Category: Information for Financial Planners

Changes to Social Security in 2022 for Coloradans

reverse mortgage loveland fort collins greeley longmont westminster coloradoAs society and the economy continues to shift in the wake of the pandemic, seniors in Colorado and beyond continue to be one of the most impacted demographics between health and finances. Good news is the Social Security Administration is keeping up. Next year, those receiving Social Security will see the largest cost of living increase in 40 years. There are various changes to social security that will be affecting seniors in 2022.

Most notably these are:

• The Social Security cost-of-living adjustment (COLA) will be 5.9%. This is the largest Social Security COLA in nearly 40 years. Your current and future Social Security benefits may be increased each year, partially depending on inflation numbers.

• For Americans who are still a few years away from entering retirement, those born in 1960 or later, the full retirement age for Social Security has increased to 67. Seniors will still be able to start taking Social Security retirement benefits at age 62, but with reduced monthly payments.

• For workers near the top of the Social Security income scale, $147,000 or more for 2022, your maximum Social Security payout will likely increase slightly in 2022. No individual at full retirement age can take home more than $3,345 per month, regardless of their pre-retirement income. This number can be increased by delaying Social Security until the age of 70.

• The amount that is hit with taxes will depend on household income levels. Just 50% of your benefits will be taxed if your income is between $25,000 and $34,000 as an individual. That goes up to $32,000 to $44,000 for a married couple. As you get more Social Security income, more of your benefits will be taxed.

Reverse mortgages can help to use social security strategically. For example, there are perks to delaying taking benefits. Social Security stands to increase as much as 7-8% per year if you don’t apply until age 70.  But many seniors need this income.  With the ability to apply for a reverse mortgage at the age of 62, and current low interest rates, retirees stand to actually make gains by using a reverse mortgage to supplement while delaying benefits.

When approved for a reverse mortgage, the borrower can choose from a variety of ways to access the funds.  It could be a monthly installment, a lump sum, or even a line of credit that in itself stands to grow over time.

This is a creative way to use the hard earned equity in your home to your benefit.  Reverse mortgages are available to seniors 62 and over, including married couples, with an approved type of home.  The borrower will always retain the title to the home and reverse mortgages are insured by the FHA.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Lupton, Erie,  Lafayette, 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.

If I Get A Reverse Mortgage, What Happens When I Die?

Reverse Mortgage Colorado Fort Collins LovelandA common question and concern surrounding reverse mortgage is what will happen to the home after the homeowners pass away?  Will the bank take possession?  Will it be allowed as inheritance?  Will it be possible to keep the home in the family?  Will the family of he deceased be held liable?  These are very valid concerns – so I’d like to offer some clear and concise guidance.

When the last homeowner passes, whether we’re talking about you or a loved one, the home will transfer into the estate or a specific person according  to the wishes expressed in the homeowner’s will.  At this time there are three main options:

1.  Pay off the remainder of the loan

Depending on the amount of equity that still exists in the home, the financial situation of the family, and just the overall ability of those involved, this may or may not be a feasible option.  It’s not uncommon for a portion of life insurance to be used in this manner.  Because these loans are FHA insured, if the loan is repaid, it will never be more than the home is worth – even if the housing market is in a deep low spot.

2. Obtain a conventional loan.

Many mortgage brokers are familiar with the reverse mortgage process and the right broker will be able to help those in need identify the best route in obtaining a conventional loan and keeping the home.

3. Sell the home

The final option is to sell the home.  When there is not a desire to keep the home, the heirs can sell the home.  When the home is sold, the loan will be repaid and any remaining equity from the sale will go to the heirs.

If there are no heirs or the heirs are not interested in the home, no one will be held liable.

One last note, as long as the communication lines remain open, the bank will typically allow up to one year to help with the transition.  This one year is allotted in three month increments.

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.

Reverse Mortgages As A Financial Strategy In Retirement

Reverse mortgages are available to seniors 62 and over who either have their home paid off or have substantial equity.  Certain criteria applies to the home in order to meet HUD’s rules, and although anyone on the loan must be 62 and over, they are available to married couples the same as individuals.  The funds available from these FHA insured loans are available in various ways including monthly installments, a lump sum, a line of credit, and as a purchase option.  Even with all these funding choices, reverse mortgages are not right for everyone but they are a perfect match for many.

When is Reverse Mortgage a good financial strategy?

reverse mortgage loveland fort collins greeley longmont westminster coloradoThink of reverse mortgage as a financial tool that turns home equity into cash WITHOUT incurring a loan payment, unlike a traditional mortgage or home equity loan.  No repayment is due as long as the borrower is living in the home.  This also goes for married couples, in which case no repayment would be due until the last borrower permanently leaves the home.  The borrower will still be responsible for some things related to the home, such as property taxes and homeowners insurance.

