional funds.   Because these programs are government sponsored programs with strict approval guidelines based on all sources of income, even non-taxable income, there is a possibility the additional cash flow will need reported.  Other supplemental and assistance programs would need to be addressed on a case by case basis.  Working with a reputable reverse mortgage lender and required third party counseling will ensure all your questions are answered thoroughly and honestly.

Reverse mortgages are available to homeowners 62 and older.  The proceeds can be received as a lump sum, as monthly installments, a reverse line of credit, and even to purchase a home.  The funds can be used for any purpose the borrower sees fit.  This FHA insured loan allows the borrower(s) to live mortgage payment free.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

Home Equity Among Seniors Rises

reverse mortgage advisor connecticutIn the first quarter of 2017, home equity held by homeowners 62 and over rose 2.6% to $6.3 trillion, according to data from the National Reverse Mortgage Lenders Association.

This $200 billion increase of housing wealth is attributed to rising home values across the nation, and especially in Colorado where some of the largest spikes were indexed.  It is important to note, however, that this was slightly offset by a 0.6% increase in senior held mortgage debt, which is equal to $9 billion.

So, what are the takeaways from these figures?

First, now is a fantastic time for older individuals and married couples to look into a HECM reverse mortgage while home values are up and interest rates are down.  One of the factors that determines the amount of funds available through a reverse mortgage is the appraised value of the home – the higher the appraised value, the more funds available.  On the flip side, because these loans are FHA insured, if a reverse mortgage is tapped into while home values are high, there is never a concern that more will be owed when it comes time to repay than what the home is worth at that time.  This is a comforting guarantee if the housing market were to decline in the future.

Second, the $9 billion increase in senior housing debt signals that older homeowners are not entering retirement mortgage-free at an increasing rate, and/or they are comfortable taking on mortgage debt in retirement.  In either scenario, a HECM reverse mortgage should be considered as it may be a viable option.  HECM reverse mortgages can be used to eliminate current mortgages – allowing the homeowners to live mortgage payment free.  They can also be used to purchase a new home.  This is something that all senior buyers should be made aware of while in the real estate market, as they can enjoy their new living situation AND live mortgage payment free.

HECM reverse mortgages are individualized, specialized loans for those 62 and older that allows older adults to tap into the equity of their home while living mortgage and loan payment free.  The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. Adult children can help their parents plan ahead by working with a reputable reverse mortgage specialist.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

When To Refinance Your HECM Reverse Mortgage Loan

reverse mortgage advisor connecticutHECM reverse mortgages are for seniors 62 and older, including married couples, and were once considered a life line. Times have changed, and now reverse mortgages are regularly being incorporated into retirement planning.  But refinance a reverse mortgage?  It’s not something you hear about often, or maybe you don’t even realize it’s an option.  And why would someone want to do this?  Well, here are some fast facts:

Who might want to refinance:

• In the case of a remarriage, possibly you want to add the new spouse (note: new borrowers added must be 62 or older).
• Or in the case of divorce, you want to remove a spouse.
• If the housing market has improved drastically, maybe you want to tap into the new equity.
• Better interest rates?  Just like with a traditional mortgage, this matters.
• Interested in the Line of Credit option but took out the monthly installments?  Then refinance may be for you.

What you need to know:

• The process is similar to that of a traditional mortgage refinance, except you will still be able to live mortgage and loan payment free.
• You will need a new appraisal.
• Some older lenders have exited the reverse mortgage industry, such as Wells Fargo and Bank of America.  If you currently have your loan with one of these lenders, you’re not out of luck, you can still refinance through an existing lender.
• You can shop around.  You are not stuck with your current lender.
• If your previous reverse mortgage was not FHA insured, you can switch to one that is.  The FHA insurance offers consumer protections, including the promise that you’ll never owe more than your home is worth at the time the loan comes due.
• You will need to take part in third party reverse mortgage counseling.
• If you received your reverse mortgage before 2015, be aware some of the requirements have changed.  Now income and credit does play a factor, although there are options if you fail to meet the new criteria.
• If you’re not sure you want to stay in the home, refinancing may not be the best move.  Instead possibly consider selling the home to pay back the existing reverse mortgage, then look at a HECM Reverse Mortgage for Purchase to downsize or move to a more suitable home.
• After the refinance, the borrower will still be responsible for property taxes, homeowner’s insurance, and other related costs to the home such as HOA fees, upkeep, and utilities.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

Why Society is Reversing Their Thinking on HECM Reverse Mortgages

reverse mortgage advisor connecticutSince the HECM reverse mortgage industry began seeing changes in 2015 and again, earlier this month, financial advisers, retirement planners, and reverse mortgage specialists are collaborating more than ever before.  In an effort to ensure these changes are are thoroughly understood and appropriate solutions are offered to clients, a strong relationship between professionals is vitally important.

