HUD Lending Limits

FHA reverse loans are under the umbrella of HUD and recently they increased the amount of funds a senior may receive from a it and this is very good news as having additional funds for many seniors can make a substantial increase in the quality of their life and financial peace of mind.

Effective in January 2020 the Lending Limit will increase to $765,600.  For 2019 it has been $726,525 and the previous year in 2018 it was $679,650.   And what does this mean to a senior who applies for a reverse loan?

Increased access to their equity and along with the higher property values here in California, it might mean paying off a large loan balance a homeowner has now and eliminating the burden of mortgage payments.

If a senior already has a reverse loan, this will not be retroactive for them.  But if their loan is at least 18 months old, they could possibly refinance it and take advantage of the higher Lending Limit.

And in addition to possibly a lower interest rate and more funds, they would be entitled to a credit on the MIP/Mortgage Insurance Premium they paid at the time their loan was originated.

For anyone who previously investigated doing a reverse loan but was unable to qualify for it due to lack of equity or a high loan balance, might be able to do it in 2020.  And it certainly would be worth a few minutes of time to investigate it and find out if it is an option for one, or not.


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The Costs of Care Giving

As the Boomer population ages and the reality begins to loom that at some point they may need someone to provide them with “care giving” but no one wants to talk about this possibility happening to them.

But as we age and I’m going to be 72 myself  ( Yikes, when did that happen?) our bodies are going to start to give us trouble as we begin our slide down the slope of aging and at some point, we may need help.

Ideally the Boomer generation has taken better care of themselves then our own parents did and we certainly are much more active than their generation who smoked, didn’t exercise and had high fat diets.

But at the least, they didn’t have as much stress in their lives as we seem to have in our’s and their generation lived a much slower daily pace compared to the hectic lifestyles so many of us have in this period of time.

Hopefully those of you who are reading this post and are of a “certain age”, will manage to dodge falling apart and having to rely on a care giver.   But what happens if you need one and you don’t have Long-Term-Care Insurance?

Medicare will not pay for this service in case you were under the impression it would, you have to pay for it.

You will have to rely on your own retirement funds if you happen to have any and pay a professional care giver or rely on family members to take care of you.   And that’s a terrible option.

There are two kinds of “costs” in this equation, the actual monthly expense that can run $4000 or more each month while you are helpless or the physiological  and turmoil and burden to your family members who will be overwhelmed by the responsibly of taking care of you.

And if you don’t have enough funds to cover this expense, it will be up to your children to pay for it and in many family situations, the adult children will fight among one another and it typically will fall to one of the children to pay for all the expenses and also to attend to your needs.  And the one’s who refuse to help in any capacity, will disappear.

As for paying for the care of a professional, licensed and Bonded care giver that expense could be paid by the funds from a reverse loan and it will become a safe and valuable option for money to cover the costs and relieve the adult children from using their own funds to pay for your care.

It’s something to think about, utilize one’s equity to pay for your own needs and not rely on your adult children and keep your dignity and keep your family intact.

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Bloomberg News and Reverse Loans

Last month Bloomberg published an article discussing the positive changes to the HUD Reverse loan program and how their image is beginning to be seen as not only positive but as a viable option for additional funds to manage retirement portfolios and extend those funds into the future.

By using a Reverse loan Line-of-Credit when funds are needed in a “down” market  in lieu of withdrawals from a portfolio, possible tax consequences could be avoided and the funds left in place for later use when the market recovers.

Here is a copy of the summary of the article as it appeared in Reverse Mortgage Daily.

Bloomberg: Reverse Mortgages a Boon for Boomers
Posted By Jason Oliva On May 19, 2014

Last year’s program overhaul and newer research are helping reverse mortgages overcome stigmas of the past and become widely viewed as effective financial tools when planning for longevity, Bloomberg reports.

This combination of factors have transformed the perception of reverse mortgages from a “pariah in financial planning circles’and tools of last resort, to strategies for retirement planning, the article writes:

Recent studies on reverse mortgages have boosted their reputation in long-term financial planning, such as those conducted by John Salter, a Texas Tech University professor, CFP and occasional reverse mortgage researcher.

