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.

5 Surprising Ways To Put a Reverse Mortgage to Work for You

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonOne of the biggest perks of a reverse mortgage is it’s up to the borrower to decide how to use the funds, as well as how to receive those funds.  And with the rapidly improving reputation of today’s reverse mortgage, those uses are being suggested more often and are becoming more creative.  This wonderful financial tool, available to seniors 62 and over, is now being widely accepted by financial advisors across the nation.  Here’s a few reasons why…

1.) A reverse mortgage can eliminate existing housing debt.  In 2010 42% of seniors age 62 and over had housing debt.  This is a dramatic increase compared to the 1992 estimate which was only 24%.  Housing debt can be a huge financial burden to aging Americans, whether it’s because they’re on a fixed income or because it interrupts the dreams they once had for their golden years.  Using a reverse mortgage to pay off a conventional mortgage, or even a HELOC (Home Equity Line of Credit), can relieve some serious pressure in the borrower’s life, as well as adult children.

2.) A reverse mortgage line of credit can protect a retirement portfolio.  During the 2008 economic crisis we all saw first hand how retirement investments are not guaranteed.  But an FHA insured reverse mortgage line of credit is.  Using home equity to take out a reverse mortgage line of credit now offers a second level of protection against economic pitfalls and the impact they may have on a retirement portfolio in the future.   And unlike a conventional home equity line of credit, the reverse mortgage line of credit is not accompanied by a loan payment.

3. ) Age at home and fund in-home care with a reverse mortgage.  One of the most common things I hear from those seeking a reverse mortgage is that they want to age at home as long as possible.  Why wouldn’t they?  The funds from a reverse mortgage can allow the elderly to do just that and fund the care they need if assistance becomes a need.

4.) Delay Social Security payments until the maximum benefit is available at age 70.  The funds from a reverse mortgage can be used as a bridge to put off tapping into Social Security payment before they’re worth their max.  Then once the Social Security is accessed, the borrower will receive funds from both.

5.) Reduce tax burden by reducing taxable income.  The funds from a reverse mortgage are not considered income, meaning they are not taxed.  This can be a huge benefit when other options to bring in cash include taxable incomes such as working and withdrawing from taxable retirement investments.

For seniors 62 and over reverse mortgage is an excellent 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.

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 by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonA 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.

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.

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.

How Reverse Mortgage Works in Seattle, WA

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonThe beautiful areas surrounding Seattle, Washington are home to many retirees and seniors.  Year after year, this area makes news as one of the best places in the nation to retire.  Elderly adults stay active, family loves to come visit, and with so much to do, it’s hard to ever want to leave!

Now, imagine living in your home mortgage free, and enjoying monthly proceeds for life, both scenarios benefiting from the years you’ve invested in your home. A reverse mortgage is a unique tool designed for seniors 62 and older. You enjoy access to part of the equity in your home and the freedom and comfort of the home you’ve known for so many years. It’s your home, now you can put it to work for you.

Reverse mortgage borrowers retain ownership and title to their home. It’s yours just as it was before, but now you can benefit from the equity that’s been building in your home for years. In addition, HECM reverse mortgage loans give you the peace of mind of a government guaranteed FHA backed loan where you will never owe more than the home is worth. You can get a reverse mortgage on your primary residence and no repayment is due until the last borrower passes away or permanently leaves the home.

As a protection, all those seeking a reverse mortgage are required to obtain HUD counseling (from an independent third party) prior to incurring any costs associated with the loan. While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Food Stamps.

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.