Because of these newly developed relationships, it appears a wonderful shift is taking place.  HECM reverse mortgage, once stereotyped as a product for poverty stricken widows or the like, is now being realized as a product of opportunity.  More and more we’re seeing affluent and middle class retirees utilizing this option to provide financial stability and financial freedom throughout retirement.  The industry has only begun to scratch the surface of those who would benefit or will discover the possibilities when tying a reverse mortgage into their retirement plans.

This paradigm shift will likely increase knowledge across the board regarding both traditional reverse mortgage loans and the reverse mortgage for purchase program.  Both products are available for seniors 62 and over.

If you have any questions regarding the changes that have taken place surrounding the reverse mortgage industry in Connecticut, please don’t hesitate to contact me.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

 

Reverse Mortgage Changes Coming Oct 2, 2017

reverse mortgage advisor connecticutLast week the FHA announced some important changes to HECM reverse mortgages which will go into effect October 2, 2017. If you already have a loan in place or have signed an application by this date, this will not impact you. But if you are still in the thinking stage, you should consider the possible financial impact on you.

Here’s a run-down of the changes…

There will be a reduction on how much you can borrow. Remember, how much you borrow is based on an FHA formula that also includes your appraised home value, the current interest rate and your age.

The FHA upfront mortgage insurance fee, which is charged at closing, will increase for most borrowers. BUT the FHA ongoing mortgage insurance premium will be reduced. This is very good news. What HUD says about this reduction: “…this reduction preserves more equity for borrowers over time by slowing how quickly the loan balance grows”.

The FHA made these changes to help address both concerns and costs to make the reverse mortgage process less expensive and more efficient for the borrower.

For some people, there is a definite advantage to getting a loan application in before the changes. For others, delaying until October may be the best plan. I am more than happy to review how these changes could impact your personal situation.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

Applying for a Reverse Mortgage : What to Expect

If you’ve reached the point you are ready to apply for a reverse mortgage, you have likely done a fair amount of research (and if you haven’t, feel free to read through the informational articles here on my blog).  So what comes next? Here’s a quick run down of what to expect…

Age qualifications.  You’re probably aware the borrower needs to be age 62 or older to qualify, but in the case of married couples who both want to be on the loan, both borrowers will need to be 62 or older.  In addition, the loan amount will be calculated of the age of the youngest borrower, with the older the borrower, the more funds available.

Does your home qualify?  Not every residence qualifies for a reverse mortgage but many do.  The home must be HUD and FHA approved.  These include: single family or a 2-4 unit homes with one unit occupied by the borrower, as well as some condominiums and manufactured homes.  If you’re looking to purchase a home with a Reverse Mortgage for Purchase, any new construction must have a certificate of occupancy.  Once it’s determined your home qualifies, an appraisal will be done to determine it’s value.

Financial Assessment.  In some recent changes made by HUD to ensure the continued progress of the reverse mortgage industry, a financial assessment became part of the application process.  This is set up to make sure borrowers are financially stable enough to continue to pay property taxes, homeowner’s insurance, and other related costs to the home, although once a reverse mortgage is obtained on the home, there are NO mortgage or loan payments.  Although the financial assessment is similar to that with a traditional mortgage, if borrowers don’t meet the traditional criteria, there are still options through a Fully-Funded Life Expectancy Set-Aside, which is an amount drawn under the HECM that is reserved for payment of property taxes and insurance by the lender; or a Partialy-Funded Life Expectancy Set-Aside which works the same as the Fully-Funded option except a smaller reserve is drawn when borrowers meet credit requirements but not income requirements. The amount of both of these reserves is determined by the age of the borrower and the value of the home. 

During these first steps, it’s incredibly important to work with a trusted and reputable reverse mortgage advisor and lender.  You should never feel pressured or feel your concerns and/or questions aren’t being addressed.  Also watch out for scams that some homeowners can easily fall prey to.

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.

Are You Ever Too Old For A HECM Reverse Mortgage?

reverse mortgage advisor connecticutThe minimum age for a reverse mortgage loan is 62, but what about a maximum age?  Is anyone ever too old for a reverse mortgage?  I don’t think so, although it won’t be right for everyone.

