Category: Managing Debt

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.

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.

Managing HELOC Debt Burden With A Reverse Mortgage

reverse mortgage advisor connecticutAt the peak of the housing boom in 2005/2006/2007, many people took out HELOC (Home Equity Line of Credit) loans that allowed interest only payments for 10 years. But after that 10 year term is up, everything changes as principal is now added to the interest payments.  Then to add insult to injury, many people are only vaguely aware of what this means.  They had assumed the equity in their home would continue to grow and planned to sell before this loan was even due, along with various other scenarios based on the assumption the housing market would remain strong.  But as we all know, in 2008 everything changed.

Between December 2015 and March 2016, the default rate on HELOC loans jumped from 0.5% to 1.9% – potentially tripling the HELOC loans in trouble.  Another large amount of loans have reset in 2016, leaving many unprepared homeowners with new debt.  For senior homeowners, a reverse mortgage can help.

To obtain a HECM reverse mortgage the borrower(s) must be aged 62 and over, live in their primary residence they’ll be wanting to loan on, and have at least some equity in the home.  They CAN have a mortgage or a HELOC on the home, and still be able to get a reverse mortgage.  Some of the funds would need to be used to take care of these existing loans – but once that is done, the borrower will have access to the remaining funds to use as they see fit and they will always live mortgage and loan payment free.

Here’s a how a Reverse Mortgage can help with a HELOC:

Scenario 1 – Homeowner has existing HELOC that has reset to include principal as well as interest.  Because the HELOC was obtained 10 years ago, before retirement, income has drastically changed and the borrowers are now living on a much tighter budget – that did not include this reset.  

Solution 1 – By exploring the reverse mortgage idea, the homeowner finds they can completely eliminate the HELOC and convert the additional equity in the home into cash via a reverse mortgage line of credit or monthly installments – all while living loan and mortgage payment free.

Scenario 2 – Homeowner has a HELOC that is about to reset on a vacation home, while their primary residence is nearly paid off.  

Solution 2 – By obtaining a reverse mortgage on their primary residence, they have the liquid funds available to pay off the HELOC on the second home without acquiring a payment on the primary home.  And by using a reverse mortgage line of credit, they have created a nest egg for use now or in the future.

These are only two examples of how a reverse mortgage can be used to manage debt.  Have more questions?  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.