Reverse mortgages are increasing in popularity as more retirement and financial planners are recommending their use as a potential tool.  Typically retirement planners have used a three legged stool as an example for their clients – saving, social security, and pensions make up this visual structure.  But with changes in the economy and uncertain futures, pensions are disappearing.  In this scenario, those who are “house rich, but cash poor” may find using home equity to balance out the stool is a saving grace.  In addition, for those secure in all three areas, adding home equity can be used as a safety net or to delay, thus enhance, certain areas.

The reverse mortgage industry underwent some changes last year as legislation was passed making these loans a safer option for both borrowers and lenders.  As a result, the reputation that once surrounded the industry has drastically improved and their use is being studied by some of the most prominent retirement experts.

Jan Jordan is a Reverse Mortgage Specialist serving the Erie, Lafayette, Fort Lupton, Dacono, 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.

As Senior Housing Wealth Reaches New High, Is It Time To Consider A Reverse Mortgage?

Older homeowners continue to break home equity records as home values appreciate across the nation. In the first quarter of 2021 homeowners 62 and older saw their housing wealth grow by 3.4 percent or $305 billion from Q4 2020. 

That brought senior housing wealth to a record-breaking $9.23 trillion in the first quarter of the year, according to a quarterly index published by National Reverse Mortgage Lenders Association and RiskSpan.

Reverse mortgages have become a critical component to helping fund retirement alongside other tools such as 401(k)s, IRAs, savings, investments, and Social Security. 

Because the amount available for the borrower through a reverse mortgage is based on the current appraised value of the home, today’s senior housing wealth numbers indicate this is a great time to explore the reverse mortgage option. The FHA insured reverse mortgage means even if the housing market were to become volatile in the future, the borrower will never owe more than the appraised value of the home at any given time.

Homeowners 62 and over, with significant equity in their home, may be eligible for a reverse mortgage.  These loans are typically insured by the FHA and provide non-taxable income to the borrowers based on the available equity in the home.  The more equity and the older the borrower, the more funds available.  The funds can be accessed via a line of credit, monthly installments, a lump sum, and even can be wrapped into the purchase of a new home.  The borrower can always use the funds for whatever they deem fit.

The homeowner will live mortgage payment free for as long as they remain in the home, although they will have a few financial obligations related to the house such as homeowners insurance, property taxes, utilities, and HOA fees.  As long as the borrowers keeps current on these few obligations, they cannot be evicted from the home or made to repay the loan.  The loan comes due once the last borrower has left the home for 12 consecutive months or passes away.  At this time the loan will be due and payable with time allotted to allow for transitions.  

This is where the FHA insurance comes in.

In the case of a death, the home with pass onto the heirs.  At this time they have two options – 1) Pay off the loan and keep the home (often through life insurance or sale of another asset), or 2) Sell the home.

In the scenario of loan repayment the heirs will never have to repay any more than the home is appraised for.  They will only be required to pay 95% of the appraised home value or the full amount of the loan, whichever is less.  Any amount due on the loan above the appraised amount will be covered by the FHA insurance and no one will be held liable.

In the case of a home sale, the heirs will never be required to pay more on the loan than the home sells for as long as the sale price is at least 95% of the appraised value.  Any remaining balance will be covered by the FHA insurance.  On the other hand, if the home sells for more than the loan balance, the heirs will keep any remaining funds.   This is especially important as over the years the housing market shifts.

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

 

Is Paying Off A Traditional Mortgage With A Reverse Mortgage A Good Idea?

reverse mortgage loveland fort collins greeley longmont westminster coloradoA recently released university report by the Michigan Retirement Research Center and funded by the Social Security Administration showed that 55% of those utilizing a reverse mortgage are using some of the proceeds to pay off a traditional mortgage.

So, when is this a good strategy?

1.) They’re living in a house they can’t afford

When many older adults reach retirement, they have to figure out out how to live on a fixed income and how to make their other retirement assets last for what is often decades.  Tapping into a reverse mortgage will both eliminate the weight of the mortgage payment, and often even allow extra funds to use throughout the remainder of their lives.

2.) They want to purchase a different home

It’s not uncommon for retirees to purchase a home in retirement.  But few know they can do this with a reverse mortgage instead of a conventional one. This allows buyers to either preserve assets and income, or purchase a home that would typically be out of their price range.  Click here to learn more about the Reverse Mortgage for Purchase program.

3.)  They don’t want to interrupt performing assets

For those with retirement investments that are doing well, drawing from these to make mortgage payments could be a bad move.  Using a reverse mortgage to eliminate mortgage payments can be a win-win in the long run.

Reverse mortgages use the equity in your home to allow access to cash through monthly payments, a lump sum, or a line of credit while living mortgage payment free.  The borrower and the home must meet certain qualifications, such as age (62 or older), and HUD’s  home eligibility requirements, and they must also continue to pay and maintain certain responsibilities such as property taxes and homeowners insurance.

