December 2016 - Colorado Reverse Mortgage Specialist

Month: December 2016

What Rising Interest Rates Mean for Reverse Mortgages

Posted on December 30, 2016January 2, 2017 by janjordan

Interest rates have been at historic lows for years. This has afforded thousands of Americans to the ability to secure home loans for their dream house. It’s also worked in favor for those who have made the decision to tap in their home equity using a reverse mortgage. But interest rates affect a conventional loan differently than a reverse mortgage.

HECM reverse mortgage are insured by the Federal Housing Administration (FHA), and are available to homeowners 62 and over. These tax-free loans convert a portion of home equity into cash without incurring a loan payment. Borrowers can access the funds via monthly installments, line of credit, a lump sum, and even to purchase a home. The Department of Housing and Urban Development (HUD), which regulates the reverse mortgage industry, sets a “floor” rate of about 5%. As interest rates rise and fall above this floor rate, borrowers will receive less or more in proceeds. In fact, even a small rise of 1% above the floor rate can decrease available funds by as much as 20%.

Fortunately, once a homeowner has tapped into a reverse mortgage they lock in the interest rate and proceeds will never decrease, no matter what the market does, and the funds available will increase over time when using the line of credit option. In addition, even if the home decreases in value below the amount of their loan proceeds, they will never be responsible for more than the home is worth.

Bottom line: with interest rates on the rise, now is the time to act if you’re considering a reverse mortgage.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

Harvard Study Predicts Surge in Senior Households

Posted on December 23, 2016January 2, 2017 by janjordan

A recent report by the Harvard Joint Center for Housing Studies, Projections and Implications for Housing a Growing Population: Older Adults 2015-2035, it is predicted that by 2035 one in five people will be aged 65 and older while one in three households will be headed by someone of that age and older.

The report included the use of a reverse mortgage as an important financial tool for older Americans in the future and cited it as a source of funds making it feasible to age in place. The study also analyzed the amount of debt those in the 65+ age group will still have, including existing mortgages.

“For those with mortgages they cannot afford but who still have substantial home equity, reverse mortgages may make it more financially feasible to age in place,” says the report.

Also discussed in the report was the strong desire older adults have to continue to live their home while they age. This will require those in the retirement planning community to look at creative options to fulfill the needs of their clients. Reverse mortgage can fit strategically into many different scenarios.

Reverse mortgage is an individualized, specialized loan for those 62 and older that allows seniors to tap into the equity of their home while living mortgage and loan payment free. The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home.

2017 to See Increase in Reverse Mortgage Loan Limit

Posted on December 13, 2016January 2, 2017 by janjordan

It’s been several years since the Federal Housing Administration has raised the loan limit for reverse mortgages, but in 2017 the industry will finally see an increase. Currently the HECM loan limit is $625,500 and this will rise to $636,150. This new limit will apply only to case numbers issued on or after January 1, 2017.

This increase is accompanied by an increase in the national conforming loan limit which will expand to $424,100. The national conforming loan limit hasn’t seen a boost in over a decade and is expected to result in higher mortgage volume.

In addition, the FHA will increase its national loan limit “floor” to $275,665 in 2017 from $271,050 and its loan limit “ceiling” in high-cost areas would rise to $636,150 from $625,500. The floor is determined at 65% of the national conforming loan limit, while the ceiling figure is 150% of the national conforming loan limit.

According to National Mortgage News:

FHA determines its loan limits for forward mortgages based on median home prices. Limits are set by metropolitan statistical area and county. FHA said that maximum loan limits for forward mortgages increased in 2,948 counties and remained the same in 286 counties. The loan limits did not decrease in any part of the country, according to the announcement.

Use a Reverse Mortgage Line of Credit to Fund In-Home Care

Posted on December 6, 2016January 2, 2017 by janjordan

According to statistics, there’s a 70% chance seniors over 65 will need some sort of long term care such as in-home care, skilled nursing, or assisted living at some point during their lives. Although there are various ways to pay for such care, like Medicare, Medicaid, or health insurance, these options often come with limits and additional costs.

For homeowners 62 and over reverse mortgage should be another option considered to fund long-term care. These tax-free loans convert a portion of home equity into cash without incurring a loan payment. Borrowers can access the funds via monthly installments, line of credit, a lump sum, and even to purchase a home.

The reverse mortgage line of credit is a great option when facing the future needs of long term care. This option allows homeowners to secure this FHA insured loan at the current interest rate, then only use the funds when needed – and the line of credit grows as the borrower ages.

Unlike a traditional loan or a Home Equity Line of Credit (HELOC), there are no loan or mortgage payments as long as the borrower lives in the home. The line of credit comes due either when the last borrower permanently moves out or passes away, in which case the heirs or the estate could pay the loan back either through sale of the home or other means. Depending on how much of the line of credit has been tapped, this could result in significant equity left to heirs. If you never used the line of credit, the equity would still be in place and would pass to heirs along with the home.