HECM
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.
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.
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.
Home Equity
I just read the following stunning statement about how much American seniors have in home equity. It is an enormous figure and seems to be growing upwards every quarter, and is now at $7.54 trillion dollars.
But many seniors still have a mortgage on their property and have to make mortgage payments and its become extensively more difficult in the last few months due to Covid-19 and how it has impacted millions of Americans and their savings and retirement funds.
Many American homeowners who are unemployed due to the Pandemic are extremely concerned about making their mortgage payments and have entered into forbearance plans with their Lenders. Their payments will be deferred for a period of time, but depending upon the terms of the agreement, the homeowner might be faced with a balloon payment.
If they don’t have funds, to begin with, how are they going to pay whatever the amount is when it becomes due in a few months?
But if the homeowner is a senior, they can use a reverse loan, pay off the mortgage they have, and not have any more monthly payments. The Title stays in their name, no prepayment penalties and when they pass away, their home goes to their estate.
This is one of those times when it is seriously advantageous to be a senior in America. A reverse mortgage can help mitigate market risks and provide some financial security to them during this very difficult time in our country.
And it is a very intelligent solution to eliminating money insecurities.