Category: Information for Financial Planners

Are Reverse Mortgages An Under Utilized Resource?

Two or three decades ago, the idea that an elderly couple or individual could live comfortably in their home far beyond retirement was practically unheard of.  Preparing for aging meant retirement homes, assisted living, or moving in with adult children.  Now today people are living longer and healthier lives than ever, but on the flip-side, they are retiring with less.  The Pew Research Center has found that the percent of adults who said that they “will not have enough money to live comfortably” in retirement rose from 32% to 53% in ten years. Among adults in the 55 to 64 age bracket, the percent who are “not too” or “not at all” confident that they will have enough to live on in retirement rose from 26% in to 39%.  These are alarming statistics.

Many seniors can improve their retirement outlook by considering a reverse mortgage, but very few use it as a retirement tool.  Homeowners, 62 and over, qualify for these FHA insured loans.  When creating a retirement portfolio, looking into home equity and a possible reverse mortgage can often mean the difference between getting by and living well.

So why is this option not utilized more often?  It is usually for one of two reasons: senior homeowners are either unaware or uneducated on the option, or negative public perception has steered them away.  Media coverage may report a negative story, but will fail to include the facts as to why these situations happened in the first place and how they can be prevented.  The majority of reverse mortgages are favorable experiences, although this is not considered newsworthy.  Some financial advisers or retirement planners are ambivalent to reverse mortgages, not adequately educating their client on this possibility.  It’s important to stay educated while watching out for scams.  And working with a reputable lender is critical when going through the reverse mortgage process or obtaining information to share with others.

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

FHA Backed Reverse Mortgages Offer Protection For Heirs

Jan Jordan Blog : Reverse Mortgage Loveland Fort Collins Greeley Longmont ColoradoIf you’ve taken the time to learn even a little bit about a reverse mortgage, it’s likely you’ve heard the term “FHA insured” at least a couple of times.  But what exactly does it mean?

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.

A Look At How Reverse Mortgages Have Evolved

reverse mortgage loveland fort collins greeley longmont westminster coloradoSince the reverse mortgage industry saw big changes in 2015 then again in 2017, financial advisers, retirement planners, and reverse mortgage specialists are collaborating more than ever before.  In an effort to ensure these changes are are thoroughly understood and appropriate solutions are offered to clients, a strong relationship between professionals is vitally important.

Because of these newly developed relationships, it appears a wonderful shift is taking place.  Reverse mortgage, once stereotyped as a product for poverty stricken widows or the like, is now being realized as a product of opportunity.  More and more we’re seeing affluent and middle class retirees utilizing this option to provide financial stability and financial freedom throughout retirement.  The industry has only begun to scratch the surface of those who would benefit or will discover the possibilities when tying a reverse mortgage into their retirement plans.

This paradigm shift will likely increase knowledge across the board regarding both traditional reverse mortgage loans and the reverse mortgage for purchase program.  Both products are available for seniors 62 and over.

If you have any questions regarding the changes that have taken place surrounding the reverse mortgage industry in Colorado, please don’t hesitate to contact me.

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 to learn if reverse mortgage is right for you.

What’s So Great About a Reverse Mortgage Line of Credit?

reverse mortgage loveland fort collins greeley longmont westminster coloradoThe HECM Reverse Mortgage Line of Credit is still relatively new, and to this day many within the financial and retirement industries haven’t fully grasped how it works.  Well, they need to get on board because consumers are interested – and they should be.  Here’s why..

First, what is a line of credit?  Simply put, a line of credit are funds available to you through a financial institution that you can access as needed, or not at all if the need doesn’t arise.  Interest is not acquired if the funds are not used.  This makes line of credit options excellent safety nets, especially for the purpose of creative retirement strategy.

When looking at a HECM Reverse Mortgage Line of Credit, the two are obviously intertwined, meaning the qualification requirements for any reverse mortgage still apply.  These are: age 62 and over, using your primary residence for the loan, this home must meet HUD’s guidelines and needs to be either paid off or have substantial equity, and the borrower must have the financial capability to continue to pay homeowners insurance, property taxes, and the like. Because there are various options to receive the payout from a reverse mortgage, the line of credit is only one of them.

When you have a reverse mortgage line of credit, you have money that is available to you — but you only accrue interest on the money you withdraw.  This means the reverse mortgage line of credit can act as an excellent back up source of funds or can be used for retirement fun, whether it be vacation, spoiling grandchildren, or knowing you have the funds available when you’re ready to take on new ventures.

There are other benefits though.  This line of credit is pretty astounding beyond just being a safety net.

Growth: Not only are you not paying interest, but your untouched reverse mortgage line of credit can grow in value. Money in a reverse mortgage line of credit grows at the same rate as the interest rate on the loan PLUS 1.25% monthly.  So, if the interest rate on your reverse mortgage is 2.50%, then your line of credit will grow at 3.75% (2.50% + 1.25%).

Unique: This growth is unique to reverse mortgage lines of credit — a HELOC for example does not grow.

