Quick Facts Archives - Colorado Reverse Mortgage Specialist

Category: Quick Facts

Everything You Need To Know About Reverse Mortgage For Purchase

Posted on October 28, 2024November 13, 2024 by janjordan

Reverse Mortgages, once typically thought to only help struggling seniors, have undergone enormous changes recently and are being used to help even affluent retirees achieve their retirement dreams and home buyers purchase new homes.

The Reverse Mortgage for Purchase program is quickly gaining in popularity. This program allows seniors to purchase a home using a reverse mortgage and live mortgage payment free. To qualify for this program, borrower(s) simply need to be age 62 or older, be purchasing a home to become their primary residence, and have their “required investment”. The borrower will still be the homeowner and will always retain the title. In addition, similar to a homeowner who owns their home free and clear, there will not be a monthly mortgage payment but the borrower will still be required to pay property taxes, homeowner’s insurance, HOA fees, and basic upkeep and utility payments.

The borrower can use this loan to purchase single family homes, town homes, and FHA approved condos, and even homes under construction.

As mentioned above, the borrower will need to have their “required investment” or down payment. This amount 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, and the current expected interest rate. There are many examples available of these numbers to help real estate professionals and borrowers determine the price bracket they should search based on the required investment they have available.

Unlike a traditional mortgage where the loan reaches a “maturity date”, reverse mortgages have a “maturity event”. This is the event which causes the loan to become due and payable. These “events” include: the last remaining borrower passes away, the homeowner sells the home, the last remaining borrower leaves the home for 12 consecutive months, or the homeowner defaults on property taxes or insurance.

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 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.

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.

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FHA Backed Reverse Mortgages Offer Protection For Heirs

Posted on October 21, 2024November 14, 2024 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 and Kelsey are Reverse Mortgage Specialists 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 Kelsey to learn if a reverse mortgage is right for you.

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

Posted on September 16, 2024September 25, 2024 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?

A Comparison: Reverse Mortgage vs HELOC vs Downsizing

Posted on August 5, 2024 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.

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

What You Need To Know To Avoid Identity Theft

Posted on July 29, 2024August 5, 2024 by janjordan

According to the 1998 Identity Theft and Assumption Deterrence Act identity theft is when someone “knowingly transfers or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of federal law, or that constitutes a felony under any applicable state or local law.”

The three most common types of identity theft are:

Financial identity theft (using another’s identity to obtain credit, goods and services)
Identity cloning (using another’s information to assume his or her identity in daily life)
Medical identity theft (using another’s identity to obtain medical care or drugs)

How does Identity Theft happen?

In today’s technology driven society, protecting your identity is more important than ever. But don’t assume identity theft only happens online. It can happen anywhere, anytime. Someone could be watching over your shoulder as you fill out a form at your doctor’s office. Another individual could be rummaging through your trash, hoping to find a tossed out credit card offer. Your email program’s spam filter may not be blocking those emails from Phishing websites. There are many ways to fall victim to identity theft, arming yourself with facts and prevention is key to protection.

How do I protect myself from Identity Theft?

Be aware of your surroundings. When filling out forms that include private information, take a seat away from others when possible. Never throw out forms or paperwork that may have your personal information on them, always take these home with you and dispose of them properly.
Don’t toss out credit card offers or other junk mail that pertains to obtaining credit. In addition, any other private information you have – bills, car registration, insurance documents, bank statements – should always be disposed of properly and NEVER put out with your household trash. These items should be shredded or burned. In addition, limiting the amount of junk mail you receive by “opting out” of mail distribution lists can vastly decrease your risk. Opt out by calling 1-888-5-OPTOUT.
Never follow links to bank accounts, credit accounts, PayPal accounts, etc from an email. “Phishing” emails may appear as a completely legitimate email from your bank or credit card company, warning you of unauthorized transactions or other alarming information. These emails will include links that take you to a website that looks identical to your bank’s – but it’s not. Once you enter your information into this “Phishing” site, you have given some of your most valuable financial information to a con-artist. ALWAYS access your bank and credit accounts by entering their web address into your web browser, NEVER through a link. Reputable companies will not contact you via email about such important matters.
Don’t respond to emails offering money in exchange for “helping” an individual transfer money into the country. These are always scams and have proven to be very dangerous.
Password protect your computer and your wireless internet. Use firewalls and virus protection software.
Never give personal information to telephone solicitors or door to door solicitors. Do not give out personal information over the phone unless you placed the call yourself.
Lock your car. Identity theft via “glove compartment” information is on the rise. Keeping your car locked can ensure you are not an easy target.
Don’t carry your Social Security card in your wallet or purse. Purge expired credit cards, insurance cards, and ID’s regularly. Keep these items at home in a safe place.
If you do not have a locking mailbox, do not mail payments using your mailbox. Always take the mail directly to the post office.

