Reverse Mortgages

June 4, 2019 Fees, Reverse Mortgages No Comments

Reverse Loans and MIP

In the post that I previously shared, I discussed the fees and costs the borrower pays when they originate a reverse loan, and I mentioned the fees were very similar to traditional mortgages with the exception of the Mortgage Insurance Premium.

This insurance fee is quite expensive and gives the reverse loan a reputation for having higher closing costs compared to more traditional loans and I agree. it is expensive, but it is important to understand why it is being charged and how it protects and benefits the borrower and their heirs.

A reverse mortgage or HECM is insured by the federal government and will be repaid in the future regardless of how long the borrower(s) lives or if the property value declines. It has a “non-recourse” feature and that means you can never owe more than the property is worth at the time the loan is repaid.

If for any reason all of the equity has been used over the years and now the loan balance exceeds the value of the property, the borrower and or the estate will not have to pay the difference between the two figures, as the MIP will cover the shortfall.

At the time of the loan application and Closing, the fee is currently 2% of the Maximum Claim Amount and an annual fee for the life of the loan at .50% that is charged upon the loan balance during the time the loan is active.

I don’t want to make my explanation too complicated or confusing, so, for now, I will conclude my comments but will discuss the fee further in my next post and why it’s such a great benefit to the borrower and their heirs.

I will explain what the Maximum Claim Amount is and also give a bit of information about what a “Principal Limit” is and why the “Expected Interest Rate” and not the Note rate is used to calculate the amount of funds an applicant may receive from their reverse mortgage.

June 15, 2018 Reasons for Using a Reverse Loan No Comments

A Second Act

Through our youth, most of us were busy either attending college, working or doing both at the same time and thinking about how we wanted a fulfilling life and make piles of money in the process.

Or “not”, maybe you “partied” your way through this period of time.

Then you married, had a family, a mortgage and all the obligations that came with those choices. Regrets? Maybe, maybe not.

Once in a while you managed to afford a vacation but the dreams that you may have had when you were young, probably fell away and now are seen as unattainable. Buried under the responsibilities of marriage, parenthood and the plethora that comes with it, you gave up on the interests you may have been passionate about.

But sometimes in those quiet vulnerable moments, they return.

Years pass quickly and you have no sooner begun your career and profession, when you find yourself on the verge of retirement and without the career you had for years that was your guiding purpose, you find yourself adrift.

Your identity you cultivated over the years, vanished and now you are unsure what the last part of life will be like because it feels empty; there is no purpose…..

And there is the distinct possibility that you won’t have enough funds to retire and will be forced to continue to work well past your retirement years, because you are burdened with a mortgage.

However, you could use the funds from a reverse loan to get out from underneath it and possibly have additional funds in a Line-of-credit and not have any mortgage payments ever, again.

See what my clients are saying!

And having this money available to use for any purpose, could open up possibilities to move yourself forward, towards whatever it is you are passionate about and reignite those dreams from long ago. And begin a very rewarding and satisfying second chapter in your life as a retiree.

And possibly fulfill that dream that you had so many years ago?

Why not?

June 5, 2018 Retirement Planning No Comments

Retirement and “Reinvention”

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.

See what my clients are saying!

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.

Why wait?

May 22, 2018 Buying a Home No Comments

Reverse Loans and Second Homes

A reverse loan has more than just one use for a homeowner other than refinancing their residence and it’s beneficial to know that funds from the loan can be used to purchase a property.

Most senior homeowners and Realtors are unaware of this option and could be using it to “downsize” into a smaller property or to purchase the “dream” home a senior may wish to buy in a 55+ community or move to an area of the country that they have always wanted to live in.

Another terrific option is to purchase a Vacation home.

Everyone often dreams about having a cabin, a beach house, a home on a lake or some other wonderful property that allows them to enjoy themselves and have fun and quite often, make it a family destination for vacations and family reunions.

If qualifying for mortgage payments using income and credit isn’t realistic on a second property isn’t possible, why not use the equity in one’s residence to complete the purchase and possibly pay “all in cash” for the dream home and not have payments on it, and no payments on the reverse loan because they are not required.

How perfect is that? Two homes without mortgage payments.

How is this possible you are thinking? Contact me to find out and possibly acquire that vacation home you have always wanted.

April 19, 2018 Bankruptcy No Comments

Reverse Loans and Bad Credit

In general having derogatory credit is less of an issue for being approved on a reverse loan than it would be on traditional financing.

The reverse loan applicant does undergo some “light” credit Underwriting to determine their residual income after all housing obligations are paid and this would also include any revolving or installment debts as well.

The underwriting process is referred to in the industry as the Financial Assessment and was put into place within the last few years, providing an overview of the borrowers financial capacity and willingness to continue making any on going payment obligations after the reverse loan has funded and closed.

FICO scores are not used to determine an individual eligibility for the loan, but if there are any late payments on an existing mortgage and other obligations, a letter of explanation must be provided along with the necessary documentation to support it.

But what if one had had a bankruptcy? Can they still be approved for the loan or not? The short answer is “yes”.

Chapter 7 Bankruptcies must be dismissed or discharged prior to closing the new loan. If it was dismissed over one year ago, no additional documentation is required.

But if it was less than one year, the borrower must provide a court order signed by the judge as proof of the discharge or dismissal along with the discharge schedule.

Chapter 13 Bankruptcies have a couple of options.

The borrower pays the bankruptcy in full at the close of Escrow. And obtain a payoff letter from the trustee.

The borrower must pay off any liens against the property and any federal debt.

See what my clients are saying!

The court must provide written permission signed by the judge indicating that the borrower does not need to pay off the bankruptcy to proceed with the reverse mortgage. This permission must specify that the mortgage may be an adjustable rate mortgage, if applicable.

Chapter 11 Bankruptcies are most prominently used by businesses and have similar guidelines as a Chapter 13 Bankruptcy.

This is a brief description about what the lending process is and what must take place in order to approve a reverse loan for a borrower who has had credit problems in the past. But do contact me if you have any questions.