Reverse Mortgage Terms to Know – Part 4

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonThe preceding “Terms to Know” articles have laid a firm foundation for your understanding the reverse mortgage world lingo, but this final installment of this series will go over a number of terms commonly used to describe the process.

Origination refers to the entire process of preparing the documents and setting up the mortgage. It will include an Appraisal. The Appraisal is the estimate of a house’s market value, or how much it would sell for if put on the market. The terms Appreciation and Depreciation mean what they sound like, that is, the increase or decrease of the value of a home at the time an assessment is done.

Condemnation is unlikely to come into your inquiry around a reverse mortgage for your home, however it is often in the appraisal field of terms. Condemnation is either the government taking private property for public use implying right of the eminent domain or it is a court action saying a property is unfit for use.

The Home Value Limit denotes the largest value in the reverse mortgage program of the home that can be used to decide what the loan advances to the borrower could be. A TALC rate means Total Annual Loan Cost.  It is an annual percentage cost of a reverse mortgage. Unlike the Annual Percentage Rate (APR), which takes into account only the finance charges, the TALC rate considers all costs.

If all goes well, the Origination goes into the Closing.  The Closing is a meeting to seal the deal. All the documents are signed and the mortgage begins at this moment. Even though the mortgage begins upon signing there is a Right of Rescission to protect the borrower. It gives them the right to cancel the home loan so long as it is within three business days of the closing.

Servicing happens after the closing. It is the administration of everything about the loan and includes the keeping of loan records and the sending of statements.

The following articles are also available within this blog – Terms to Know – Part 1, Terms to Know – Part 2, Terms to Know – Part 3, and Terms to Know – Interest Rates.

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 3

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonPretty 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 by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIn 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.

Can Reverse Mortgage Rescue A Looming Retirement Crisis?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonNumbers are being released showing that the impending retirement crisis may be worse than originally thought.

Half of Americans have less than $10,000 in savings.  Nearly half of the oldest Baby Boomer generation have insufficient resources to pay for basic retirement living expenses and healthcare costs.

The Center for Retirement Research at Boston College estimates that our “retirement income deficit” is $6.6 trillion. That number represents the gap between pension and retirement savings that American households have today and what they should have to maintain their standard of living in retirement.

Over 6 million American seniors are living in poverty.  This number is expected to grow by 33% by the year 2020.

These stats are concerning not only for the retirees, but also their families. A reverse mortgage can help by becoming an important piece of retirement planning. Seniors, 62 years and older now have the ability to fund or protect their retirement using the equity in their homes, alleviating mortgage payments, and receiving the funds via a line of credit, monthly payments, or at times a lump sum.  In addition, a reverse mortgage can now be used to purchase a home!

For many, this option makes a world of difference, allowing for the sought after prosperous retirement years instead of barely scraping by on a budget. And the reverse mortgage funds can be used for any purpose the borrower chooses, and is often used to help with every day expenses, for long term medical costs, or to guard assets.

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.

Summer Visits Lead to Reverse Mortgage Conversations with Adult Children

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonAs summer vacation is in full swing, many of us are reflecting on our experiences visiting with family.  Maybe you took your children on a camping trip or to Disneyland.  Possibly you flew overseas to experience a new culture.  Or maybe you took a road trip to visit your aging parents or other loved ones.  If you visited with elderly family members, it likely came with mixed emotions.  Every year they are a little older – and for some, every year brings just a little more worry.

This is very common after a visit.  It may raise concerns about health or finances, and questions about how aging parents will continue to cope.  If you’re wondering when and how you need to intervene, ask yourself these questions:

• Are they able to get around by him or herself? Are there stairs in the home?

• Is this person able to take medications without assistance? Is there a health concern that would require more regular supervision, such as Alzheimer’s or Parkinson’s?

• Is your parent able to manage mortgage payments, home-owners insurance payments, and property taxes? Is the home outdated and in need of frequent repairs – such as a furnace, roofing, electricity?

• Where is this home located? Is it in close proximity to relatives, hospitals, etc? Or is it secluded and away from town?

