California obviously has the most expensive properties in the country and a very high rate of citizens who are seniors but are carrying mortgages on their homes which are preventing them from retiring due to mortgage debt.
Many working seniors would like to retire but they can’t because of the ongoing mortgage payments and sometimes they find themselves withdrawing funds from their retirement investments to make the payment each month.
And depending on how many years are left on the mortgage, many are concerned about running out of money to make the payments and the other monthly obligations.
The average home value in California generally exceeds the HUD Lending Limit that is currently at $679,650 and if a homeowner has a home with a great deal more equity than the FHA HECM would allow them to withdraw, then a Jumbo reverse loan would be an additional option for consideration.
There are many new Jumbo loan programs to choose from that are superior to the FHA HECM in many aspects and are considerably less expensive in regards to fees. Here are some highlights and are subject to change in the future.
- Maximum loan amounts to 4 MM
- Fixed rates or a LOC
- 2nd T.D’s for those who would like access to their equity but currently have a 1st T.D. in place with a favorable interest rate they wish to keep, preserving more of their equity. This option can also be used as a 1st T.D.
- Origination fees vary by the loan choice but are “none” to either 6K or 8K maximum.
- No Mortgage Insurance Premiums.
- Non-Recourse Loan. The borrower continues to own their home. No equity sharing or pre-payment penalties. The property will go to the heirs of the borrowers when they (the borrowers) have passed away.
- Can be used to purchase a home. “Right-Sizing/Down Sizing”.
- No payments are required other than the borrower must continue to pay property taxes, Homeowners Insurance, and HOA fees and keep the property well maintained.
- No loan terms.
- Borrowers must be at least age 60 or 62. It depends upon the loan choice to determine the minimum age.
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.
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?
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.
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?
The Boomer generation is more likely to find something else, another avenue of expression for their “Second Act” in life after retirement then the previous generation.
Boomers tend to be healthier, active and more engaged in life, rather than being passive and giving into physical changes in their health and personal relationships.
And certainly they don’t plan to give into being old or elderly, because they ( And myself included) feel that there is still so much more to do in their lives and plan on enjoying every moment of it right down to their last breath.
After entering the work force, marriage and having a family, many of us gave up on some of the dreams we may have had when we were younger because we became obligated and sometimes burdened with responsibilities to our family and our jobs.
And time went on and the dreams slipped away and seemingly became unrealistic and unreachable and sometimes forgotten.
The hurdle to making these latent dreams happen now, might be financial and if that is the reason for feeling as though you still cannot pursue your dream consider using some of your home’s equity by putting in place a reverse loan.
There won’t be any mortgage payments and when you pass away, your home will still go to your heirs and they can keep or sell it just like they would as of this time, if you were to “exit”.
“When you think it’s too late, be careful and don’t let that become your excuse for giving up” Deshun Wan.
What would some of those dreams look like?
Culinary school, wine making, travel expert, anything in the Arts, getting a new college degree in a field you are interested in, taking a hobby to a new level? The possibilities are endless for reinvention of ourselves and the only limitation comes from our lack of belief that it’s still possible.
The equity you have in your home could certainly be a resource to fund your next adventure, your next chapter in your life and possibly facilitate a new and life fulfilling experience for you that you never thought could be possible.