Reverse Mortgage Counseling – Seattle Reverse Mortgage Specialist

Reverse Mortgage Terms to Know – Part 3

Posted on August 3, 2016August 18, 2016 by Janis Layman

Pretty soon you will find yourself versed in the language of reverse mortgage. There are a number of reasons this will be helpful. First of all, you can read information on your own and understand the basic meaning. Second, you will be able to understand what your counselor has to share with you as the outline and give the valuable consulting time to deeper questions. And third, you can protect yourself from scams and those who would try to use terminology that could mislead you. This final installment of “Terms to Know” focuses on terms you may run across when applying for and finalizing the loan. As with any contract, it’s important to read and understand what is in it. I hope this will help. You can find the previous installments to this series by clicking here for “Terms to Know – Part 1” or click here for “Terms to know – Part 2” and here for “Terms to Know – Interest Rates“.

There are a few different kinds of advances to know. The first would be a Loan Advance which simply means the payment to the borrower or their designated party, it is an umbrella term under which the other advances fall. Another would be a Fixed Monthly Loan Advance which is exactly what is sounds like, the payment made monthly that remains the same to the borrower. A Term Advance is the same as a Fixed Monthly Loan Advance except that it is for a period of time and not the length of the loan. The last is a Tenure Advance which is a fixed monthly loan advance for the duration of time the borrower is living in the home.

If you receive the entire loan at closing this is called a Lump Sum. Sometimes a Lump Sum comes from a DPL, or Deferred Payment Loan. This type of loan gives you cash for home repair or maintenance and is usually offered on the local or state government level. From time to time the government may take hold of property for community use, such as building a needed highway, the right to do this is called Eminent Domain. A Credit Line is another way to employ a reverse mortgage for your needs. It is an account that lets the borrower decide how much and when they would like to take money. Line of Credit is another term for the same credit account.

Two terms common to the end of a reverse mortgage and the beginning of repayment are Loan Balance and Leftover Equity. The Loan Balance is the amount owed. It is capped in a reverse mortgage by the value of the home at the time the loan is repaid and will be the sum of principal and interest. If you take the sale price of the home and subtract out the cost of selling it and the amount owed you will get the Leftover Equity. This is what either the homeowner or the heirs will receive.

Reverse mortgages are available to seniors 62 and over, including married couples. The funds can be accessed in a variety of ways including monthly installments, a line of credit, a lump sum, and to purchase a home. Homeowners with a reverse mortgage will be able to stay in the home as long as they desire and the will NEVER have a loan payment until the last borrower permanently leaves the residence.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.

Reverse Mortgage Terms to Know – Part 2

Posted on July 27, 2016August 4, 2016 by Janis Layman

In continuing my series of “Terms to Know”, this third installment goes over some very common acronyms used in the reverse mortgage industry. Understanding what these mean can help with understanding on a more detailed level when doing research or speaking with a specialist, as well as when applying for or finalizing the loan. You can find “Terms to Know- Part 1” of this series here, and “Terms to Know – Interest Rates”, by clicking here.

There are a few notable agencies involved in the federally created reverse mortgage system. These are HUD, FHA, and AAA. All are designed to help the one seeking a reverse mortgage understand the process and proceed safely. Like any product where the lender is receiving advantage alongside the borrower, it is good to be cautioned about scams. The best route when considering a reverse mortgage is to always work with a reputable reverse mortgage specialist.

The HUD is the U.S. Department of Housing and Urban Development. They not only instituted the reverse mortgage (aka HECM – Home Equity Conversion Mortgage) program, but also provide solid third party counselors to help you sift through the options and make sure all questions are answered. The FHA is the Federal Housing Administration. It is the part of the HUD that insures reverse mortgages.

The AAA stands for Area Agency for Aging. This organization provides information and resources for aging adults. They can be found as non-profit agencies right in your town or region. Not only can you find information about the variety of reverse mortgage options but many other resources available to senior citizens.

A reverse mortgage can be called both HECM and Reverse Mortgage, but they are the same thing, the terms are interchangeable. They are also often referred to as Federally Insured or FHA Insured Reverse Mortgages. Another term you may run across is Model Specifications; these are recommended rules for both analyzing and comparing reverse mortgages.

Reverse mortgages are available to seniors 62 and over, including married couples. The funds can be accessed in a variety of ways including monthly installments, a line of credit, a lump sum, and to purchase a home. Homeowners with a reverse mortgage will be able to stay in the home as long as they desire and they will NEVER have a loan payment until the last borrower permanently leaves the residence.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.

Only 3% of Seniors Use a Reverse Mortgage to Buy A Home – But Why?

Posted on July 6, 2016August 4, 2016 by Janis Layman

A recent statistical survey showed that only 3% of senior home buyers were even considering using a reverse mortgage to the make the purchase, compared to 48% who were planning to use a conventional mortgage. But why is this?

The Reverse Mortgage for Purchase program is not new, but knowledge about it is. This program efficiently wraps the home purchase and the reverse mortgage into the same transaction allowing the home buyer to purchase the home they want AND live mortgage payment free as long as they live in it. Available to seniors 62 and older, reverse mortgages are available in various forms – a lump sum, monthly installments, a line of credit, and yes, even a home purchase. The first options are widely advertised and information about them is broad. But the last option, the home purchase option, is still relatively unheard of.

Here’s why I think this home purchasing tool is so broadly under-utilized:

• Realtors aren’t educated enough on the option, therefore they don’t suggest it. When someone is considering purchasing a new home, the realtor is often the first point of contact. If more realtors understood how this powerful program works AND how it can help their own bottom line, it would be used more frequently.