What do I do if think I’ve been targeted?

Contact the Federal Trade Commission at 1-877-IDTHEFT or www.ftc.gov

3 Important Things You Are Still Responsible For When You Have A Reverse Mortgage

Posted on July 15, 2024July 18, 2024 by janjordan

Reverse Mortgages have helped millions of seniors live more plentiful lives as they age. Homeowners and their spouses over the age of 62 are eligible for Home Equity Conversion Mortgages (HECM), but although they will NOT have a monthly mortgage payment to pay, they are still responsible for some financial obligations regarding the home. These include:

Property Taxes:

Just as with a conventional home loan, a reverse mortgage homeowner is always responsible for paying their property taxes. Your particular county or city may have a program that allows you to defer a portion of your property tax. Homeowners can contact their county human services office for more information.

Homeowners Insurance:

Just as with any conventional home loan, reverse mortgage holders are required to purchase and maintain homeowners insurance. This yearly expense is something that should be discussed with your lender and a reverse mortgage counselor to ensure the homeowner understands their options and a plan is put in place to keep insurance current.

Home Maintenance:

The homeowner or their family will be responsible for continuing to maintain and upkeep the home. Because a reverse mortgage uses the equity available in the home to make it’s monthly mortgage payments, if major repairs are needed the homeowners will not be eligible for a home equity loan or similar. It’s important to keep this in mind, especially when homeowners elect to receive their reverse mortgage funds in one lump sum. Again, discussing this with your lender can help ensure you have planned to have funds available should a major home repair be needed.

Ultimately, understanding and planning for these expenses is key to being prepared in the years to come. Working with and asking questions of a reputable reverse mortgage lender, as well as a reverse mortgage counselor, can help alleviate any concerns a homeowner may have.

How to Use a Reverse Mortgage to Eliminate a Traditional Mortgage

Posted on June 10, 2024July 17, 2024 by janjordan

It’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).

Debunking 5 Common Reverse Mortgage Myths

Posted on June 3, 2024June 17, 2024 by janjordan

Reverse mortgages have made a serious comeback in the past several years. After regulation changes were enacted in 2015, the reverse mortgage loan once considered a desperate lifeline is now being used as a retirement tool for even the wealthy. The loans are still only available to seniors 62 and older (including married couples) with the amount of funds available increasing depending on age and appraised value of the home, but now those funds are often being accessed in ways not available before – such as a line of credit or to purchase a home. This really is not your mother’s reverse mortgage, it’s something much more versatile than it was years ago.

Here are some lesser known facts about today’s reverse mortgage:

1.) I’ve said it before and I’ll say it again – the borrower will always remain the homeowner as long as basic responsibilities such as property taxes are paid, homeowners insurance is kept current, and utilities and HOA fees are paid. One of reverse mortgage’s scariest myths has always been that a bank will own the home. This couldn’t be further from the truth. Not only will the borrower remain the homeowner, they will also retain the title.

2.) There are NO mortgage or loan payments. That’s correct. Regardless of how the borrower decides to utilize the reverse mortgage funds, they will not pay a loan or mortgage payment while they remain in the home.

