February, 2018 | Reverse Loan Consultant

February 2018

February 27, 2018 "Gray" Divorce No Comments

Seniors Are Divorcing

Divorce is always an emotional and difficult experience regardless of the reason or the age of the two individuals who are experiencing this wrenching event in their lives.

Overall the national average of divorcing couples has declined over the years but what is odd, is that it has tripled for those couples over the age of 65 since the 1990’s.

The reasons for senior or “gray’ divorce vary but some of the more common ones is that after raising their children for many years, they began to see themselves as simply parents and no longer friends or lovers.

Then when the adult children leave the home and start their own lives, an older couple may discover that they no longer have any shared interests as they have grown apart over this period of time.

The financial implications of a “gray’ divorce can be quite complicated in that any assets and or retirement funds could end up being liquidated with disastrous consequences for the couple and their future financial stability and security.

I am not a financial advisor and certainly not a Divorce attorney and not qualified to provide any guidance in this matter and it’s best for couples to always seek professional advice when it comes to something as serious as a divorce and splitting up their assets.

However if there is equity in the home, it may be adequate enough to utilize a Reverse mortgage as a tool to either give half of it to one of the divorcing party’s and or buy them out in exchange for the other party receiving any investments they may have accrued together.

But a property settlement would have to be created by their mutual Divorce attorneys to make a final determination as to how all assets are to be divided.

So how would that work?

February 21, 2018 Fees No Comments

Fees or Costs Allowed on a Reverse Loan

In my previous post I discussed the one fee or expense on reverse loans that conventional mortgages do not have. And that was the FHA insurance premium for MIP.

Conventional mortgages allow what some would call “Lender junk fees”, which typically are for processing, underwriting and other “back office” costs the lender will pass on to the borrower. And they can add up to additional $1800 to $2000 on a traditional mortgage.

But they are not considered “allowable fees” to a reverse mortgage borrower and cannot be charged and built into the loan.

What are the fees that a reverse loan applicant can expect?

Flood Certificate – Pulled by the Appraiser
Appraisal fee
Credit Report
All title settlement, title insurance, transfer fees and recording fees. These are based on the loan amount, the Title company and county or state.
Document preparation fee
Notary
Payees; all third party fee and third party providers must be disclosed on the HUD-1 Settlement Statement per RESPA. List all required loan fees, including fees paid outside of Closing on their worksheets.

All HECM/Home Equity Conversion Mortgage are subject to FHA’s requirements on allowable closing costs.

See what my clients are saying!

In my next post I will provide a list of fees that are not allowable and cannot be passed on to the borrower.

February 14, 2018 Fees No Comments

What is MIP and PMI?

In my previous post I described what IMIP is in regards to Reverse mortgages and that it is one of the fees listed as a Closing Cost for all borrowers.

Let’s pick up where I left off in the earlier post.

The other benefit to paying this insurance premium, is that in the event and if for any reason the Lender who is servicing the borrower’s Line of Credit should cease to exist and or are unable to provide funds to the borrower from their Line-of-Credit, the borrower is protected, because their loan and funds in the LOC are insured by FHA.

Any money left in the borrowers account will continue to be available to them regardless of whether or not the company servicing their loan continues to exist.

The IMIP protects the borrower, their funds in the Line-of-Credit and the heirs to the estate and that’s very reassuring and beneficial to everyone who has a reverse loan and to their family.

See what my clients are saying!

Sometimes the consumer is confused about what MIP and PMI are and there is a difference between them. PMI is used in conventional mortgage financing whenever a borrower will have less than 80% in equity.

This is typically seen when someone is buying a home and coming in with a small down payment. PMI protects the Lender in the event the borrower ceases to make mortgage payments on their loan and there is a foreclosure. PMI gives the Lender some protection by having the loan insured against this possibility.

PMI is for traditional financing and IMIP is for FHA government insured loans.

And there you have it.

February 12, 2018 Fees No Comments

Reverse Loan Fees

Fees or “costs” for a reverse mortgage are identical to what the fees are for traditional real estate loans, with a couple of exceptions and I’m going to discuss one of those exceptions in this post.

I discussed this topic previously, but I thought that I would go into more detail about the IMIP that is always charged on FHA loans and just what it is, because it is the most expensive but important fee that is charged on all reverse mortgages.

Reverse loans never have a required mortgage payment and there is no loan term to be concerned about, but the interest that is owed each month on it will compound over the life of the loan and one of the important purposes of the Initial Mortgage Insurance Premium / IMIP is to guarantee that no matter how much is owed when the loan becomes due ( the death of the last borrower and or the estate selling the home), they can never owe more than the present value of the property.

See what my clients are saying!

In other words, if the loan is larger than what the property is worth, the IMIP will pay the difference, not the borrower or their heirs. They are completely protected and not liable for the repayment of any funds that exceed the current value of the property.

This is referred to as a “Non-Recourse” mortgage.

February 7, 2018 Selling my home No Comments

Senior Dilemma

American seniors retain over 6 trillion dollars in their homes and more of them are beginning to use their equity to extend their retirement funds (Everyone is worried about out-living their savings) by using a reverse loan to leverage their portfolio’s longevity.

Another reason, might be to eliminate an existing mortgage payment and thus free up some extra money each month to be used for other expenses.

But maybe they decide to sell their home instead and take the remaining equity after Broker fees and expenses related to selling it and possibly rent instead of “own”.

What are the costs to the seller if they opt this route? I’m going to give a very simple example in this post, but obviously it would depend on the sales price, if they are paying off a mortgage and the Broker fee and other miscellaneous expenses related to the transaction.

Sales Price: $450,000 @ 6% Broker Fees ( Might be less) = $27,000; Paying off existing loan $150,000 = $273,000 remaining equity.
Now there are the “other” costs associated with the sale of a home.
Escrow Fees and Title Insurance Policies Approx: $1800
Repair and any “staging” fees; approx: $2,000 assuming any repairs are minor, etc.
Moving expenses. Local rates can be $25.00 per “mover” and the average cost is $1000 to $2000. If the move is out of the state then it’s obviously more expensive and can be between $4000 to $8000. But again, it depends on the amount of items being packed and moved and the size of the home.
Surprise expenses: There is no way of knowing what could happen in the process of selling one’s home. But it could be more money out of your pocket. Such as a Buyer wanting you to pay for some of their loan’s Closing Costs.
Hassle and stress factor? It’s impossible to determine the “costs” of the amount of stress just trying to organize, pack, toss and find a new home to live in.
And where? Going to rent or buy?

So if we deduct the estimated costs associated with our fictitious Seller and deduct it from the equity they have leftover after paying the Broker to List and sell their home, they would have somewhere in the “middle” of $260,000 and $245,000 left over after the entire, frustrating experience ends.

Now what? Rent until the money runs out or possibly consider buying another home, but this time use a Reverse mortgage to purchase it.

In the next post, let’s discuss why using a Reverse loan to purchase a property can be very beneficial method to qualify for a mortgage on a new residence.