Using what they dubbed as a “standby reverse mortgage,, strategy, Salter and his colleagues revealed that the use of a reverse mortgage can improve the chances of financial sustainability of up to 30 years when based on simulated retirement portfolios.

In a “falling market,” the standby reverse mortgage was tapped rather than the individual’s portfolio, with the retiree repaying the money when the market recovers.

Under this strategy, which is based on a home valued at $250,000 and supports a 5% withdrawal rate, there is a 90% profitability of the money lasting 30 years, according to Salter.

The article also touched on recent research from Ibis Software CEO Jerry Wagner, which introduced the “6% rule” [3] when outlining the spending success of reverse mortgages.
Read more Ell at Bloomberg. Written by Jason Oliva..


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How to Plan for Retirement if You Are Single

The statistics are showing that more  people are remaining alone and unmarried in the United States and many of them have no children or significant “other” in their lives.   This has a lot of implications when it comes to how these “singles” will enter their elder years and face the challenges of failing health and maintain their financial independence.

One area that needs to be considered, is the question of retirement and how to plan for it when a person lives alone and is single.

I will be posting two parts of the following article, written by Steven M. Greenwood, P.C., a specialist in retirement planning.

Retirement Planning for Singles
“There’s a growing trend among the nation’s retirees – unexpected singlehood.

A March report by BMO Financial Group’s BMO Retirement Institute ( explains why more seniors are finding themselves living alone in their golden years, and it offers some advice on how to deal with it. I encourage you to download the report and share it with clients.”

Singlehood Is on the Rise

‘According to a 2011 U.S. Census Bureau report, 43% of people ages 65 and over are single, either due to the death of a spouse (27%), divorce (12%), or simply because they never married (4%).

These numbers are sure to rise as baby boomers reach retirement age, especially among women, who tend to outlive men by a large margin and whose salaries and pensions tend to be lower than those of men.

Single retirees have a 40-50% higher cost of living compared to married couples, and single women tend to have half the money saved for retirement than that of couples in the same age bracket.

Trying to maintain the same standard of living on one person’s pension instead of two can be daunting. There are also potentially additional expenses that a newly single person can incur when a spouse is no longer there to help with cooking, cleaning, household maintenance, or other necessary functions.”‘

I will post the reminder of this article on Monday, July the 11th.

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Financial Planning & Reverse Mortgages

Here is part 2 of an article that was published in Reverse Mortgage Daily, discussing how more Financial Advisors are beginning to look at the Reverse loan as an additional method of managing their client’s investments from being drawn down.
“Statements from those like Evensky, who are highly regarded in the financial planning community, have the potential to reach an largely untapped market. And some lenders may already be seeing an immediate benefit.

“We have already begun to market to the younger demographic, and this article has strengthened our message,” says Mike Gruly of 1st Financial Reverse Mortgages. ”The fact that the message comes from a respected member of the financial planning industry instead of the lending industry itself attracts more serious listeners, and is creating more serious dialogue.”

The dialogue is something originators have long worked toward, but have seen little success with as recently as late 2011.

Numerous financial planners told RMD in September [3] that they either didn’t know enough about reverse mortgages to recommend them to their clients, or that outdated information about reverse mortgages was drawing them against the loans as a retirement tool.

Today, however, the conversation has a different tune as originators have research with data to back up the idea of marketing to younger borrowers who have greater savings and higher home equity.

“This offers different possiblities but for a different customer, and a customer who might be amendable to a financial planner,” financial columnist Scott Burns told RMD after writing about the Sacks and Sacks research.

The Saver is a win-win for retirees, Evensky told Financial Advisor magazine.

“When markets regain their strength, the mortgage can be paid back,” Evensky told Financial Advisor magazine. “Our studies indicate this will significantly increase the survivability of the portfolio in retirement.”

Written by Elizabeth Ecker [4]


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