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What is an FHA Insured Reverse Mortgage Loan?

Posted on December 4, 2015May 16, 2017 by janjordan

If 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 Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Six Ways to Use a Reverse Mortgage to Protect Retirement Income

Posted on November 20, 2015January 31, 2017 by janjordan

reverse mortgage loveland fort collins greeley longmont westminster colorado — Wade Pfau, Ph.D., CFA

Reverse mortgages have long been shunned by many financial professionals, often thought of as a lifeline for desperate and broke seniors. This thinking wasn’t misplaced. Reverse mortgages were often often only used for these type of scenarios. But as retirement planners are facing the harsh reality of slower than anticipated growth in investments and a stagnant economy, they are fast beginning to understand how under-utilized home equity and reverse mortgages have been – and how they can be the missing puzzle piece for so many of their clients.

In some latest research, Wade Pfau, a professor of retirement income at the American College of Financial Services, examined six ways to use a reverse mortgage as part of retirement-income plan.

Here are those six strategies:

Use home equity first: With this strategy, you’d open a line of credit at the start of retirement, and use this line to pay for all your retirement expenses until the line of credit was fully used up. This allows more time for the investment portfolio to grow before being used for withdrawals after the line of credit is depleted, wrote Pfau.
Use home equity last: Here, you’d open a line a credit at the start of retirement and only use it after your investment portfolio was depleted.
The Sacks and Sacks Coordination Strategy: With this strategy, you’d open a line of credit at the start of retirement, and use the line of credit, when available, following any years in which the investment portfolio experienced a negative market return, wrote Pfau. No efforts are made to repay the loan balance until the loan becomes due at the end of retirement, he wrote.
The Texas Tech Coordination Strategy: This method is a bit more complicated. With this one, you’d open a line of credit at the start of retirement and then each year you’d analyze whether you can keep withdrawing money from your investment portfolio at the desired rate over a 41-year time horizon. If the remaining portfolio balance is less than 80% of the required wealth you’d tap the line of credit, when possible. And if the portfolio balances is greater than 80%, you’d pay down provided your portfolio did not fall below the 80% threshold the balance on the reverse mortgage balance. This, Pfau wrote, would provide more growth potential for the line of credit.
Use tenure payment: Here you’d open a line of credit at the start of retirement and a receive a fixed monthly payment for as long as the borrower is alive and lives in the house. And spending needs over and above that reverse mortgage payment would be covered by the investment portfolio when possible, Pfau wrote.
• Ignore home equity: This strategy makes no use of home equity, and Pfau only examines it to show the probability of a retirement-income plan succeeding when home equity isn’t used.

So what did Pfau find?

Generally, strategies which spend the home equity more quickly increase the overall risk for the retirement plan, he wrote. More upside potential is generated by delaying the need to take distributions from investments, but more downside risk is created because the home equity is used quickly without necessarily being compensated by sufficiently high market returns.

Meanwhile, he wrote, opening the line of credit and that start of retirement and then delaying its use until the portfolio is depleted creates the most downside protection for the retirement-income plan.

Reverse mortgages are available to seniors 62 and over as long as the home the loan is being used against is the primary residence and there is some equity available.

Get Your Dream Home with Reverse Mortgage for Purchase

Posted on November 13, 2015June 26, 2017 by janjordan

When we’re working hard and raising a family, there are two things we often hope to achieve in our future – having no house payments and living in our dream home. Then as the years close in on retirement, these may still seem unachievable – but they’re not. With the Reverse Mortgage for Purchase program seniors 62 and over can live mortgage payment free in the home of their dreams.

Here’s how it works:

When a home buyer uses a reverse mortgage to purchase a home, they will be required to provide a down payment. The amount of the down payment will depend on the amount of the home they are purchasing – but unlike a conventional loan, not only will the lender provide the funds to make up the difference between the home price and the down payment, the new home owners will also be able to live mortgage payment free for as long as they remain in the home, freeing up income for other things – such as medical bills, in home care, or even vacations.

Commonly when someone has a large amount of cash they want to simply pay cash for a home. But in today’s housing market, even $200,000 doesn’t go very far. With a reverse mortgage for purchase that $200,000 can be used as a down payment on a much more expensive and desirable home – AND the buyer will still live mortgage payment free, just as if they’d paid for the home with cash. As with any reverse mortgage or conventional mortgage, the homeowner will always remain exactly that – the homeowner. And the loan will not reach maturity until the last borrower passes away or permanently leaves the home.

Click here for more detailed information about how the Reverse Mortgage for Purchase program works.

How to Use Home Equity for Retirement Security

Posted on November 4, 2015June 26, 2017 by janjordan

Did you know home equity can be used to reduce the overall risk of your retirement plan? Your house is a great asset that for many years has been overlooked in financial planning for seniors. This is making a sharp turn lately as retirement experts are beginning to understand how tapping into home equity via a reverse mortgage should never be underestimated.