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.

Should You Refinance Your Reverse Mortgage?

reverse mortgage loveland fort collins greeley longmont westminster coloradoReverse mortgages are for seniors 62 and older, including married couples, and were once considered a life line. Times have changed, and now reverse mortgages are regularly being incorporated into retirement planning.  But refinance a reverse mortgage?  It’s not something you hear about often, or maybe you don’t even realize it’s an option.  And why would someone want to do this?  Well, here are some fast facts:

Who might want to refinance: 

• In the case of a remarriage, possibly you want to add the new spouse (note: new borrowers added must be 62 or older).  
• Or in the case of divorce, you want to remove a spouse.  
• If the housing market has improved drastically, like we’re currently seeing all over northern Colorado, maybe you want to tap into the new equity.  
• Better interest rates?  Just like with a traditional mortgage, this matters.
• Interested in the Line of Credit option but took out the monthly installments?  Then refinance may be for you. 

What you need to know: 

• The process is similar to that of a traditional mortgage refinance, except you will still be able to live mortgage and loan payment free.
• You will need a new appraisal.
• Some older lenders have exited the reverse mortgage industry, such as Wells Fargo and Bank of America.  If you currently have your loan with one of these lenders, you’re not out of luck, you can still refinance through an existing lender.  
• You can shop around.  You are not stuck with your current lender.
• If your previous reverse mortgage was not FHA insured, you can switch to one that is.  The FHA insurance offers consumer protections, including the promise that you’ll never owe more than your home is worth at the time the loan comes due.
• You will need to take part in third party reverse mortgage counseling.
• If you received your reverse mortgage before 2015, be aware some of the requirements have changed.  Now income and credit does play a factor, although there are options if you fail to meet the new criteria. 
• If you’re not sure you want to stay in the home, refinancing may not be the best move.  Instead possibly consider selling the home to pay back the existing reverse mortgage, then look at a Reverse Mortgage for Purchase to downsize or move to a more suitable home.
• After the refinance, the borrower will still be responsible for property taxes, homeowner’s insurance, and other related costs to the home such as HOA fees, upkeep, and utilities.  

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.

Delaying Social Security With Reverse Mortgage

reverse mortgage loveland fort collins greeley longmont westminster coloradoWhen planning for retirement, there will no doubt be a discussion about when a retiree should start taking their Social Security benefits.

There are perks to delaying, for example Social Security benefits stand to increase as much as 7-8% per year if you don’t apply until age 70.  But many seniors need this income.  With the ability to apply for a reverse mortgage at the age of 62, and current low interest rates, retirees stand to actually make gains by using a reverse mortgage to supplement while delaying benefits.

When approved for a reverse mortgage, the borrower can choose from a variety of ways to access the funds.  It could be a monthly installment, a lump sum, or even a line of credit that in itself stands to grow over time.

This is a creative way to use the hard earned equity in your home to your benefit.  A well educated financial advisor would easily be able to help you decide if this is a good option.  Reverse mortgages are available to seniors 62 and over, including married couples, with an approved type of home.  The borrower will always retain the title to the home and reverse mortgages are insured by the FHA.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Lupton, Erie,  Lafayette, 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.

CNBC: Fighting Inflation With A Reverse Mortgage

reverse mortgage loveland fort collins greeley longmont westminster coloradoRecently CNBC published an article about how reverse mortgages can help protect retirees from the unknowns of inflation. 

From the article:

“Reverse mortgages — also known as home equity conversion mortgages, or HECMs — offer seniors aged 62 or older the chance to borrow money from their home’s equity.

These fixed- or variable-rate loans are designed for older Americans who plan to stay in their single-family home. 

The variable-rate option offers a line of credit, with no obligation to withdraw money, and the unused balance may continue to grow over time. (The fixed-rate version doesn’t offer the same benefit, making it less useful in fighting inflation.)
 
Typically, older retirees may borrow a higher amount of equity.   

For example, with a 3% expected rate, a 62-year-old homeowner may borrow about 52% of their home’s value. The percentage rises to nearly 61% at age 75, Pfau said.

Variable rates may range from 2.5% to 4% right now, depending on short-term variable interest, often tied to Treasurys, he said. 

For the line of credit, heirs may pay off the loan once the borrower dies, allowing them to keep or sell the property.

Typically, retirees spend down their investment portfolios while preserving home equity. 

But research suggests making a reverse mortgage part of a retirement plan may offer an unexpected benefit, Pfau said. 

“The bigger impact is you’re reducing pressure on the portfolio in retirement,” he said.

Research shows that a reverse mortgage may offer some retirees more money to spend while giving their portfolio more of a chance to grow.
 
