Category: Information for Adult Children

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.

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.

Delay Social Security Payments with a HECM Reverse Mortgage

reverse mortgage advisor connecticutWhen planning for retirement, there will no doubt be a discussion about when a retiree should start taking their Social Security benefits.

There are perks to delaying, for example Social Security benefits stand to increase as much as 7-8% per year if you don’t apply until age 70.  But many seniors need this income as soon as they’re eligible.  With the ability to apply for a HECM reverse mortgage at the age of 62, and current low interest rates, retirees stand to actually make gains by using a reverse mortgage to supplement while delaying benefits.

When approved for a HECM reverse mortgage, the borrower can choose from a variety of ways to access the funds.  It could be a monthly installment, a lump sum, or even a line of credit that in itself stands to grow over time.

This is a creative way to use the hard earned equity in your home to your benefit.  A well educated financial advisor would easily be able to help you decide if this is a good option.  HECM reverse mortgages are available to seniors 62 and over, including married couples, with an approved type of home.  The borrower will always retain the title to the home and HECM reverse mortgages are insured by the FHA.

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.

 

The HECM Reverse Mortgage Line of Credit, Explained

reverse mortgage advisor connecticutThe HECM Reverse Mortgage Line of Credit is still relatively new, and to this day many within the financial and retirement industries haven’t fully grasped how it works.  Well, they need to get on board because consumers are interested – and they should be.  Here’s why..

First, what is a line of credit?  Simply put, a line of credit are funds available to you through a financial institution that you can access as needed, or not at all if the need doesn’t arise.  Interest is not acquired if the funds are not used.  This makes line of credit options excellent safety nets, especially for the purpose of creative retirement strategy.

When looking at a HECM Reverse Mortgage Line of Credit, the two are obviously intertwined, meaning the qualification requirements for any reverse mortgage still apply.  These are: age 62 and over, using your primary residence for the loan, this home must meet HUD’s guidelines and needs to be either paid off or have substantial equity, and the borrower must have the financial capability to continue to pay homeowners insurance, property taxes, and the like. Because there are various options to receive the payout from a HECM reverse mortgage, the line of credit is only one of them.

When you have a HECM reverse mortgage line of credit, you have money that is available to you — but you only pay interest on the money you withdraw – and just like any reverse mortgage, you don’t pay anything until the loan comes due.  This means the reverse mortgage line of credit can act as an excellent back up source of funds or can be used for retirement fun, whether it be vacation, spoiling grandchildren, or knowing you have the funds available when you’re ready to take on new ventures.

There are other benefits though.  This line of credit is pretty astounding beyond just being a safety net.

Growth: Not only are you not paying interest, but your untouched reverse mortgage line of credit can grow in value. Money in a reverse mortgage line of credit grows at the same rate as the interest rate on the loan PLUS 1.25% monthly.  So, if the interest rate on your reverse mortgage is 2.50%, then your line of credit will grow at 3.75% (2.50% + 1.25%).

Unique: This growth is unique to reverse mortgage lines of credit — a HELOC for example does not grow.

Hedge Against Falling House Prices: The growth in a reverse mortgage line of credit is guaranteed — without withdrawals, your line of credit is guaranteed to grow.  This means you lock in the current value of your home without taking out an interest accruing loan.

Pretty great, isn’t it?

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.

The HECM Reverse Mortgage Maturity Event

When a conventional mortgage is taken out, there is always a maturity date. This date designates, if the borrower never defaults, the last payment (including all interest and principal) bringing closure to the loan.

With a HECM reverse mortgage there is a maturity event, that is, a designated event in the borrower’s life which makes the loan then due. Reverse mortgage loans do not require monthly payments which can be quite an advantage for a senior entering into a new phase of life – whether their looking to supplement their income, protect retirement assets and investments, or buy a new home. FHA insured reverse mortgages are offered to those 62 and older based on certain guidelines, such as the home the loan is on must be a primary residence and it must meet HUD’s required guidelines.

Maturity event will be a term the borrower will encounter  several times during the application process and required third party counseling.  It’s very important piece for both the borrower and loved ones to understand.

Here are some examples of maturity events:

• The borrower, (or last borrower if married) passes away.
• The property for which the reverse mortgage is taken is no longer in the borrower’s primary residence.
• The property is sold out of the borrower’s name
• The borrower moves out of the primary residence for more than twelve consecutive months, such as moving in with family or assisted living for care.
• The borrower defaults on property taxes, homeowners insurance, or other obligations to the home.

