home equity
Jumbo Reverse Mortgages
If a homeowner lives in a property that is valued above 1MM and they would like to have more funds than the FHA HECM would would provide them, they could consider using a Jumbo Reverse loan as an option.
This is a non-FHA mortgage and thus becomes more affordable in the Closing Costs, because the Lender does not charge any Mortgage Insurance Premium/MIP which the FHA HECM loan does.
Given that the value of a property will be capped at $636,150 for the FHA loan, then it stands to reason if the property has considerably more value above that limit, the homeowner may want to consider using a Jumbo reverse loan instead of the FHA option.
Overall, the fees to complete the transaction are lower and just like the FHA HECM loan, there are no mortgage payments, the borrower remains on the Title ( And in a Trust if that is applicable) and the property goes to the borrower’s estate when the last borrower passes away.
And there are no prepayment penalties if the borrower decides to repay the loan back, typically through the sale of their home. This also applies to the FHA HECM reverse mortgage as well.
They must pass the Financial Assessment, just like they would on the FHA loan and continue to pay their on going property taxes, Homeowners insurance and any HOA fees that might be associated with the property.
This is an excellent option for anyone who has a very large amount of equity in their home and may want to retire an existing mortgage and it’s payment, have extra funds for monthly expenses or possibly medical bills and care giving costs and increase their monthly cash flow and limit the amount of “draw downs” on a retirement portfolio.
If anyone like to have the details about this loan, it would be best to contact me in that I can discuss the details with you and how you may ( or may not) benefit from it’s use.
It depends upon on each person’s personal circumstances.
Reverse Loans Offer a Solution to Seniors
This is the final post on a rather long article that discusses a recent report that was published by the Department of Housing and Urban Development that expressed concern about the amount of housing debt seniors are carrying.
Some made the decision in the last few years to either do a traditional mortgage and take some money out at the close of escrow or they applied for a LOC from their bank because they needed additional money for their monthly expenses.
The problem with this idea is that eventually they run out of that “cash” and still have a mortgage payment each month when a much better option would have been for them to apply for a Reverse loan.
Here is the remainder of the article that was written by Jason Oliva.
“The Home Equity Conversion Mortgage (HECM) enables homeowners age 62 and older to convert their home equity into tangible funds that can be used to pay a variety of living expenses, including paying off existing mortgage debt.
But although HECMs have undergone substantial changes in recent years that have made them safer products for borrowers, not many eligible homeowners are aware of these new updates, let alone know how a reverse mortgage could supplement their retirement.
“The HECM program currently serves a relatively small number of older homeowners, but many more households could potentially benefit from the program,” HUD writes. “Although FHA endorsed fewer than 1 million HECM loans between 1989 and 2015, HECM may be an effective option for some seniors looking to access their home equity.”’
How Good Are Reverse Loans?
There is a lot of confusion about Reverse loans and whether or not they are safe to use. But each day another expert in the financial community has begun to support their use for people who are concerned about out-living their retirement funds.
Seniors currently retain over 5 trillion dollars in equity and that certainly is a very large amount of money that can be tapped by a senior to use in the future if needed.
For most of them, their home is the biggest assist they have and the best resource for funds to cover their on going expenses, but also any medical and unexpected expenses as they occur.
See what my clients are saying!
Jane Bryant Quinn is a well known author and also a columnist specializing in personal financial topics. And she feels that using a Reverse loan as part of a retirement plan could be a very good option for many people and it could relieve them of the burden and worry of running out of money they need each month to support themselves.
Here is what she had to say.
TIME: Personal Finance Expert Champions Reverse Mortgages
Posted By Alana Stramowski On May 12, 2016
“TIME recently featured a segment with renowned author and personal finance columnist, Jane Bryant Quinn, where she discusses how her perspective has changed on reverse mortgages and why it can be a good option, even if you aren’t running out of retirement income.
As many in the industry are aware, recent changes have put new rules in place for reverse mortgages—changes that Quinn admits really pushed her to give reverse mortgages another look.
Formerly, people would take their reverse mortgage in a lump sum, then would run out of money and wouldn’t be able to pay their insurance or taxes, she explains.
“Now congress changed the rules, basically they take the money out for you and they only give you a certain amount per month that they are sure will last for life,” Quinn says. “This change has very much reduced the risk for older people with very little money.”
For people on the younger side, she explains that it can be very helpful if you take a credit line instead of a lump sum if you qualify for a reverse mortgage. This way, people could make interest on it for each year they don’t use it.
“Then if you’re taking money out of your savings or investments and the market is down and you want to sell investments, you can take money to pay your expenses out of your home equity credit line,” she says.
Quinn talks more in-depth about how her views on reverse mortgages have changed in her latest book, How to Make Your Money Last: The Indispensable Retirement Guide.”