Hedge Against Falling House Prices: The growth in a reverse mortgage line of credit is guaranteed — without withdrawals, your line of credit is guaranteed to grow.  This means you lock in the current value of your home without taking out an interest acruing loan.

Pretty great, isn’t it?

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.

Here’s Where To Start If You’re Considering A Reverse Mortgage

reverse mortgage loveland fort collins greeley longmont westminster coloradoEvery month thousands of Americans make a decision to obtain a reverse mortgage, but where do they start? Here are my suggestions to begin the reverse mortgage process, as well as an outline of what to expect.

  1. Research: Begin by researching reverse mortgages to understand how they work, their benefits, and potential drawbacks. Educate yourself on the eligibility criteria, loan types, repayment requirements, and any associated costs. This will help you make an informed decision.

  2. Consult with Professionals: Consider consulting with a financial advisor or an elder law attorney who can review your financial situation and provide personalized advice. They can help you assess whether a reverse mortgage aligns with your long-term financial goals and explore any legal or tax implications.

  3. Find Lenders: Identify reputable lenders who offer reverse mortgages. Look for those approved by the Federal Housing Administration (FHA) or other relevant regulatory bodies. Compare lenders based on their reputation, ties to the community, information, and customer reviews. It’s advisable to select a lender with specific experience in reverse mortgages.

  4. Gather Information: Once you’ve chosen potential lenders, contact them to request information and application materials. They will provide you with details about their specific reverse mortgage products, requirements, and the application process. The reverse mortgage professional you choose should be easy to get a hold of, knowledgeable, and able to answer any and all questions.

  5. Seek Counseling: Counseling is a mandatory step in the process and is designed to provide you with unbiased information and guidance. The counselor will evaluate your financial situation, discuss alternatives, and help you determine if a reverse mortgage is the right choice for you.

  6. Application Process: Begin the application process with your chosen reverse mortgage professional and lender. You will need to provide various documents, including identification, proof of homeownership, income verification, and information about outstanding mortgages or liens on the property. The lender will guide you through the specific documentation requirements.

  7. Home Appraisal: The lender will arrange for a professional appraisal of your home to determine its current market value. This step is necessary to calculate the maximum loan amount you may be eligible for.

  8. Loan Approval and Closing: After reviewing your application, financial assessment, and appraisal report, the lender will decide whether to approve the loan. If approved, you will proceed to the closing process. During closing, you’ll sign the necessary documents, including the loan agreement and any other legal paperwork.

Remember to take your time, ask questions, and carefully review all the details before proceeding. It’s important to fully understand the terms and conditions of the reverse mortgage before making a decision.

Reverse mortgages are available to homeowners 62 and over, including married couples. 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.

Looking For A Reverse Mortgage Professional? Here’s Some Differences

reverse mortgage loveland fort collins greeley longmont westminster 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.

Everything You Need To Know About The Reverse Mortgage Line of Credit

reverse mortgage loveland fort collins greeley longmont westminster coloradoA reverse mortgage line of credit is a financial product designed for homeowners who are at least 62 years old and have significant equity in their homes. It allows them to access a portion of their home’s value without having to sell the property or make monthly mortgage payments.

Here’s how a reverse mortgage line of credit typically works:

  1. Eligibility: To qualify for a reverse mortgage line of credit, you must meet certain criteria, including age requirements and home equity. You need to be at least 62 years old, own your home outright or have a considerable amount of equity in it, and reside in the property as your primary residence.
  2. Application and Counseling: You’ll need to apply for a reverse mortgage through a lender approved by the Federal Housing Administration (FHA). As part of the process, you’ll be required to attend counseling to ensure you understand the terms and implications of the loan.
  3. Loan Calculation: The amount you can borrow is determined based on several factors, including your age, the appraised value of your home, and current interest rates. The older you are and the more valuable your home, the larger the potential loan amount.
  4. Line of Credit: Instead of receiving a lump sum, a reverse mortgage line of credit provides you with a pool of funds that you can access as needed. This line of credit can grow over time, allowing you to access more funds in the future. The unused portion of the line of credit can also earn interest, which increases the available funds.
  5. Repayment: The outstanding loan balance, including any accrued interest, becomes due when you sell the home, move out permanently, or pass away. Typically, the home is sold, and the proceeds are used to repay the loan, but because these loans are FHA-backed, no one will ever owe more than the home is worth at the time the loan comes due. If the sale proceeds exceed the loan balance, the remaining amount goes to you or your estate.
  6. Flexibility and Payments: One advantage of a reverse mortgage line of credit is that you have the flexibility to choose when and how much to borrow. You can access funds at any time, and you’re not required to make monthly mortgage payments. However, you must continue to pay property taxes, homeowner’s insurance, and maintain the property.
  7. Interest and Costs: Like any loan, a reverse mortgage line of credit accrues interest over time. The interest rate may be fixed or adjustable, depending on the terms of the loan. Additionally, there are upfront costs involved, such as origination fees, closing costs, and mortgage insurance premiums.

