Care Giving Costs

Many families of seniors are facing a serious problem of not only aging parents who need assistance at home with their health problems but how to pay for this invaluable service.

Too often the care of older parents falls on the shoulders of one family member, who is typically a middle-aged married woman, has children at home and quite often has a career or is employed.   Once a family member attempts to care of their parents on their own and without any help from other members of the family, they often develop their own serious health issues and sometimes die within a year due to the stress they are experiencing.

A family can quickly fall into bickering and fighting about how to handle the situation and in addition to this problem, there are the expenses of actually hiring a professional to provide the necessary assistance to the senior who needs help when the family member can no longer manage it on their own.

The fees for such services can vary, but on the average and depending upon if the care is needed 24/7 can be as high as $10,000 a month.  How and who will pay for this?   The family?

Probably not, but what if funds from a reverse loan were used to pay this expense?  Why not utilize the equity in a parent’s home to cover this expense and any additional expenses for their care that may occur as time passes?

Using the equity in a parent’s home makes good sense for everyone in the family.   The parents will be well taken care of and their family will not have to be overwhelmed with this responsibility, not use their own funds, miss family time or take time off from their professions each time an emergency comes up with their parents.

In conclusion, it is an excellent option to pay for the fees of caregiving and it is also a solution to keep families from using their own funds to pay for a caregiver, but also to protect their own health and the unity of their family.

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Realtors Increase Their Sales

Well, actually they “could be increasing their sales” if they understood how a senior client could use funds from a reverse loan to purchase a home.

Although the HECM for Purchase has been available for several years, it seems that most Realtors are unaware of it and or they don’t understand reverse mortgages and how they can benefit their senior clients and their own business.

Apparently, some who do know about it, are apprehensive about this mortgage financing option and because of that, they are not considering it’s use for their older clients.  And that is because they are unfamiliar with the loan, the benefits and in general how it functions.

They are doing a disservice to their senior clients and themselves because they could receive two commissions.   One for the Listing their client’s home and one for selling them their new property.

Generally, the client will sell their current residence and purchase another home using the funds from the sale of their home for the new purchase, typically about 50% for a down payment.

And if they are buying new construction they can apply for their reverse loan prior to the authorities issuing a Certificate of Occupancy, that can speed up the loan process rather than waiting for the Certificate to be issued and then applying for their loan.

It’s an ideal option for seniors to buy as they don’t have to qualify on Debt to Income rations or FICO scores, have no mortgage payments and own the property as the Title will record in their name or Trust.

And overall, it’s a much less stressful experience compared to applying for traditional mortgage financing and can be accomplished quicker as well, taking away much of the anxiety associated with purchasing a home.

And when they pass away, the property will go to their estate and designated heirs, not the Lender.

In conclusion, more Realtors should learn about how to increase their own sales and help their senior clients into properties that better suit their needs as they age.

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Power of Attorney for Reverse Loans

There are some occasions when it is necessary for a POA or Power of Attorney to be used when the borrower for the reverse mortgage is no longer physically or mentally competent and unable to manage their personal affairs and they need someone else who can legally represent them when it’s needed.

Generally speaking, if the borrower has a Trust in place, a Durable Power of Attorney is included in the Trust documents for each Trustee and can be used to manage the financial affairs of the named individual on the document.

For the sake of simplicity, I will not discuss all of the details in regards to Underwriting a reverse loan when a POA is being used for the loan application.   But I am going to quote directly from a Reverse Loan lender guidelines about what a family needs to know if they intend to use one for their family member if they are unable to represent themselves in the loan process.

  • If the borrower is mentally incompetent with a condition such as dementia or Alzheimer’s, he or she must meet the HUD face-to-face requirement at application, the HUD counseling or at the signing of the loan documents.
  • A doctor’s letter certifying that the borrower is no longer capable of handling his or her own financial affairs and it must include the date the borrower became incapable of handling financial affairs.
  • The date on the doctor’s letter must be AFTER the date the borrower originally signed a Notarized POA.

