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Category: Information for Adult Children

Reverse Mortgage and Taxes: Everything You Need To Know

Posted on November 22, 2019December 6, 2019 by janjordan

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 new 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.

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

Yes, Married Couples Can Get a Reverse Mortgage

Posted on November 15, 2019December 6, 2019 by janjordan

It’s not uncommon to hear heartbreaking stories of reverse mortgages that left a spouse in dire straits after the other spouse passed away. How could this happen? Is it something that you need to worry about? If you and your spouse are considering obtaining a reverse mortgage, it’s important to understand the long term effect it could have on either spouse once the other passes away, and feel confident any appropriate protections are in place.

What Married Couples Need to Know

When applying for a reverse mortgage the amount of money you can receive is calculated according to the age of the youngest borrower. The older the borrower, the more money is available from the lender.

If both homeowners are over the age of 62, both homeowners can be on a reverse mortgage loan. If both spouses are on the loan, the loan continues if either passes away and will continue until both borrowers have passed.

Another scenario to consider is if a borrower obtains a reverse mortgage and then remarries. If this was to happen, it wouldn’t be unheard of for the married couple to live in the home for 20 or more years before the borrower passes. At this time the new spouse would not be protected under the existing reverse mortgage loan. If you have reverse mortgage and you remarry, you could consider looking into refinancing the reverse mortgage and adding the new spouse to the loan.

And yet one more thing to note is the possibility one spouse needs to move out of the home into an assisted living facility due to health concerns. If this happens, as long as the spouse that remains in the home is on the loan, they can continue under their current reverse mortgage.

Bottom line: If you are married and are considering obtaining a reverse mortgage, it is extremely important to work with a trusted and experienced reverse mortgage specialist who can easily answer all of your questions and address any concerns you may have. Making sure both spouses are protected should be a lender’s top priority.

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.

Reverse Mortgage vs HELOC vs Downsizing

Posted on October 24, 2019November 7, 2019 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.

Everything You Need To Know About The Reverse Mortgage Appraisal

Posted on September 17, 2019October 3, 2019 by janjordan

Getting assessments on just about anything can seem laborious or tedious, who wants to have something close to them looked at with a magnifying glass? But appraisals for reverse mortgage loans are not only very helpful for everyone involved, they’re required by the lender. Part of what determines the amount of funding available from a reverse mortgage is the appraised value of the home. Luckily the process is very simple.

First, after talking with a reputable reverse mortgage specialist, you will submit your application. The specialist or lender will be the one to contact an appraiser who will in turn contact you to set up a time for them to look at your home.

The procedure is standard and involves three steps, the inspection, the research, and the report.

Inspection:

The appraiser will walk through your home with you, he or she might take photographs. It will document features that add value to your home. If the appraiser takes a picture of something in need of repair it lets you know that it matters and gives you a chance to fix it.

Research:

Once the walk through is done, the appraiser’s work continues as they research factors that influence the value they place on your home. Home sales in your area are one area of research. Others include multiple listing services, tax assessor’s records and public records come into play. Anything that will help to give the present value will be taken into account.

The Official Report:

This is the synthesis of the appraiser’s home visit and all the research. The report is used with your loan request. If photographs were taken, they will be included as well.

The appraiser gives this report to the lender who will give you a copy and an updated reverse mortgage figures taking into account the new information.

There are simple things you can do before the appraiser gets to your home to help your loan request. Read my article about preparing your home for an appraisal by clicking here.

Reverse mortgage is an individualized, specialized loan for those 62 and older that allows seniors to tap into the equity of their home while living mortgage and loan payment free. The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. If you are planning ahead 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 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.

New FHA Rules Expand Reverse Mortgage Market To Include Condos

Posted on September 10, 2019September 17, 2019 by janjordan

Effective October 15, 2019 a new rule by the FHA will make it easier for condo owners to get HECM Reverse Mortgages.

Currently most condos cannot obtain HECM Reverse Mortgage loans because they require approval of the entire building, which includes multiple units. The new change allows for approval of single units. This is a huge step forward for the industry, as many seniors find condos to be comfortable and affordable as they age in place.

The rule will also affect other non-HECM FHA programs, such as first time home buyer programs.

“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” said HUD Secretary Ben Carson. “This is an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.

FHA deputy assistant secretary of single family housing, Gisele Roget, also clarified that the previous rules governing condo approvals shut out a lot of senior condo owners from obtaining a HECM in the past, and this new rule will help to address that.

“We recognize that many seniors live in condominiums that were unable or unwilling to go through the process of FHA’s project approval,” Roget said. “And so, by allowing borrowers to utilize the single unit approval, they will be able to age in place in condominiums that do not have the overall FHA project approval.”

This also means condos can now be purchased using a Reverse Mortgage for Purchase.

If you have a condo and are interested in learning more about a reverse mortgage, contact me to find out if it could be a fit for you.

An Overview Of Required Reverse Mortgage Counseling

Posted on July 29, 2019July 30, 2019 by janjordan

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.

Here is what you can expect at your counseling session:

The potential borrower will need to schedule an appointment directly with a counseling agency. The lender does not initiate or take part in the session, but can provide you with resources to seek out a counselor. The session will take place in person or over the phone – although the FHA recommends a face-to-face meeting whenever possible.

Prior to your appointment, the counseling agency will provide you with a packet of information to allow you to prepare for the session. During the session the counselor will discuss your immediate and long-term financial needs, your reasons for seeking out a reverse mortgage, address any questions or concerns you may have, and clearly educate you on the process as well as the pros and cons of a reverse mortgage. Again, they are not there to “sell” you on the product, but to educate instead.

Once you have completed the counseling session, you will be provided with a “Certificate of Completion”. This certificate verifies to your lender that you have completed the counseling session and that you understand the essentials of a reverse mortgage. Your counselor will also follow up with you to ensure you have no further needs, questions, or concerns.

5 Fast Facts About Reverse Mortgages in Colorado

Posted on July 22, 2019July 30, 2019 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.

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.

What Happens to a Reverse Mortgage After the Owners Pass?

Posted on May 31, 2019June 4, 2019 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? Will the family of he deceased be held liable? These are very valid concerns – so I’d like to offer some clear and concise guidance.

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

1. Pay off the remainder of the loan

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

2. Obtain a conventional loan.

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

3. Sell the home

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

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

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

A Glimpse Into What Retirees Want In Regards To Housing

Posted on May 17, 2019June 4, 2019 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.

Will A Reverse Mortgage Affect Social Security, Medicare & Pension?

Posted on May 10, 2019May 14, 2019 by janjordan

A very common concern among seniors and adult children when considering a reverse mortgage is how it will affect social security, medicare, and even certain pensions. For many seniors, these benefits are a large part of their income. Fortunately, because the funds from a reverse mortgage are NOT considered taxable income, a borrower’s benefits will not be affected when taking out a reverse mortgage.

On the other hand, borrowers who have Medicaid, TANF, Food Stamps or SSI may see those benefits affected by this additional income. Because these programs are government sponsored programs with strict approval guidelines based on all sources of income, even non-taxable income, there is a possibility the additional cash flow will need reported. Other supplemental and assistance programs would need to be addressed on a case by case basis. Working with a reputable reverse mortgage lender and required third party counseling will ensure all your questions are answered thoroughly and honestly.

Reverse mortgages are available to homeowners 62 and older. The proceeds can be received as a lump sum, as monthly installments, or a reverse line of credit and can be used for any purpose the borrower sees fit. This FHA insured loan allows the borrower(s) to live mortgage payment free.

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.