Lorraine

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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Decision Making and Fears

I think it tends to be human nature in that for some people, they hesitate to make a decision for just about everything that requires one.   Whether it is getting married or maybe divorced, having children, taking a leap at a new career or choosing a paint color for their house.

And it’s prudent not to blindly rush into anything, you should be well informed before making decisions that are especially crucial to your life.

Most of the time these decisions are minor, but what about the ones that are not and could potentially have a huge impact on your life and future?

Sometimes this hesitation comes from looking for the best price for something if you are considering doing a large purchase, but other times it comes from a place of being worried about the possibility of making a “wrong” decision.

Or not being educated enough about whatever it is you are considering.  So, you put off making any decision about it indefinitely.

A good question to ask yourself is, “what is the worst thing that could happen if I make a decision and it turns out to be awful?”   Asking yourself that question can potentially take away your fear and help you to move forward.

However, hesitating or waiting can continue for a very long time and it can be costly.    And what is the “cost’ of waiting?

If you are hesitating in learning about reverse loans because you have heard “bad things” about them, why are you allowing yourself to be influenced by other’s opinions that generally are incorrect instead of doing some research with a professional?

What is this inertia costing you every month that you wait to find out how much money you could possibly receive from the HECM loan?

It’s fear.

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There Are a lot of Boomers

10,000 Americans each day are turning 62 and few of them have any funds saved for retirement and those that do, are underfunded in their retirement portfolios and they may not have enough funds to protect them as they grow older and face medical expenses due to aging and other unplanned life events.

I feel that the FHA and proprietary reverse loans will become part of everyone’s retirement plan, because a home is a senior’s greatest assist and why not use the equity in it to pay for unplanned expenses and still be able to remain in their home?

Seniors will start to see that by using a reverse loan to assist in funding their retirement as a viable option to protect them from drawing down on their retirement funds too often and also potentially avoid tax consequences such as paying Capital Gains on any withdrawals.

It’s an obvious and safe solution and should not be overlooked by any senior homeowner and they owe it to themselves to consider the loan as a possible solution allowing them to eliminate their concerns, age in place and not be afraid to consider its use as a possible solution to remaining financially secure.

http://reverseloanmoney.com

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Retiring With More Money

As the need for utilizing one’s equity to leverage a retirement fund increases, more seniors will consider using a reverse loan to protect themselves from outliving their savings and running out of money.

Boomers are living longer than previous generations and the number 1 fear for any senior, is that they will not have enough funds saved for the remainder of their lives and what will happen to them if they use up all of their retirement funds and investments?

But the use of a reverse loan can possibly remove that fear and the negative image and myths that have plagued the FHA HECM for many years, are finally changing and are now seen in a positive light.

http://reverseloanmoney.com

More Financial Advisors and CPA’s are recommending to their senior clients that they consider using it to protect their retirement funds from unnecessary draw-downs, taxable consequences and preserve their portfolio.

And now the mortgage is being seen as a creative and beneficial option to allow seniors to continue to live independently in their homes and be free of the stress and worry of running out of money in the future.

With the current concerns about Medicare and Social Security becoming insolvent in the near future and that Medicaid/MediCal will not be able to meet the needs of an aging population, is very scary and depressing and how will seniors be able to live comfortably and have enough money to maintain their lives?

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