• Is this person lonely? Has he or she suffered the loss of a spouse? Does he or she have a solid social group or close friends?

Based on your answers to these questions, aging in place may be the right solution, and if financial strains exist surrounding the current mortgage, a reverse mortgage may be an option. Reverse mortgages allow homeowners age 62 and older to access equity in their home. The homeowner retains the title and remains in the home. With a reverse mortgage homeowners will live the remainder of their lives mortgage payment free, and can receive their funds as a monthly installment, a line of credit, or sometimes as a lump sum.  Nearly all reverse mortgages are government guaranteed with FHA insurance and no repayment is due until the last borrower passes away or permanently leaves the home.  At that time there are several options that include keeping the home in the family.

It is especially important to work with a reputable lender and watch out for scams if parents or loved ones are considering a reverse mortgage.

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 Helps Seattle Widow Buy Home

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIt’s a scenario many wish wasn’t reality, but often it is…

A spouse passes away leaving behind a widow.  The remaining partner wants to move closer to family.  But there’s a catch – although the widow’s current home is owned outright, they would typically need to sell it before they could purchase another.   And they wish to move to an area where the median home price is much higher than the home available to sell.

Reverse mortgage for purchase may be an excellent option for this widow.  Let’s look at the scenario in detail:

Predicament #1: Widow needs to sell current home before purchasing a new home.

Solution: With a reverse mortgage for purchase, this widow would not need to sell the home immediately.  Any personal funds or assets used to purchase the new home could be replenished when the current home sells – and the funds from a reverse mortgage would supplement the initial funds needed.  This would allow her to move and get settled immediately.

Predicament #2: The cost of a home in the area the widow is moving is much higher than where she currently lives, meaning the proceeds from her current home sale will not cover the entire purchase.

Solution: When utilizing a reverse mortgage for purchase, her out of pocket cost would be substantially supplemented.  For example if she anticipates selling her current home for $200,000 and purchasing a home for $300,000, the reverse mortgage may cover the $100,000 difference allowing her to live mortgage payment free and best of all – near her family.

Reverse Mortgage for Purchase (aka: HECM for Purchase) is an FHA insured program for seniors 62 and over.  To qualify, the borrower(s) must be purchasing an eligible property, have the required down payment, and meet the HECM financial assessment guidelines.

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.

Should a Reverse Mortgage be Part of Your Retirement Portfolio?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonFor the past quarter century seniors have easily managed to retire on three things: company pension plans, social security, and personal savings.  But with an always uncertain economy facing us today and in the future, many baby boomers are taking a second look at their retirement portfolios.  Previously, tapping into home equity for retirement has been considered a last resort.  But should it be?

Both company pensions and social security benefits face much uncertainty down the road, and if you’re lucky enough to have a somewhat stable retirement investments, protecting them will be high priority.  When adding home equity into the retirement equation, statistics show most baby boomers 51 and over have enough to retire comfortably.  So where does this leave reverse mortgages?

For seniors 62 and over reverse mortgage is a feasible option.  Homeowners can access the equity in their home, live mortgage and loan payment free, and no repayment is due until the last borrower passes or permanently leaves the home at which time there are options.  For some retirees, it could mean the difference between living and living well.

When looking down the road toward financial planning for retirement, ask yourself a few questions and determine if a reverse mortgage might fit into your Plan A or your Plan B.  Discuss it with your spouse and with your financial planner.  Learn the facts about reverse mortgage and how it will affect your loved ones after you pass.

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 FHA Insurance on a Reverse Mortgage Loan in Seattle, WA?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIf you’ve taken the time to learn even a little bit about a reverse mortgage in Seattle, it’s likely you’ve heard the term “FHA insured” at least a couple of times.  But what exactly does it mean?

Homeowners 62 and over, with significant equity in their home, may be eligible for a reverse mortgage.  These loans are typically insured by the FHA and provide non-taxable income to the borrowers based on the available equity in the home.  The more equity and the older the borrower, the more funds available.  The funds can be accessed via a line of credit, monthly installments, a lump sum, and even can be wrapped into the purchase of a new home.  The borrower can always use the funds for whatever they deem fit.

