janjordan, Author at Colorado Reverse Mortgage Specialist - Jan Jordan

Author: janjordan

Delaying Social Security With Reverse Mortgage

Posted on June 24, 2021July 9, 2021 by janjordan

When 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.

Reverse Mortgage Line of Credit (HECM-LOC) Quick Facts

Posted on June 17, 2021June 21, 2021 by janjordan

The 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.

CNBC: Fighting Inflation With A Reverse Mortgage

Posted on June 10, 2021June 21, 2021 by janjordan

Recently 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

Posted on June 3, 2021June 21, 2021 by janjordan

When 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.

Is A Reverse Mortgage For Purchase Right For You?

Posted on May 27, 2021May 31, 2021 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 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?

Previously these loans could not be used as construction loans and homes needed a Certificate of Occupancy before the loan application could be started. This changed in 2017, and now homes in construction are eligible. Read here to learn specifically about obtaining a Reverse Mortgage for Purchase on 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.

Applying For A Reverse Mortgage? Here’s What To Expect

Posted on May 20, 2021May 31, 2021 by janjordan

If you’ve reached the point you are ready to apply for a reverse mortgage, you have likely done a fair amount of research (and if you haven’t, feel free to read through the informational articles here on my blog). So what comes next? Here’s a quick run down of what to expect…

Age qualifications. You’re probably aware the borrower needs to be age 62 or older to qualify, but in the case of married couples who both want to be on the loan, both borrowers will need to be 62 or older. In addition, the loan amount will be calculated of the age of the youngest borrower, with the older the borrower, the more funds available.

Does your home qualify? Not every residence qualifies for a reverse mortgage but many do. The home must be HUD and FHA approved. These include: single family or a 2-4 unit homes with one unit occupied by the borrower, as well as some condominiums and manufactured homes. If you’re looking to purchase a home with a Reverse Mortgage for Purchase, any new construction must have a certificate of occupancy. Once it’s determined your home qualifies, an appraisal will be done to determine it’s value.

Financial Assessment. In some recent changes made by HUD to ensure the continued progress of the reverse mortgage industry, a financial assessment became part of the application process. This is set up to make sure borrowers are financially stable enough to continue to pay property taxes, homeowner’s insurance, and other related costs to the home, although once a reverse mortgage is obtained on the home, there are NO mortgage or loan payments. Although the financial assessment is similar to that with a traditional mortgage, if borrowers don’t meet the traditional criteria, there are still options through a Fully-Funded Life Expectancy Set-Aside, which is an amount drawn under the HECM that is reserved for payment of property taxes and insurance by the lender; or a Partialy-Funded Life Expectancy Set-Aside which works the same as the Fully-Funded option except a smaller reserve is drawn when borrowers meet credit requirements but not income requirements. The amount of both of these reserves is determined by the age of the borrower and the value of the home.

During these first steps, it’s incredibly important to work with a trusted and reputable reverse mortgage advisor and lender. You should never feel pressured or feel your concerns and/or questions aren’t being addressed. Also watch out for scams that some homeowners can easily fall prey to.

What Do Retirees REALLY Want In Regard To Housing?

Posted on May 13, 2021May 31, 2021 by janjordan

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.

Here’s What Adult Children Need To Know When Considering A Reverse Mortgage With Parents

Posted on May 6, 2021May 14, 2021 by janjordan

If you are concerned for your aging parents or relatives as their home becomes too much to manage or too difficult to move about, reverse mortgage may be an option. It is common for adult children to look into the reverse mortgage process for their parents and help them make the right decision. Here are some common questions and concerns you may have.

Questions to ponder:

1. Do I have the financial resources to help my parents with their medical and living expenses?
2. Is there a concern from other siblings as to inheriting the home or the equity?
3. What are my parents’ wishes as to staying home if medical care is needed for an extended time?

Common concerns:

Will Mom and Dad use up my inheritance?

While tapping into their equity, your parents’ home may be appreciating in value, which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.

Will the bank take their home?

No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.

How much money will they owe when the loan has to be repaid?

Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.

What happens to the equity if my parents or I decide to repay the loan by selling the house?

There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaining equity is retained by the owners or heirs.

What happens to my mom and dad’s house if they move into a senior care facility?

A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently (12 consecutive months). For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.

What happens if the loan balance becomes greater than the value of the home?

The reverse mortgage (aka: Home Equity Conversion Mortgage or HECM) is a FHA insured non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM reverse mortgage borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.

What are the risks my parents would be taking in receiving a reverse mortgage?

A reverse mortgage doesn’t affect regular Social Security or Medicare benefits. To find out if it impacts other federal or state assistance or medical programs, contact your reverse mortgage lender, tax attorney, or counseling agency.

Are there restrictions on how my parents spend their money?

Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren’s educations, vacations, new cars, home improvements or to eliminate debts. The money can be used for anything they desire.

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 FHA insured, 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.

Should Retirees Use Cash Or A Reverse Mortgage for Purchase When Buying A Home?