The perk of opening a reverse mortgage line of credit early, especially when interest rates are low, is that the retiree may borrow more now. This move may offer more time for the untapped balance to grow. 

Moreover, higher inflation will speed into faster growth for the line of credit, he said.

“For anyone who’s thinking about a reverse mortgage, opening it before interest rates are higher, can be quite valuable if you’re in the home you’re thinking you’ll stay in,” he added.

Click here to read the entire article.

Jan Jordan is a Reverse Mortgage Specialist serving the Erie, Dacono, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and learn if reverse mortgage is right for you.

Considering A Reverse Mortgage? Know Who You Are Working With

reverse mortgage loveland fort collins greeley longmont coloradoWhen you start navigating the waters of reverse mortgages, you will undoubtedly come across MANY different companies and individuals ready and willing to help.  Flashy ads, website calculators, famous spokesmen, and more.  But who are all these people?  And what is the difference between them?  How do you know what is the best fit for YOU?

Here’s some information I think anyone considering a reverse mortgage needs to know about the various professionals who work in the industry:

Banks and Credit Unions – Most local banks and credit unions do not offer reverse mortgage loans, although sometimes the larger ones will.  Unfortunately seeking a loan through them can often mean little or no face-to-face time, and it’s not uncommon for these banks to leave the industry down the road.  At one time Wells Fargo and Bank of America were in the business, but they quit, leaving their borrowers with loans that few employees can understand and little help if reverse mortgage customers need it. 

Brokers – A reverse mortgage broker is a third party individual that is licensed by the state but doesn’t work directly with a lender, instead they essentially shop the marketplace.  When working with a broker, borrowers will pay higher fees because they will have to cover the costs of the broker.  In addition, because all transactions run through a third party, things can easily get slowed down or even stalled completely.

Direct Lender Specialists – This is the category I fall into.  Working directly with a lender that specializes in FHA insured HECM reverse mortgages, such as Mutual of Omaha, direct lender specialists are able to offer local, personal, face-to-face time with clients, and eliminate the need for costly third-party fees.  We are able to do all this while ensuring the smoothest, most efficient transaction possible because they are handling the loan and not farming it out to another company.

Reverse mortgages are available to individuals and married couples age 62 and older.  These FHA insured loans allow homeowners to live mortgage and loan payment free until they pass away, permanently leave the home (meaning 12 consecutive months), or they default on financial responsibilities associated with the home, such as property taxes or homeowner’s insurance.  The funds are available via monthly installments, a line of credit, a lump sum, or even to purchase a home

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.

What Do Retirees REALLY Want In Regard To Housing?

If you find yourself yearning for a retirement of comfort in your own home in a community you love, you are definitely not alone.  Here are some pretty telling facts and statistics surrounding the desires of older adults in the U.S..

According to research by the American Association of Retired Persons (AARP):

  • Nearly 90 percent of seniors want to stay in their own homes as they age.
  • Even if they begin to need day-to-day assistance or ongoing health care during retirement, 82% would prefer to stay in their homes.
  • Most pre-retirees expect they will be able to live independently during retirement; only 14% expect they will need day-to-day assistance or ongoing health care at any point during their retirement.
  • Thinking about parents’ getting older is on the minds of 88% of adult children.
  •  75% of adult children and 69 % of parents think about the parents’ ability to live independently as they get older
  •  AARP identified housing features that seniors find are especially important in the later years: – Safety features such as non-slip floor surfaces (80 percent)

    – Bathroom aides such as grab bars (79 percent)

    – A personal alert system that allows people to call for help in emergencies (79 percent)

    – Entrance without steps (77 percent)

    – Wider doorways (65 percent)

    – Lever-handled doorknobs (54 percent)

    – Higher electrical outlets (46 percent)

    – Lower electrical switches (38 percent)

From the National Assocation of Home Builders:

  • 75% of remodelers report an increase in inquiries related to aging in place.
  • The NAHB predicts that aging in place remodeling market to be $20-$25 billion.  That’s about 10 percent of the $214 billion home improvement industry.

According to the MetLife Mature Marketing Institute:

  • 91% of pre-retirees age 50 to 65 responded that they want to live in their own homes in retirement.  Of that group, 49% want to stay in their current homes, and 38% want to move to new homes

Whether it’s the desire to simply stay put through retirement, or to make modifications to the home, or even to purchase a new home, a reverse mortgage is a flexible tool to help finance any of these.  

Reverse mortgages are available to homeowners 62 and over, including married couples, with many protections in place to ensure borrowers are adequately educated before using this option, such as required third-party counseling.  Reverse mortgages are gaining in popularity among retirees from all walks of life.  A reverse mortgage for purchase option is available for those looking to purchase a new residence.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and learn if reverse mortgage is right for you.