Cash Home Buyers Get a Boost with Reverse Mortgage for Purchase

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIn this day and age, buying a home with cash is rare.  And not because of the reasons you may think – such as who has that much cash nowadays?  Well, that is part of the reason, but it’s a little more complicated than that.  Those who have a substantial amount of cash are finding there are no homes available in their price range and suddenly they don’t have enough cash to be a true “cash buyer”.  This diminishes their hopes of living mortgage payment free.  For example, if a retired couple sells their home or allots other funds amounting to $200,000 for a new home, they will suddenly be facing a new dilemma – finding a home to meet their needs, that doesn’t need repairs, and is in the community they wish to live – and that is within that price range.  With home prices quickly rebounding across the Seattle, Washington area, this scenario is playing out often.  The alternative is assumed to be either A) settle for less than what is desired in a home, or B) use the cash as a down payment and take out a conventional mortgage giving up the hope of not having a mortgage payment.  But there is another option…

This is where the Reverse Mortgage for Purchase program can provide a solution.  Not only will the program add funds to the buyer’s available cash making up the difference needed to purchase an appropriate home, it will also allow that buyer to live mortgage payment free.

Here’s how it works:

For seniors 62 and over, home buyers are able to use a reverse mortgage to purchase a new home.  The amount of the down payment required from the buyer will depend on the amount of the home they are purchasing.  But unlike a conventional loan, not only will the lender provide the funds to make up the difference between the home price and the down payment, the new home owners will also be able to live mortgage payment free for as long as they remain in the home, freeing up income for other things – such as medical bills, in home care, or even vacations.

With options like this available to seniors, there is no reason realtors shouldn’t be suggesting their clients look into this opportunity.  It’s not right for everyone – but it’s a win-win for many!

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.

 

Are Funds From Reverse Mortgages Taxable?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIt’s the New Year!  This means new possibilities and new opportunities are abound!  But it also means it’s time to get business in order in preparation for tax season.  It’s common during this time of year for me to receive many questions regarding taxes and reverse mortgage– from both those considering a reverse mortgage, and those who already have a reverse mortgage.

Here are the two most common questions I get:

Are the funds from my reverse mortgage considered “taxable income”? 

No.  This can often be a huge benefit of a reverse mortgage – the funds received are NOT taxable, meaning they do not count as income.  This can be a positive compared to other types of retirement income, including various investments, some of which are taxable.  Because the funds received from a reverse mortgage are technically an advance on a loan, any payments or lump sums received are not taxable income and do not need to be reported on a tax return.  They also typically do not affect Social Security or Medicare payments.

Is the interest from my loan deductible? 

No.  Because reverse mortgage holders do not make monthly mortgage payments and typically the interest is not paid until the loan is paid in full, the interest from a reverse mortgage loan is not deductible on a tax return.  This is also the case with a reverse mortgage for purchase loan.

FHA insured reverse mortgages are available to homeowners 62 and older in the Seattle, Washington and surrounding areas.   These loans allow the borrower to live mortgage payment free and receive their loan payment in monthly installments, a line of credit, a lump sum, and even as a tool to purchase a new home.  All borrowers are required to participate in third party counseling to ensure all their questions are adequately answered before making a decision.

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 1

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonThis is the first in a three part series of frequently asked questions about Reverse Mortgage.  Find Part 2 here and Part 3 here.  If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Are There Any Special Requirements to Get a Reverse Mortgage?

In order to qualify for a reverse mortgage, you must own your home, be at least 62 years old, and have some equity in your home.  In early 2015 the FHA implemented new rules requiring lenders to consider credit and income for each applicant, similar to a traditional mortgage, the purpose being to minimize possible defaults due to the inability to pay property taxes and homeowners insurance. But unlike a traditional mortgage, if potential borrowers do not meet this 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.

How Much Money Can I Get?

In general, the older you are (or the youngest borrower in the case of married couples) and the more valuable your home, the more money you can get.  Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in your home.

Does My Home Qualify?

Eligible properties include single-family homes, 2-4 unit properties, modular homes, condominiums, and townhouses.  This home must also be your primary residence.

What are My Payment Plan Options?

Funds from a reverse mortgage can be received as fixed monthly payments for a set term or for as long as you live in the home, as a line of credit which allows you to draw on the loan proceeds at any time, a lump sum, or a combination of all these.  Reverse mortgage can also be used to purchase a home wrapping the purchase the home with a reverse mortgage loan.

How Can I Use the Proceeds from a Reverse Mortgage?

Their are no restrictions as to how the proceeds from a reverse mortgage can be used.  Whether it is to supplement retirement income, to cover your living expenses, to repair/modify your home, to pay for medical expenses, pay off existing debts, or simply do something for nice yourself, no one can tell you how you must spend your money.

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.

Use a Reverse Mortgage to Purchase a Home in Seattle

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonSeniors typically want to be homeowners, often purchasing a new home during their retirement years – some for the very first time.  The reasons they are looking to purchase varies, ranging from downsizing, eliminating burdensome stairs or extensive grounds upkeep, moving closer to family, or possibly purchasing their dream home in a different climate.  Whatever the reason may be, using a reverse mortgage to make the purchase is an option that should not be overlooked.

Prior to congress approving the Reverse Mortgage for Purchase (HECM for Purchase) program, homeowners that wanted to purchase a new home and obtain a reverse mortgage needed to do so through two separate transactions.  The downside of this is obvious.  First, when taking out a conventional mortgage, potential borrowers are held to the various income and credit standards of traditional mortgage lenders.  And second, the borrower is subject to closings costs and the headache of both loans.  Since the initiation of the Reverse Mortgage for Purchase program, seniors wishing to buy a new home and obtain a reverse mortgage are no longer subject to overwhelming standards.  With a Reverse Mortgage for Purchase and all the fees are wrapped into one transaction.

Some seniors are cash rich when buying a home, so the question arises why not wait to take out a reverse mortgage?  Why do it when purchasing?  When using the Reverse Mortgage for Purchase a down payment is required – but for cash rich borrowers, this means they have the opportunity to use their cash as a down payment and potentially purchase a home in a higher price range than they were originally planning AND still live mortgage payment free.  Or, on the other hand, if they don’t wish to shop in a higher price bracket, they can keep some of their cash since the reverse mortgage will cover a portion of the cost of the home.  The other major consideration is variable interest rates in the future, as higher rates will reduce the amount a senior can draw on a reverse mortgage.  Waiting can be a risky strategy if reverse mortgage is something being considered for the future.

Senior borrowers, 62 and over, can use a reverse mortgage for purchase to buy single family homes, town homes, and FHA approved condos as long as it has a certificate of occupancy. The home being purchased will need to be the buyer’s primary residence.  The required down payment will need to come from a HUD approved source.  And the borrower will be the owner of the home – just like with a conventional mortgage.  Click here to learn more about the details of Reverse Mortgage for Purchase.

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.