Posted on April 29, 2021May 14, 2021 by janjordan

In this day and age, buying a home with cash is rare. And not because of the reasons you may think – such as who has that much cash nowadays? Well, that is part of the reason, but it’s a little more complicated than that. Those who have a substantial amount of cash are finding there are no homes available in their price range and suddenly they don’t have enough cash to be a true “cash buyer”. This diminishes their hopes of living mortgage payment free. For example, if a retired couple sells their home or allots other funds amounting to $170,000 for a new home, they will suddenly be facing a new dilemma – finding a home to meet their needs, that doesn’t need repairs, and is in the community they wish to live. With home prices dramatically increasing in the across Northern Colorado, this scenario is playing out ever more often.

This is where the Reverse Mortgage for Purchase program can provide a solution. Not only will the program add funds to the buyer’s available cash making up the difference needed to purchase an appropriate home, it will also allow that buyer to live mortgage payment free. In addition, putting all your cash into one asset can be a scary thought, especially later in life when the future is largely an unknown, and security is a necessity. When adding a reverse mortgage into the equation, cash home buyers can consider keeping some of the cash or invest it elsewhere.

Here’s how it works:

For seniors 62 and over, home buyers are able to use a reverse mortgage to purchase a home. The amount of the down payment required from the buyer 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 buyers will be able to live mortgage payment free for as long as they remain in the home. This frees up income for other things – such as secure retirement living, medical expenses, in home care, vacations, or anything else they may desire. A Reverse Mortgage for Purchase can be used to buy single family homes, town homes, and FHA approved condos. New construction can be purchased, but it must have a Certificate of Occupancy before the loan application can be accepted. The home being purchased will need to be the buyer’s primary residence and the required down payment will need to come from a HUD approved source. And just like a conventional mortgage, the buyer will always retain the title to the home.

How Much Do Reverse Mortgages REALLY Cost And Why?

Posted on April 15, 2021April 21, 2021 by janjordan

Over the years reverse mortgages have shifted from being a choice of last resort to a creative and effective retirement planning tool. But still many who do not fully understand how reverse mortgages function will immediately bring up the perceived high cost of originating the loan.

When all costs and variable options are considered, the opposite is true. Reverse mortgages actually cost considerably less when used as a source of income when compared to a portfolio or continuing to make payments from a portfolio after the age of 62. They also allow for financial freedom during some of the most important and valuable times in life.

Let’s start by looking at the actual costs. People are generally familiar with the costs that come with a traditional forward mortgage. They do vary by state but consist of lender fees, third party fees like appraisals and title costs, origination fees, PMI and other miscellaneous costs.

All of those are similar to a reverse mortgage with the exception of one difference: Mortgage Insurance Premium (MIP). This is a 2% fee based on the home value which goes to the FHA to insure the loan.

So, what does that insurance fee get you? Why is it required?

In the case of a traditional forward mortgage, insurance encourages the lender to lend to a borrower with a lower credit score or a small down payment so they are insured by the mortgage insurance company if there is a default. Reverse MIP is much more powerful than forward PMI. It not only insures the lender, but also the borrower AND the borrower’s heirs. The reverse mortgage is a non-recourse loan that requires no payments until the borrower passes away or moves out of the home permanently. That’s a solid guarantee.

As we’ve seen the past few years here in Colorado, home values continue to rise. And just as we’ve seen before, that’s not guaranteed to continue forever. No one really knows what the home value will be next year or a decade from now. With this MIP, the borrower can live a very long life, and even if the home value plummets, if the balance on the loan is more than the value of the house, the MIP fund pays out the loss to the lender. The borrower, or the borrowers’ heirs, will never be responsible for any negative gap between loan balance and home value or any tax liability.

Additionally, it’s very common that there is equity left over to pass on to the children because the home value has increased faster than the loan balance. In this case, even with the FHA insured loan, the heirs will always receive any equity in the home.

Now how do you calculate these additional costs into a financial portfolio? Let’s look at some ways a reverse mortgage can be used.

The first factor is often also the biggest benefit – eliminating a mortgage payment so that cash flow is freed up to invest or use for other purposes. Currently 44% of seniors reaching the age of 62 are still making a mortgage payment. Most can afford it, but it needs to be asked if this is the best use for the money.

The second factor to consider is for those who are wealthy and have what one would consider “plenty of money” with homes that are already paid off. These people still have a cost of living, and often it is high. The funds to maintain their lifestyles has to come from somewhere, whether passive or active income. A reverse mortgage just acts as another source of income, and it is often the most efficient and cheapest income available to someone past 62. Advisors can keep their senior clients fully invested in longer term portfolios while maintaining a cash reserve in the reverse mortgage line of credit. And that line of credit is guaranteed never to be cancelled or closed as long as the borrower meets their basic responsibilities such as paying homeowners insurance, taxes, and other basic fees such as HOA. It also requires no payments and is guaranteed to increase every year that goes by even if the house value does not.

And the third factor is quality of life. As these individuals plan for the rest of their lives in a way only retirees do, the answer isn’t always calculated in dollars and cents, it’s calculated in time spent vacationing with grandchildren and creating memories with friends and spouses. This particular return on investment should never be overlooked.