It’s important to note that while a reverse mortgage line of credit can provide financial flexibility for seniors, it’s crucial to work with a reputable lender to ensure you thoroughly understand the terms. 

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.

Senior Home Equity Falls – What It Means For Reverse Mortgages

For the first time in 12 years, senior home equity has fallen, according to the Reverse Mortgage Lenders Association (NRMLA). The decline in home equity has resulted in the collective senior housing wealth sliding from a peak of $12.42 trillion in 2022 Q3 to $12.39 trillion in Q4. According to NRMLA, the dip in equity resulted from a $30 billion increase in senior mortgage debt, while home values remained flat due to the cooling housing market.

A reverse mortgage can be a smart financial decision for seniors, even when senior home equity is declining. The amount of funds someone can receive from a reverse mortgage is based on the value of their home among other factors, so a decrease in home equity can potentially impact the amount of money that can be borrowed. However, even in times of declining home equity, a reverse mortgage can still be a valuable source of income for seniors.

One important reason why it’s important to consider a reverse mortgage now, even as senior home equity is declining, is that home values were previously at their peak. This means that many seniors may still have significant equity in their homes, even if the value has declined somewhat. By taking out a reverse mortgage, seniors can access that equity and use it to supplement their retirement income, cover expenses, or make improvements to their home.

Furthermore, a reverse mortgage can provide a valuable source of financial security, even if the value of the home has declined, because these loans are FHA insured. This means a borrower will never owe more than the balance of the loan OR the current value of the home, whichever is less. Seniors who have a lot of equity tied up in their homes may feel anxious about the impact of declining home values on their financial security. A reverse mortgage can provide a reliable source of income that’s not dependent on the value of the home, which can provide peace of mind and reduce financial stress.

Finally, it’s important to remember that a reverse mortgage is just one option for seniors who want to access their home equity. Depending on individual circumstances, other financial products or strategies may be more appropriate. It’s important to carefully consider all available options and consult with a reputable reverse mortgage lender before making a decision.

In conclusion, while declining senior home equity can impact the amount that can be borrowed with a reverse mortgage, it’s still a valuable financial tool for seniors 62 and over. By providing access to home equity, even in times of declining home values, reverse mortgages can provide a reliable source of income and financial security. But it’s important to consider a reverse mortgage now, while home values are still relatively high, to take advantage of this valuable asset.

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

Use a Reverse Mortgage to Eliminate Your Traditional Mortgage

reverse mortgage loveland fort collins greeleyIt’s not uncommon that I get questions about why a senior may want to use a reverse mortgage to pay off an existing conventional mortgage loan.  This scenario would vary from person to person, but in the long run, if the equity in the home can eliminate a mortgage payment without acquiring another loan payment, it’s often a win-win. 

A reverse mortgage is essentially a home equity loan in which the borrower is not required to make payments. The homeowner must be at least 62 years old and meet certain income and credit guidelines.  Although a reverse mortgage does accrue interest, it does not have to be repaid until the last borrower passes away or leaves the home permanently. Almost all of these loans are FHA insured.  There are certain things like property taxes and HOA fees that the homeowner will still be responsible for. 

Here is a scenario:

Barbara is a 75-year-old widow with a house worth $495,000. She still owes $125,000 on her conventional mortgage, with no other mortgage debt such as a HELOC.

Based on her age and the home’s value, she can get a reverse mortgage that would not only pay off her mortgage but give her extra funds as well that could be accessed via a line-of-credit.

She could live mortgage payment free for the remainder of her time in the home.  

A common question with reverse mortgages is who technically owns the home?  The borrower does.  They will retain the title and can make modifications or upgrades to the home.  

In addition, this is a great option for eliminating a HELOC (home equity lines of credit).

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.

Understanding The Reverse Mortgage Maturity Event

reverse mortgage colorado fort collins loveland greeleyFor many who have had a conventional mortgage on their home, they are familiar with the “maturity date”.  But with a reverse mortgage, there is no maturity date, only a “maturity event”.  So, what’s the difference?

A maturity date indicates the date which the borrower will make the final payment on the loan, including principal and interest.  These are used with conventional mortgages.

A maturity event represents a specific event that takes place in the borrower’s life that signifies the loan has come due.  Because reverse mortgage borrowers do not make monthly mortgage payments. many seniors see this as an advantage.

Here are some examples of maturity events:

  • The property is no longer the borrower’s primary residence
  • The property is sold or transferred out of the borrowers name
  • The borrower (or last borrower on the loan) passes away
  • The borrower moves away from the home for more than 12 consecutive months (such as moving into an assisted living facility)
  • The borrower fall substantially behind on their property taxes, homeowners insurance, or HOA fees.

A reverse mortgage is available to seniors 62 and over, and this FHA backed loans allow the borrowers to live mortgage  payment free.  The funds are available in various different ways, including a line of credit, monthly installments, a lump sum, and even to purchase a home.

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