Reverse mortgages are available to homeowners, or those seeking to purchase a home, who are 62 and older, including married couples.  There are NO loan or mortgage payment requirements while living in the home, but they are responsible for continuing to pay property taxes, homeowners insurance, and any other associated costs such as HOA fees and utilities.  The loan becomes due when the last borrower passes away or permanently leaves the home (for 12 consecutive months).

Common reasons for seeking out a reverse mortgage include boosting retirement income, strategically protecting retirement assets or delaying the use of them, medical care, or simply to have a safety net.   The creative uses for reverse mortgages go full circle.  But what about the very elderly?  How can it help them?

I once worked with a 100 year old man to obtain a reverse mortgage on his home and fund in-home care while he continued to age.  He was able to reside at home with 24 hour care at a cost of $10,000 a month.  When I was sitting at the closing table with this client and his lawyer, the lawyer mentioned that that he could move to an assisted living facility at half the cost ($5,000/month). This gentleman’s quick, sharp answer back to everyone? “NO…. I’m staying in my home.”  And he did.  And I was honored to have helped him be able to do that.

An example would be if a parent-adult child duo were living together as they both age.  In many of these cases, it’s common both are age eligible to be on the loan.  And why shouldn’t they be?

Sometimes the elderly want to live out the final years of their life by sharing time and gifts with those they love.  Why not offer inheritance while you’re here and can enjoy watching those you love reap the rewards of it?

Whatever the reason, reverse mortgage may be the answer, no matter how old the borrower is.

One concern that can arise is whether or not the elderly can pass the financial assessment needed to obtain the reverse mortgage loan, since they likely have limited income by this point.  But older borrowers can tap a larger percentage of their home’s equity, allowing for a potential set-aside of funds to cover required expenses. The reason is that their life expectancy is shorter, meaning the expected term of their loan will be shorter, too.

Why Your Retirement Will Be Different Than Your Parents

reverse mortgage advisor connecticutDecades ago, when our parents were working and raising a family, they looked at retirement as the true golden years.  It would be a time when they stopped working and lived off the fruits of their savings and investments.  Retirement planners used a three-legged-stool strategy back then.  The make up of this stool was Social Security, employer-sponsored retirement plans, and personal savings.  But somewhere between their retirement and now this stool became unbalanced – and now today’s retirees are needing to compensate for it.  But how?

First, it’s important to remember that these three components of retirement are still an integral part of retirement success, which is why it should be considered how they can be best utilized as well as protected.  But it’s also important to consider what else has changed – things like life expectancy, a more active retirement, and a move toward non-traditional and even extravagant retirement goals.   Why not have it all?  And what are the options to achieve it?

Part-Time Work: It’s not uncommon for retirees to utilize a phased retirement strategy, where they can work and begin receiving benefits.  In addition to the obvious point of this – additional income – working can help to delay Social Security benefits, as well as keep older people engaged in the community.  

Reverse Mortgage: For those with substantial equity in their homes, a reverse mortgage can be an excellent way to balance out that stool analogy with a fourth leg, or simply get the boost retirees need to live that extravagant retirement life they’ve been dreaming of.  Funds are available via a line of credit, monthly installments, a lump sum, and even to purchase home (or a combination).  Because the income is not taxed, it can be used strategically with investments, or used to delay Social Security benefits.  Another common function is a stand-by strategy that taps the line of credit now, but only uses it during bear markets to protect investments.  These FHA backed reverse mortgages do not incur any mortgage or loan payments, although borrowers must keep up with homeowner’s insurance, property taxes, and other associated costs.  In addition to living mortgage payment free, they can actually eliminate any existing mortgage or HELOC payments, and the loan is not payable until the last borrower passes away or permanently leaves the home.  

Downsizing and HELOC’s:  When considering how to make ends meet during retirement, downsizing is often part of the conversation.  Selling the home and moving to smaller one, then using any additional equity as a retirement funding source.  For anyone considering this, I’d suggest looking at the details of a Reverse Mortgage for Purchase prior to making a final decision.  A Reverse Mortgage for Purchase option can allow buyers to get more house for their money, while still having cash to stash away for retirement. 

A Home Equity Line of Credit (HELOC) is another common solution.  When going this route versus a reverse mortgage, ensure the new monthly payment will not cause damage down the road if other needs arise, like medical care.  

Reverse mortgages certainly won’t be right for everyone, but for many they can be used creatively to aid in funding today’s retirement that is so different than what we are used to.  

Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.