• Buyers are starting with a conventional mortgage company seeking pre-approval to determine how much they can obtain a loan for and how much the payment would be. Even if the buyer has taken this route prior to looking at homes, they should still be informed about the Reverse Mortgage for Purchase program for two very important reasons. One, it increases their purchasing power allowing the buyer to shop in a market that may be well above what a conventional mortgage would approve. And two, they will live mortgage payment free unlike is possible with a conventional mortgage.

• Cash home purchases are very enticing. For buyers considering using cash from retirement, inheritance, insurance, another home sale or asset liquidation the idea of being able to buy a home outright is gold. Again, two problems can be encountered here. One, the housing market is booming and a cash buy often results in less home, while a reverse mortgage will contribute to the cost of the home allowing for more house for less money. Two, these seniors will tie up all their cash in a home making them “home rich” but “cash poor.” The reverse mortgage purchase allows the buyer to keep a hefty chunk of their cash, or combine the home purchase with other forms of a reverse mortgage, such as a line of credit.

There will always be senior home buyers that are not a fit for the Reverse Mortgage for Purchase program, but any professional in the real estate industry is doing a disservice to not make sure their clients understand this option. For more detailed information about this program, click here. Retirement Funding Solutions often hosts detailed webinars open to all real estate professionals. If you’re interested in being informed when one is scheduled, subscribe to my e-newsletter and you will receive the notices directly from me.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.

Reverse Mortgage FAQ – Part 2

Posted on December 18, 2015December 28, 2015 by Janis Layman

This is the second in a three part series of frequently asked questions about Reverse Mortgage. You can find Part 1 here and Part 3 here. If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Can I get a Reverse Mortgage even if I have an existing mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. The existing loan will be paid off first with the reverse mortgage funds, then the remainder of the funds will be given to you. This scenario would apply as long as the amount of the reverse mortgage is larger than the existing loan. For example: if you owe $100,000 on an existing mortgage and you qualify for $125,000 under the reverse mortgage program, under these circumstances you would still have $25,000 left over to do with as you wish AND you would no longer have a mortgage payment.

Another scenario would be one where the mortgage on your house is more than what you qualified for under the reverse mortgage program. In this situation you would have the option to make up the difference with your own funds between the amount of reverse mortgage you qualified for and the existing loan. This would allow you to no longer have the burden of a monthly mortgage payment. Working with a reputable reverse mortgage lender will ensure the most accurate information regarding how an existing mortgage would affect a reverse mortgage and what will be right for you.

What is Reverse Mortgage Counseling?

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrower to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process. The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage. Read more about what to expect during reverse mortgage counseling here.

Why not get a home equity loan instead of a reverse mortgage?

Reverse mortgages do not need to be repaid as long as you remain in your home. This allows for a lot of flexibility if you are on a tight or limited budget, or would like to use your funds from a reverse mortgage for specific purposes such as retirement income.

On the other hand, attaining a home equity loan (or a second mortgage) requires you have sufficient income to cover the debt—plus, you must continue to make monthly payments on both any existing mortgage and the new home equity loan. With a reverse mortgage, you do not make monthly mortgage payments and the federally insured loan protects you from foreclosure.

Do I have to pay taxes on the cash payments I receive?

The cash you receive from a reverse mortgage is not subject to individual income taxation. But, since you hold the title to your home, you are still responsible for property taxes, insurance, utilities, maintenance, and other home-related expenses. Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole. Find a whole lot more information about what reverse mortgage holders are still responsible for after obtaining the loan here.

Who is a Reverse Mortgage not right for?

Reverse mortgages are not right for everyone, which makes it even more important that you work with a reputable lender. A reverse mortgage may not be in your best interest if you intend to leave your home within 2-3 years, if you own multiple homes or investment property, or if you intend to leave your spouse off the loan. Even if you fall into any of these categories, discuss your situation with a lender before eliminating reverse mortgage as an option.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.

What Is Third Party Reverse Mortgage Counseling?

Posted on November 5, 2015November 10, 2015 by Janis Layman

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These third party, not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process.

The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage, as well as to answer any questions.

Here is what you can expect at your counseling session

The potential borrower will need to schedule an appointment directly with a counseling agency. The lender does not initiate or take part in the session, but can provide you with resources to seek out a counselor. The session will take place in person or over the phone – although the FHA recommends a face-to-face meeting whenever possible.

Prior to your appointment, the counseling agency will provide you with a packet of information to allow you to prepare for the session. During the session the counselor will discuss your immediate and long-term financial needs, your reasons for seeking out a reverse mortgage, address any questions or concerns you may have, and clearly educate you on the process as well as the pros and cons of a reverse mortgage. Again, they are not there to “sell” you on the product, but to educate instead.

Once you have completed the counseling session, you will be provided with a “Certificate of Completion”. This certificate verifies to your lender that you have completed the counseling session and that you understand the essentials of a reverse mortgage. Your counselor will also follow up with you to ensure you have no further needs, questions, or concerns.

About Reverse Mortgages

Reverse mortgage are available to seniors 62 and older, including married couples. These non-recourse loans allow retirees to live mortgage payment free while tapping into the equity of their home. How they use the funds is entirely up to them.

The money can be accessed in a variety of ways – including monthly installments, line of credit, and even can be used to purchase a home. The loan will only come due when the last borrower leaves the home permanently or passes away, at which time the heirs will have several options when deciding what they want to do with the home, but because it is a non-recourse loan no one will every be “saddled” with debt as is a common misconception.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.

Category: Reverse Mortgage Counseling