The homeowner will live mortgage payment free for as long as they remain in the home, although they will have a few financial obligations related to the house such as homeowners insurance, property taxes, utilities, and HOA fees.  As long as the borrowers keeps current on these few obligations, they cannot be evicted from the home, the home cannot be foreclosed, and they cannot be made to repay the loan.  The loan comes due once the borrower (or the last borrower in the case of married couples) has left the home for 12 consecutive months or passes away.  At this time the loan will be due and payable with time allotted to allow for transitions.  This is where the FHA insurance comes in.

In the case of a death, the home with pass onto the heirs.  At this time they have options, with two being the most common – 1) Pay off the loan and keep the home (often through life insurance or sale of another asset), or 2) Sell the home.

In the scenario of loan repayment the heirs will never have to repay any more than the home is appraised for.  They will only be required to pay 95% of the appraised home value or the full amount of the loan, whichever is less.  Any amount due on the loan above the appraised amount will be covered by the FHA insurance and no one will be held liable.

In the case of a home sale, the heirs will never be required to pay more on the loan than the home sells for as long as the sale price is at least 95% of the appraised value.  Any remaining balance will be covered by the FHA insurance.  On the other hand, if the home sells for more than the loan balance, the heirs will keep any remaining funds.   This is especially important as over the years the housing market shifts.

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.

 

Curing HELOC Debt With Reverse Mortgage

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonA HELOC is the acronym for Home Equity Line of Credit, and thousands in the Seattle area 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 and long term loans.

Seniors 62 or older with a HELOC loan may be able to utilize a reverse mortgage to relieve the financial burden.  The HECM, or 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 as monthly payments or line of credit. 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, put 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.

Reverse mortgages are available to seniors from all walks of life, including married couples, and they will incur NO mortgage or loan payments.  The amount of funds a borrower can receive is based primarily on two things – the amount of equity in the home and the age of the borrower.  Although these are technically loans, they do not need to be paid back until the last borrower leaves the home permanently, at which time there are various options.

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 and the Alternatives

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonHome equity accounts for approximately 70% of a senior’s assets, not including social security or pension.  Often times tapping into this equity becomes inevitable when facing health crisis or financial restrictions in retirement.  Using home equity should be part of a larger financial plan and there are a few ways it can be incorporated.

Reverse Mortgage

A reverse mortgage is available to seniors 62 and older, including married couples.  Homeowners who obtain a reverse mortgage will have NO mortgage payments, and they will be able to access the equity in their home via monthly payments, a line of credit, a lump sum, or even to purchase a different home.  The loan does not have to be repaid until the last borrower passes away or permanently leaves the home, at which time there are options available to heirs.  The amount of the loan depends on the amount of equity in the home and the age of the borrowers – the older the borrower, the more money they can receive.  This is an excellent option for seniors across the board – whether on a fixed income or already affluent looking to protect their retirement portfolio.

Home Equity Loan

A home equity loan (HELOC) also taps into equity by borrowing money against the home.  This type of loan will be processed as a conventional loan and standard income and credit restrictions will apply, as well as monthly payments will need to be made to the lender.  Any health or future financial concerns should be thoroughly thought through prior to taking out a home equity loan.  Loading up the home with debt during retirement can be risky and could result in loss of the home if the borrowers are unable to make their monthly payments.

Downsize

Another option would be to downsize all together by selling the existing home and moving into a more modest situation.  Depending on the amount of equity in the home, a homeowner may be able to sell the home for enough money to comfortably be able to make rent or mortgage payments for 10 to 20  years.  Just as with a home equity loan, this option could be risky for a person with health concerns as the funds set aside for housing could be needed elsewhere.  If an owner is considering a move, they should also consider the Reverse Mortgage for Purchase, as this may offer the best bang for their buck when purchasing.

Before making any major decisions regarding how to effectively use the equity in your home, it is best to consult with a financial adviser and a reputable reverse mortgage lender.

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.