Let’s take a look at where most seniors sit currently when it comes to retirement…

• Only 22 percent of workers are very confident they will have enough money in retirement.
• 45 percent of Americans have saved exactly nothing—zero.
• The expected lifespan of women is 20 years past the age of retirement, and two years longer than men.
• The average retiree can expect to spend $220,000 in out of pocket health care costs during retirement.
• Medicare pays for an average of 62% of a seniors health care costs, leaving 38% to come out of pocket.
• 36% of up and coming retirees will rely on Social Security as their sole income.

A reverse mortgage can help in many different ways – and the how the funds are spent is entirely up to the borrower. Whether it’s a monthly payout or a line of credit, when combined with other retirement planning tools, reverse mortgage can allow retirees financial security during the years they worked so hard to enjoy. Reverse mortgages are available to senior homeowners 62 and over – even married couples. They will live mortgage payment free, always retain the title to the home, and because these loans are non-recourse, no one – including heirs – will find themselves saddled with the debt after the owner passes. There are also various solutions for adult children or other family members who may want to keep the home in the family.

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.

Should Reverse Mortgage Be Part Of Your Retirement Portfolio?

Posted on October 28, 2015November 2, 2015 by janjordan

For the past quarter century seniors have easily managed to retire on three things: company pension plans, social security, and personal savings. But with a rocky economy not long behind us – and still unsteady in many areas, baby boomers are being forced to take a second look at their retirement portfolios. Previously, tapping into home equity for retirement has been considered a last resort. But should it be?

Both company pensions, personal investments, and social security benefits face much uncertainty down the road. And if retirees have had the ability to hold onto any personal savings during the economic downturn, it likely took a hit as well. But when adding home equity into the retirement equation, statistics show most baby boomers 51 and over have enough to retire comfortably. So where does this leave reverse mortgages?

In a recent Forbes article, author and retirement income planning expert, Jamie Hopkins says: “The lack of focus on home equity in retirement income planning is nothing short of a complete failure to properly plan and utilize all available retirement assets. This needs to change immediately because strategic uses of home equity, especially reverse mortgages, could save many people from financial failure in retirement and help stem the overall retirement income crisis facing Americans.”

And he’s absolutely right.

For seniors 62 and over, reverse mortgage is something that should be considered when seeking retirement funding solutions. Homeowners can access the equity in their home and no repayment is due until the last borrower passes or permanently leaves the home. For retirees, it could mean the difference between living, living comfortably, and living out retirement dreams.

When looking down the road toward financial planning for retirement, ask yourself a few questions and determine if a reverse mortgage might fit into your Plan A or your Plan B. Discuss it with your spouse and with your financial planner. Learn the facts about reverse mortgage and how it will affect your loved ones after you pass.

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

What Happens to a Reverse Mortgage After Owners Pass?

Posted on October 19, 2015April 19, 2016 by janjordan

A 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?
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.

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.

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 Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Reverse Mortgage For Purchase – What You Need To Know

Posted on September 23, 2015 by janjordan

We’re all familiar with the two most common options to purchase a home – take out a mortgage loan or pay cash. But for seniors 62 and over, there’s another option – the Reverse Mortgage for Purchase program (aka HECM for Purchase).

Looking for a home in Fort Collins, Loveland or Longmont, Colorado but finding it’s a bit out of your price range? Because the borrower is responsible for only the down payment on the home and will have NO mortgage payments, a Reverse Mortgage for Purchase can help with this too.

What is needed to qualify for a Reverse Mortgage for Purchase loan?

you must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not)
the home you are purchasing must be your new primary residence
must meet the FHA’s new reverse mortgage credit and income guidelines
you must have your “required investment” (down payment) from a HUD allowable source. The funds cannot be borrowed. The required investment can come from the sale of a currently owned home or asset, a gift or inheritance, or money you have had for at least 90 days.

Who owns the home that I am purchasing?

As the borrower and homeowner, you will always retain the title to the home, just like any other type of home loan.

What will my personal ongoing obligations be after purchasing a home?

It’s very similar to if you owned your home free and clear – you will NOT have a monthly mortgage payment. But as the homeowner, you will be responsible for paying property taxes, home owner’s insurance, HOA fees when applicable, and basic upkeep including home maintenance and utility payments.

When will the loan become due and payable?

With a Reverse Mortgage for Purchase the loan does not reach “maturity” until:

the last remaining borrower passes away
the homeowner sells the home
the last remaining borrower leaves the home for 12 consecutive months due to illness
the homeowner defaults on property taxes or insurance

Will I need to sell my my current home residence to qualify?

Simply put, no. As long as the loan on your current residence is not an FHA loan and your required investment comes from a HUD allowable source, you can keep your current residence – but the new home will need to be your primary residence. Your lender will ensure you are financially stable enough to support the ongoing obligations on all properties you own. If you decide to keep your current residence as an investment, rental, or vacation property – or you are awaiting the sale of home, it is rarely a problem.

What types of properties can I purchase?

Single family homes, town homes, and FHA approved condos are all eligible properties. The home being purchased will need to be the buyer’s primary residence.

Can I use the loan to build a new home?

