How to Purchase Your Dream Home with a Reverse Mortgage

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonWhen we’re working hard and raising a family, there are two things we often hope to achieve in our future – having no house payments and living in our dream home.  As the years close in on retirement, these may still seem unachievable – but they’re not.  With the Reverse Mortgage for Purchase program seniors 62 and over can live mortgage payment free in the home of their dreams.

Here’s how it works:

When a home buyer uses a reverse mortgage to purchase a home, they will be required to provide a down payment.  The amount of the down payment 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.

Commonly, when someone has a large amount of cash they want to simply pay cash for a home.  But in today’s housing market, even $200,000 doesn’t go very far.  With a reverse mortgage for purchase that $200,000 can be used as a down payment on a much more expensive and desirable home – AND the buyer will still live mortgage payment free, just as if they’d paid for the home with cash.  As with any reverse mortgage or conventional mortgage, the homeowner will always remain exactly that – the homeowner.  And the loan will not reach maturity until the last borrower passes away or permanently leaves the home.

Click here for more detailed information about how the Reverse Mortgage for Purchase program works.

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.

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.

Reverse Mortgage Terms to Know – Interest Rates

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonContinuing our tour of the Reverse Mortgage terminology there are a few INTEREST related phrases that are good to know.  Although all these phrases may not come up for everyone, if you’re shopping around or learning more about the process, you may run across a few of them.

The CMT Rate is the Constant Maturity Treasury Rate and is used as an interest rate index in the HECM program; while the Maturity is when the loan is due and payable. An Acceleration Clause refers to this point by stating in the contract when a loan may be considered due and payable.

There are quite a few words used to talk about interest such as adjustable and current and expected. All of them refer to something a little bit different. If you choose a reverse mortgage with an Adjustable Rate, that would mean it would change based on the published market rate index. A Cap would be the limit on how much an adjustable rate is allowed to go up or down during a defined period of time.

An Initial Interest Rate (in the HECM program,) is the rate used to determine your loan advance amounts. It will equal one of two things, either a ten year LIBOR rate with a margin or a ten year CMT, Constant Maturity Rate. The LIBOR is the London Interbank Offered Rate and is often used as an index for interest in the HECM program.

Your Current Interest Rate in the HECM program is self descriptive. It refers to the rate of interest currently being charged on the loan.

The last significant term relating to interest is the Expected Interest Rate. This rate equals one of two things. It is either a 10-year CMT or a 10-year LIBOR and is used to determine a borrower’s loan advance amounts. To help determine the Initial, Current and Expected Interest Rates a Margin is added, this is a defined amount.

Seniors 62 and over may be eligible for a reverse mortgage or a reverse mortgage for purchase by utilizing the equity many already have in their homes. Funds can be accessed in different ways including a monthly installment or a line of credit.  The homeowner will always retain the title to the home and will live mortgage payment free, and it’s common misconception is that the home will be lost after you pass. With proper education via required third party counseling and retirement planning, this does not need to be the case.

If you have any questions about any of these terms, please don’t hesitate to contact me.

Reverse Mortgage Terms to Know – Part 1

Posted on by Janis Layman

 

 

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIf you’re considering a reverse mortgage, you’ve likely read a handful of short articles on them, or Home Equity Conversion Mortgage (HECM).  You probably have a sense of what a reverse mortgage is and what it is not. So you read longer more detailed articles and meet with a lender, only to find yourself in a sea of words that leave you swirling. Like any type of contractual agreement in America, reverse mortgage has its own language to give clear definition to the acting agencies, the building blocks involved and the rights and responsibilities of all parties involved.

The following will help you speak the reverse mortgage language, starting with the basic overarching terms.

A Reverse Mortgage is a loan taken in lieu of home equity. It gives cash advances to the borrower and does not require repayment until the last borrower passes away or leaves the home permanently. The loan repayment amount is capped by the value of the home at the time of loan maturity.  The acronym HECM means Home Equity Conversion Mortgage and is the only program of its kind backed and insured by the Federal Housing Administration.

A Mortgage refers to a legal document. The document makes a home available to a lender to repay a debt. A Non-Recourse Reverse Mortgage is a home loan where the amount owed cannot exceed the home’s value at the time of loan repayment. This type of reverse mortgage is FHA insured. Another type of reverse mortgage is called a Proprietary Reverse Mortgage, which have grown quite uncommon.  Proprietary reverse mortgages are privately insured by the banks and mortgage companies that offer them. They are not subject to all the same regulations as HECMs, and for this reason borrowers should ensure they understand these loans thoroughly and beware of scams.  They are also occasionally called “jumbo” reverse mortgages.

The value of a home, which implies subtracting out any money owed on it, is called Home Equity and Home Equity Conversion is the process of turning the equity into cash. It allows the one receiving to stay in their home without making monthly payments while there, or still alive. It takes what is due to the borrower wrapped up in the years of paying for their home and makes it available immediately.

For seniors 62 and older a reverse mortgage is an option.  Utilizing the equity of the asset you already have can help fund the retirement of your dreams – or just your retirement. You will always retain the title to your home and will live mortgage payment free. How you decide to use this asset is up to you, and a common misconception is that your home will be lost after you pass. With proper education via required third party counseling and retirement planning, this does not need to be the case.

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.