Inflation

As I am writing this post, it was noted today that inflation has increased to 7%, the highest it has been in many years, and although, I am not an economist or a financial advisor, and certainly not qualified to discuss why this is happening, I do know that it is affecting how much a dollar can buy.

Most seniors are on fixed incomes, and sometimes they only have social security to rely upon to use towards their monthly expenses.   There was a slight increase for 2022, but it is essentially wiped out due to the increase costs of food, utilities, and goods.

Given the costs of medical insurance, unplanned medical expenses, or home repairs and maintenance, many seniors do not have enough money each month to cover even their essential and ongoing expenses.

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My more recent reverse loan clients are taking advantage of historically low mortgage interest rates, and increased equity in their homes and are refinancing and using a reverse loan to eliminate their concerns about running out of money.

They have no mortgage payments, access to their equity for additional income, and still own their home.

Life is so uncertain at this time, due to the Pandemic and social issues, but at the least funds from a reverse loan could be an antidote for financial insecurity.

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Social Security Increase for Seniors

The increase in Social Security benefits for seniors is the largest in four decades and on the average will increase monthly checks by about 5.9%

However, it won’t offset inflation or the cost of living, plus it will be taxed as income.

Initially some seniors might be excited to see their checks increase, but all in all, it will be “zeroed” out as the costs of goods, food, utilities, and medical care continue to increase.

It is a bit depressing, but there are many seniors who own and live in their homes, and they are now more than any other time in the past, using funds from a reverse loan to pay their ongoing expenses, and eliminate making a mortgage payment.

Eliminating a mortgage payment, increases their cash flow each month, and may slow down withdrawing funds from savings and investments and leverage the longevity of their cash reserves, plus possibly avoid paying tax penalties for the withdrawal of funds from their accounts.

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Reverse loans are highly regulated, safe, and a sensible way for seniors to age in their homes and have some peace of mind.  They can afford to continue to do so without possibly running out of their investments or savings, and they can refinance them in the future for additional funds without any prepayment penalties.

Considering a reverse loan for financial stability should always be considered and part of a retirement plan, and it is a wonderful option to have for older Americans who wish to remain in their homes.

 

 

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Can Reverse Loans be Refinanced?

The answer is “yes”.    Reverse loans are like any other mortgage with the exception the borrower does not have to make any mortgage payments.   They simply must continue to live in their home, pay the property taxes and Homeowners insurance on time, just like they ordinarily would do anyway.

And there is no prepayment penalty on the loan being paid off, plus the borrower’s will receive a mortgage interest tax deduction in the year they complete the refinance.

Reverse loans are calculated on the age of the youngest borrower and the value of the home.   The older the borrower is and the higher the value of their home, means that they might be able to refinance an older reverse loan, improve their interest and receive more money.

Mortgage interest rates are extremely low, and home values have “shot through the roof”, and many people have more equity in their residence than any other time in the past.

It could be a very good decision to refinance a loan to a much lower interest rate and receive more of their equity and additional money.

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I have had many of my former reverse loan clients contact me to start the process, and now is the best time to do it before interest rates begin to increase in the future.

Don’t hesitate to find out if you can refinance or not, you don’t want to miss out on this opportunity.

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The Pandemic

The last 18 months of life for everyone has been very hard and uncertain due to the Covid-19 pandemic.   It was particularly frightening for seniors because they were more likely to become ill with it and possibly die.

No one was left untouched by it, either by death or the loss of employment and most certainly the loss of structure and a feeling of safety.

I received many calls from seniors during this time, very afraid about running out of money and trying to take care of themselves, and at the same time, cut off from their families and feeling isolated.

Some had entered into forbearance agreements on their mortgages and the payments for them were paused, but they were now being notified by their Lender to resume them, and many did not have the income to start making payments again.

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I received many calls for help, and I was able to provide everyone a reverse loan and at the least, make them feel a bit safer and and less anxious about what was going to happen to them.

It was challenging when we couldn’t meet personally, but I made it work for each client and we got through it together.

I am grateful that it seems we are moving forward with more confidence and less fear, and I am also grateful that I was able to help many seniors last year by providing them with more money and peace of mind and we survived the pandemic together.

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Reverse Mortgage Application

What are the steps to apply for a reverse loan?  Is it the same as applying for a traditional mortgage or is it different?

It is just like applying for a regular loan, except the borrower won’t have to make any mortgage payments but they will still be responsible for maintaining their home, paying the property taxes, and Homeowners insurance.

The loan application is standard, but there are many lender, state, and federal disclosures to sign in the  application package.   It does require quite a few signatures and a complete copy of it is left with the applicants to save and review.

Along with the signed application, copies of bank statements, Social Security card, Drivers License, Declaration page for Homeowners insurance, Trust  ( if there is one), and any mortgage statements for the property, plus a signed HUD Counseling Certificate.

The file and documents are sent to a loan processor, Escrow is opened and a Title Policy is ordered, along with an order for an appraisal to be scheduled.

When the loan processor has all the necessary items to make the file complete, it is sent to a Lender for Underwriting.

They review it and make sure it is complete prior to giving it an approval.   Sometimes they may request a few additional items,  but nothing that is unusual.

The next step is to order the loan documents and coordinate with Escrow, assign a Notary to meet with the clients and have them sign the documents.

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The documents are returned to the Closing Department of the Lender, they review them for all signatures, communicate with Escrow to finalize closing figures and after the 3-day Right of Recession, the loan funds and closes.

The entire process takes approximately 45 days as long as the borrower has provided all of the necessary documents that are needed for the file.

Appraisals can cause a delay, or issues with the Title of the property, and sometimes the lack of cooperation from the borrower will cause the loan to take longer to complete.

Applying for a reverse loan is generally not difficult and can be completed in a reasonable amount of time.

 

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