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.

Can I Get a HECM Reverse Mortgage if I have a HELOC on the Home?

reverse mortgage advisor connecticutThe short answer is – absolutely.  And as a matter a fact, HECM reverse mortgages are great options to eliminate HELOC payments.

A HELOC is the acronym for Home Equity Line of Credit, and thousands in Connecticut have taken advantage of it. When the housing boom was in full swing a number of years ago, the values of personal homes gave their owners a strong resource to draw upon in the form of a loan.  Unfortunately many of these loans amortized, leaving the borrowers with higher than  predicted payments.

Seniors 62 or older with a HELOC loan may be able to utilize a HECM reverse mortgage to relieve the financial burden.  The HECM Reverse Mortgage, provides the borrower with non-taxable income that will not affect social security or Medicare, and can be used for whatever the borrower sees fit. The funds from the loan can also be received in various options such a monthly payments, line of credit, or a lump sum. Seeking the advice of a reputable reverse mortgage lender can help you make these decisions.  During the application process, the HELOC will be discussed and a options of paying it off will be laid out.

If you do not presently have a HELOC but are considering one and are age 62 or older, put HECM reverse mortgage on the table for a consideration as well. There will be advantages to both options giving you a sense of freedom to have choices.

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.

Can I Sell My Home That Has An Existing Reverse Mortgage?

Typically when a senior takes out a reverse mortgage loan on a home, they intend to age there.  But on occasion and reverse mortgage loveland fort collins greeley longmont westminster coloradofor various reasons, the homeowners wants to or needs to sell the home before the loan comes due and payable.  So, what now?

Although this is an important factor, it’s not nearly as daunting as it sounds.  Here’s where to start:

Step 1.) Locate your reverse mortgage loan documents and find any pertinent information regarding the sale of the home.  It will vary from lender to lender.  Most (but not all) reverse mortgage loans are FHA insured.  This means even if you owe more on the loan than the home is worth, you will never owe more than the home sells for.  Consult with a real estate or elder law attorney if you have questions or concerns.

Step 2.)  Contact the reverse mortgage lender to get a payoff quote.  This combined with a home appraisal will give you a good idea of what the sale will look like and what amount of funds you could potentially walk away with.

Step 3.)  Find a real estate agent.  When seeking out an agent, be sure to provide your reverse mortgage loan information up front and look for someone who has experience with such a sale.

Step 4.)  Prepare the home for sale.  From here, everything is similar to any home sale.  You want to prep the home, keep it clean for showings, update anything you may need, etc.

Step 5.)  Sell the home, pay off the reverse mortgage loan (consult with a real estate or elder law attorney if you have questions when paying off the loan), then reap the rewards.  Congrats!

HECM reverse mortgages are available to seniors 62 and over all over Connecticut.  To learn more, contact a reputable reverse mortgage lender.

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.

 

Should You Pay Off A Traditional Mortgage With A HECM Reverse Mortgage?

reverse mortgage advisor connecticutA recently released university report by the Michigan Retirement Research Center and funded by the Social Security Administration showed that 55% of those utilizing a HECM reverse mortgage are using some of the proceeds to pay off a traditional mortgage.

So, when is this a good strategy?

1.) They’re living in a house they can’t afford

When many older adults reach retirement, they have to figure out out how to live on a fixed income and how to make their other retirement assets last for what is often decades.  Tapping into a HECM reverse mortgage will both eliminate the weight of the mortgage payment, and often even allow extra funds to be used throughout the remainder of their lives.

2.) They want to purchase a different home

It’s not uncommon for retirees to purchase a home in retirement.  But few know they can do this with a HECM reverse mortgage instead of a conventional one. This allows buyers to either preserve assets and income, or purchase a home that would typically be out of their price range.  Click here to learn more about the HECM Reverse Mortgage for Purchase program.

3.)  They don’t want to interrupt performing assets

For those with retirement investments that are doing well, drawing from these to make mortgage payments could be a bad move.  Using a HECM reverse mortgage to eliminate mortgage payments can be a win-win in the long run.

HECM reverse mortgages use the equity in your home to allow access to cash through monthly payments, a lump sum, or a line of credit while living mortgage payment free.  The borrower and the home must meet certain qualifications, such as age (62 or older), and HUD’s  home eligibility requirements, and they must also continue to pay and maintain certain responsibilities such as property taxes and homeowners insurance.

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.