The above would also apply in those situations where the borrower(s) is competent but physically incapable of signing documents and representing themselves.   This could be due to extreme arthritis, blindness or other disabling physical conditions.

I hope that this information makes it a bit easier to understand what the HUD guidelines are to use a POA and also to reassure families that it does not affect their opportunity to be approved for a reverse mortgage.  It’s important to know what are the steps that need to be satisfied to be and quickly complete the loan process.

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Reverse Loan Choices

Most of the reverse loans that are originated are the FHA HECM program and over the years has been the “workhorse” for allowing seniors to utilize their home’s equity without having to qualify for a mortgage payment.

And as of this post, that continues to be the most commonly used reverse mortgage, however, in the last few years, another option has become available to seniors, especially those who have expensive properties at one million dollars or more.

The FHA HECM loan has a cap on the value of the subject property   ( As of 2018) of $679,650 and the new loan will use that as the maximum appraised value, a percentage of “that” and the youngest borrower’s age to determine the amount of money the senior will receive at the close of escrow.

But what if you want more money than it will provide or you have a large mortgage you want to be paid off, but the funds in the HECM are insufficient to achieve this goal?

A Jumbo proprietary reverse mortgage might be the solution because the loan will consider properties valued as much as 6MM and as low as $700,000 and the interest rates are “fixed”.   An additional benefit would be if someone lives in a Condo that is not on the approved FHA Condo list (That means they cannot do a HECM), a proprietary Jumbo reverse loan is the answer to this common problem.

An additional benefit to using this loan is that the Closing Costs are less than the FHA HECM because the borrower is not being charged the MIP insurance premium that all FHA loans require.   And some are not charging an Origination fee, making the loan much more inexpensive to the borrower in comparison to the  HECM.

As more lenders are offering Jumbo reverse loans and the industry evolves to meet the demand for them, I am sure that there will be new programs and opportunities for seniors to access the equity in their homes into the future making their retirement years more affordable and comfortable.

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The True Costs of Waiting

Too often in my profession as a Reverse Loan Consultant, I see this happen.   The potential borrower wants to wait and “think about it” as to whether or not they wish to apply for the loan.   Depending upon their situation this may prove to be very costly if they are withdrawing funds from their savings to make mortgage payments and especially if they are on a fixed income as most seniors are.

How long will their savings last and will the funds they withdraw have possible tax consequences?

Or it’s the adult children of a senior who now requires professional caregiving services and they are running out of money to pay for their care but they hesitate to use the equity in their parent’s home to cover this expense, because they want to “protect” their inheritance or they are withdrawing their own funds from a savings to pay for the monthly expenditure.

Sometimes the adult children feel that the best solution is to sell their parent’s home and use the funds they receive from it’s sale to pay for caregiving in a senior community or Board and Care home.

The costs of selling the home can be exorbitant, especially if there is a monthly mortgage payment due each month and if there are any repairs needed prior to Listing it and the long hassle factor of waiting for someone to purchase it and get approved for their own mortgage.

Surveys have found that overwhelmingly seniors want to remain in their homes and do not want to move out.   They want to stay “put”.

Professional caregiving is very expensive and can run from $3500 to $8,000 a month or more.  Waiting can quickly deplete a savings and a retirement fund and any money received from the sale of their home.

Using funds from a reverse loan and the equity in the senior’s home is a safe and realisic option to pay for their care and allow them to enjoy continuing living in their home.

But they hesitate and hesitation can be expensive and would be considered an example of the “cost of waiting”.

Mortgage interest rates have increased recently making borrowing money more expensive and from one day to the next, we never know how much the cost of money will effect mortgage rates in the future.

As of this writing, rates are still excellent even though they have increased a bit this year, but if anyone is thinking about looking into getting a reverse loan and continues to wait because they are afraid, they may find out by the time they decide to do anything, the interest rates will have increased and they will receive less money from the loan.

What is the” cost of waiting?”

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