Category: Facts

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.

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.

Only 3% of Seniors Use a HECM Reverse Mortgage to Purchase a Home – But Why?

reverse mortgage advisor connecticutWhy is it that only 2-3% of older Americans use the HECM Reverse Mortgage for Purchase option to buy a home?  Recent studies show that even with the option available to them, they still seek traditional funding or opt to pay cash.  Why is that?  Well, surveys have shown there are three main reasons:

1.) No one told them they could use a HECM reverse mortgage as a purchasing tool.  Unfortunately this happens far too often.  Real estate agents and lenders are either not aware of this option or are not educated enough to suggest it.  If you’re a senior considering purchasing a home, be sure to ask about using a reverse mortgage.  If you aren’t given proper information, contact a reverse mortgage expert such as myself.

2.) Real estate agents do not have enough knowledge to adequately educate the potential buyer about this option.  If you as a potential buyer find yourself in this situation, ask who you could talk to to learn more or seek out an expert yourself.

3.) The third reason seniors opt for traditional financing is the down payment required to use a reverse mortgage.  The down payment amount varies based on the price of the home, the age of the borrower, and current interest rates.

In order to apply for a HECM Reverse Mortgage for Purchase loan, you must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not), the home you are purchasing must be your new primary residence, you must have your “required investment” (down payment) from a HUD allowable source.

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.

 

Banks vs Brokers vs Direct Lenders – Navigating HECM Reverse Mortgage Professionals

reverse mortgage advisor connecticutSo, who are these HECM Reverse Mortgage professionals, anyway?  And how do you know which is the right fit for you?  

I was recently asked by a borrower’s attorney to take over a loan application, because after two months nothing, and I do mean nothing, had been done by the original reverse mortgage 
broker!  It’s frustrating for me to see situations like this when I know full well that borrowers have alternatives – but the borrowers usually don’t know this.  Here’s some information I think anyone considering a HECM reverse mortgage needs to know about the various professionals who work in the industry:

Banks and Credit Unions – Most local banks and credit unions do not offer reverse mortgage loans, although sometimes the larger ones will.  Unfortunately seeking a loan through them can often mean little or no face-to-face time, and it’s not uncommon for these banks to leave the industry down the road.  At one time Wells Fargo and Bank of America were in the business, but they quit, leaving their borrowers with loans that few employees can understand. 

 Brokers – A reverse mortgage broker is a third party individual that is licensed by the state but doesn’t work directly with a lender, instead they essentially shop the marketplace.  When working with a broker, borrowers will pay higher fees because they will have to cover the costs of the broker!  In addition, because all transactions run through a third party, things can easily get slowed down – or even stalled – like in the situation I mentioned above.   

Direct Lender Advisors – This is the category I fall into.  Working directly with a lender that specializes in FHA insured HECM reverse mortgages, such as Retirement Funding Solutions, I’m able to offer local, personal, face-to-face time with clients, and eliminate the need for costly third-party fees.  (Be forewarned most lenders do not offer face-to-face meetings or allow you to work with the attorney of your choice.)  I’m able to do all this while ensuring the smoothest, most efficient transaction possible because I am handling the loan and not farming it out to another company.

HECM reverse mortgages are available to individuals and married couples age 62 and older.  These FHA insured loans allow homeowners to live mortgage and loan payment free until they pass away, permanently leave the home (meaning 12 consecutive months), or they default on financial responsibilities associated with the home, such as property taxes or homeowner’s insurance.  The funds are available via monthly installments, a line of credit, a lump sum, or even to purchase a 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.

The Reverse Mortgage Home Appraisal

reverse mortgage advisor connecticutGetting assessments on just about anything can seem laborious or tedious; who wants to have something close to them looked at with a magnifying glass? But appraisals for HECM reverse mortgage loans are not only very helpful for everyone involved, they’re required by the lender.  Part of what determines the amount of funding available from a reverse mortgage is the appraised value of the home.  Luckily the process is pretty simple.

First, after talking with a reputable reverse mortgage advisor, you will submit your application. The advisor or lender will be the one to contact an appraiser who will in turn contact you to set up a time for them to look at your home.

The procedure is standard and involves three steps, the inspection, the research, and the report.

Inspection:

The appraiser will walk through your home with you, he or she might take photographs. It will document features that add value to your home. If the appraiser takes a picture of something in need of repair it lets you know that it matters and gives you a chance to fix it.

Research:

Once the walk through is done, the appraiser’s work continues as they research factors that influence the value they place on your home. Home sales in your area are one area of research. Others include multiple listing services, tax assessor’s records and public records come into play. Anything that will help to give the present value will be taken into account.

The Official Report:

This is the synthesis of the appraiser’s home visit and all the research. The report is used with your loan request. If photographs were taken, they will be included as well.

The appraiser gives this report to the lender who will give you a copy and an updated reverse mortgage figures taking into account the new information.

Reverse mortgage is an individualized, specialized loan for those 62 and older that allow older individuals and married couples 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. If you are planning ahead let your reverse mortgage advisor guide you in the many scenarios that are possible, and the two of you can discuss your needs and desires.

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.

6 Reverse Mortgage Myths That Need Debunked

reverse mortgage advisor connecticutThe HECM Reverse Mortgage program was created to give our retiring generation a way to keep their homes and manage the ever increasing costs of life in America 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 advisor 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.

Let’s 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, or if the borrower defaults on property taxes or homeowners insurance.  If anyone attempts to market a reverse mortgage as “free money”, beware as it is likely a scam.


Myth #3:
 The bank owns your home.

Fact: The title of your home stays in your hands, and you own it just like you would with a conventional mortgage.  


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.  And as markets improve, home values continue to rise, so even if you have a reverse mortgage, your equity can still increase – equity that will be available to heirs when the loan comes payable.


Myth #6:
 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.