3.) With a Reverse Mortgage for Purchase, borrowers can wrap both the home purchase and the reverse mortgage into the same transaction allowing them to buy their dream home – AND the reverse mortgage will substantially supplement purchasing power allowing a home to be purchased that may have once been out of their price range. When using a Reverse Mortgage for Purchase, the borrower is required to provide some down payment and the reverse mortgage funds will make up the rest of the purchase price.

4.) Married couples can both be on the loan regardless of how the funds are utilized. Another all too common myth is that in the case of a married couple, if one spouse passes away the other spouse will be evicted. When working with a reputable reverse mortgage lender this should never happen. As long as both spouses are 62 or over, they can both be on the loan allowing either borrower to stay in the home until the last spouses passes away or permanently leaves the home.

5.) Heirs are not “saddled” with the debt of a reverse mortgage. After the borrower(s) pass away, there are several options as to what the heirs can do with the home. And in today’s hot housing market, the home may gain equity that can be available to the heirs. Most all reverse mortgages are FHA insured meaning the loan will never exceed the amount of the home sale – even if more is owed, and it also means it will only ever require the amount of the loan even if the home is worth much more when it comes due.

Find Out If Your Home Is HUD Eligible For A Reverse Mortgage

Posted on May 27, 2024June 17, 2024 by janjordan

Reverse Mortgages are a specialized loan available to seniors 62 and over. This creative resource is used by a wide demographic – from those looking to supplement a fixed income, to the more affluent in need of protection for retirement assets, and even those wanting to purchase a home in retirement. But there are some requirements when it comes to the actual home…

Which types of homes are included?

According the HUD’s Federal Housing Administration, the home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. Some condominiums and manufactured homes that are approved by HUD also meet FHA requirements.

In the case of a Reverse Mortgage for Purchase, borrowers can use a reverse mortgage to purchase a single family home or 2-4 unit home with completed construction that has received a certificate of occupancy.

Are there reasons my home may not qualify?

A home with very little equity may not qualify, although homes with existing mortgages may.

In addition, homes must be maintained with general upkeep and be current on property taxes and other expenses relevant to the home.

A second home or vacation home may not qualify. The borrower must be living (or plan to live) in the home.

Bottom line

The funds from a reverse mortgage can be accessed via a lump sum, line of credit, monthly installments, or to purchase a home. If you have questions let your specialist guide you in the many scenarios that are possible and the two of you can think creatively about your needs and desires.

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

Taxes and Reverse Mortgage: A Quick Guide

Posted on April 1, 2024April 10, 2024 by janjordan

As tax day looms, it’s common to receive some questions about taxes and reverse mortgage from those who may be considering it. There are many differences between a reverse mortgage and a traditional mortgage – and taxes are a big one. Here’s a run down of what to expect come tax time if you have a reverse mortgage.

The Tax Liability Issue

Because any funds you receive from a reverse mortgage are essentially an advance on your home equity – equity you already own and have paid for, the IRS does not consider money received from a reverse mortgage as income, they consider it an advance, therefore it is not taxed as income. This is the case regardless of how you receive the funds – whether monthly installments, a line of credit, or a lump sum, you will never pay income tax on this.

What About Deductions on Interest?

Here’s one situation where there is a stark difference between a traditional mortgage and a reverse mortgage. With a traditional mortgage interest and fees paid are tax deductible every year they are paid. This is still the case with a reverse mortgage, except in the scenario of a reverse mortgage the interest is not paid until the loan comes due, therefore it cannot be claimed as a deduction until this point. The loan comes due if the borrowers sells the home, passes away, or permanently leaves the home.

Property Taxes

With a traditional mortgage, property taxes are often taken care of by an escrow service. With a reverse mortgage the homeowner is 100% responsible for making sure these property taxes are kept up to date. If there are financial concerns about the ongoing cost of property taxes, discuss this with your reverse mortgage specialist. In the financial assessment there are options to help set aside a portion of the funds to cover ongoing expenses such as property taxes and homeowner’s insurance.

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.