These loans cannot be used as construction loans. Homes must have a Certificate of Occupancy issued before a loan application can be started, but as long as that is in place, it is fine if the home is new construction.

How is the “Required Investment” amount determined?

The “required investment” or down payment is determined by a calculation set by HUD based on:

The lesser of the sale price or appraised value
The age of the youngest of the borrowers
The current expected interest rate

What may disqualify me from a Reverse Mortgage for Purchase loan?

Foreclosures within the past 3 years.
Unresolved bankruptcy
Unpaid Federal obligations – i.e. federal taxes, defaults on prior government backed loans (such as student loans or government backed mortgages)
Income too low to support multiple properties
Unpaid judgments or tax liens

What is the HUD required “Reverse Mortgage Counseling”?

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These third party, not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process. The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.

Reverse Mortgage Funds In-Home Senior Care

Posted on August 28, 2015 by admin

Reverse mortgage has long been used to help seniors convert home equity into cash, and the funds can be used for anything the borrowers sees fit. The reason homeowners are looking to tap into these funds varies widely, but they’re commonly used to pay for extraordinary out of pocket medical expenses, including in-home senior care.

A common question is whether the amount of money received will be enough to cover the medical needs. Often it is – whether it is covering actual medical costs, live-in care, or drop-in care. The amount of money available to the borrower depends on the borrower’s age, the appraised value of the home, any outstanding mortgage balance, and current interest rates.

To best determine how much money will be needed for in-home care is to do some research. Find out what options are available from your local home care services. Talk to more than one. Get referrals from those you know and trust. Ask for an estimate of cost. Work with a reputable reverse mortgage specialist to ensure no one is being misled. They will be able to help break down the numbers long term to determine what is right for you.

Reverse Mortgage and the Alternatives

Posted on August 12, 2015August 18, 2015 by janjordan

Home equity accounts for approximately 70% of a senior’s assets, not including social security or pension. Often times tapping into this equity becomes inevitable when facing health crisis or financial restrictions in retirement. Using home equity should be part of a larger financial plan and there are a few ways it can be incorporated.

Reverse Mortgage

A reverse mortgage is available to seniors 62 and older with married couples being eligible to both be on the loan if both meet the age requirement. Homeowners who obtain these loans do not make monthly mortgage or loan payments but instead receive the funds in a variety of available options, including monthly installment and a line of credit. The loan does not have to be repaid until the last borrower passes away, at which time there are options available to heirs. The amount of the loan depends on the amount of equity in the home and the age of the borrowers – the older the borrower, the more money they can receive. This is an excellent option for both seniors with questionable retirement funds or the retiree who is looking to boost their portfolio.

Home Equity Loan

A home equity loan (HELOC) also taps into equity by borrowing money against the home. This type of loan will be processed as a conventional loan and monthly payments will need to be made to the lender. Any health or future financial concerns should be thoroughly thought through prior to taking out a home equity loan. Loading up the home with debt during retirement can be risky and could result in loss of the home if the borrowers are unable to make their monthly payments.

Downsize

Another option would be to downsize all together by selling the existing home and moving into a more modest situation. Depending on the amount of equity in the home, a homeowner may be able to sell the home for enough money to comfortably be able to make rent or mortgage payments for 10 to 20 years. Just as with a home equity loan, this option could be risky for a person with health concerns as the funds set aside for housing could be needed elsewhere. For homeowners looking to downsize, a Reverse Mortgage for Purchase is also a very good option. This will allow the borrower to move into the home they desire AND eliminate mortgage payments.

Before making any major decisions regarding how to effectively use the equity in your home, it is best to consult with a financial adviser and a reputable reverse mortgage lender.

A Hidden Gem – Reverse Mortgage for Purchase

Posted on August 5, 2015August 18, 2015 by janjordan

Nearly everyone is familiar with a Reverse Mortgage and many even know someone who has used one to increase cash flow or help them remain in their existing home. But what many people don’t realize is that you can also use one to purchase a home. This little known portion of the reverse mortgage program, called Reverse Mortgage (HECM) for Purchase, is a golden gem to many seniors who are looking to settle down somewhere other than their current home for retirement. Whether looking to move closer to family, purchase a single level home, or move into a senior community, these homebuyers are able to purchase a home they often wouldn’t be able to afford otherwise while still eliminating mortgage payments – all in a single transaction.

To qualify, the borrower(s) must be 62 years or older, be purchasing an eligible property, have the required down payment, and meet the HECM financial assessment guidelines. Eligible property types are single family residences, new construction where certificate of occupancy has been issued, HUD approved condos and townhomes. Allowable down payment sources include cash from savings or investments, proceeds from the sale of an existing home or asset, gifts. Funds that are borrowed such as a loan or credit cards are not allowed as a funding source. The amount of the down payment varies depending on the age of the youngest borrowers and the cost of the new home.

Working with an educated real estate agent and reverse mortgage specialist will expedite the process, and in most cases in a Reverse Mortgage for Purchase does not take longer to complete than a typical home purchase with a traditional loan.