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Category: Information for Adult Children

A Quick Look At How A Reverse Mortgage Impacts Taxes

Posted on January 6, 2020 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. 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 Boulder, Longmont, Fort Collins, Loveland, Greeley, and Front Range areas of Colorado as well as Cheyenne and Laramie, Wyoming.

Tips For Finding A Reputable Reverse Mortgage Lender In Colorado

Posted on December 24, 2019January 6, 2020 by janjordan

For many seniors, a reverse mortgage is a feasible option to living within a budget, without the constraints and worry of excessive financial distress. In order to qualify for a reverse mortgage, the individual must own their home, be at least 62 years old, and have some equity in the home. Funds from a reverse mortgage can be accessed in various ways including a line of credit, monthly installments, a lump sum, and they can even be used to purchase a new home. In general, the older the borrower (or the youngest borrower in the case of married couples) and the more valuable the home, the more money available. Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in the home. Once a basic understanding of how a reverse mortgage works, the next step is finding a lender.

Where to find a lender?

Reverse mortgages are marketed in every possible way. Television, radio, mailers, internet, etc. Although not all of these methods ensure trouble, some of them can be scams. When seeking a reverse mortgage lender, it’s important to speak with people you trust. Ask around at your bank or financial institution. Speak with a financial or retirement adviser. Talk with neighbors or friends who have utilized a reverse mortgage. Seek information from the local Chamber of Commerce or Better Business Bureau. Utilize other resources that may be available in your community.

What to look for in a reverse mortgage lender?

Working with a reputable reverse mortgage lender is critical. The reverse mortgage industry is riddled with scams and flashy sales. It can be risky to get involved with a lender who does not offer all the details or who is just looking to make a “quick sell”. A reputable lender will have strong connections in the community, working closely with a network of professional organizations.

Accreditations and ratings?

Seek out a lender that is a member of the National Reverse Mortgage Lenders Association (NRMLA). Members of the NRMLA must conform to a strict code of lending ethic. Look for a lender that is affiliated with the Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Follow your gut.

When it comes down to it, always follow your gut. Just because a lender may meet all this criteria doesn’t mean they will be right for you. If you do not feel comfortable or feel your questions are not being adequately answered, there is nothing wrong with seeking out a different lender.

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.

Are Heirs Saddled With Reverse Mortgage Debt After Borrowers Pass Away?

Posted on December 17, 2019January 6, 2020 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.

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.

HUD Increases Reverse Mortgage Loan Limits Beginning January 1, 2020

Posted on December 10, 2019 by janjordan

In early December, the Department of Housing and Urban Development (HUD) announced that the lending limit for FHA insured HECM Reverse Mortgages will be increasing for the fourth year in a row.

Beginning on January 1, 2020, the lending limit for government-insured reverse mortgages will be $765,600, marking an increase of $39,075 from the lending limit HUD set for 2019.

History of HECM Reverse Mortgage Lending Limits |
2009-2016 | $625,500
2017 | $636,150
2018 | $679,650
2019 | $726,525
2020 | $765,600

What These New Limits Mean for Borrowers

If you’re a prospective reverse mortgage borrower who has a home valued at or around the new 2020 lending limit, the new MCA will allow you to borrow demonstrably more money in a reverse mortgage transaction.

Remember, the amount of money you can borrow is directly influenced by current interest rates, your home value, and your age at the time that the loan is originated; younger borrowers qualify for generally lower proceeds when compared with older borrowers.

That means that these new limits can certainly make a major difference in the ability for borrowers to earn more money in loan proceeds.

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. The funds can be received via line of credit, monthly payments, lump sum, or as a reverse mortgage for purchase for those looking to purchase a new residence. The funds can be used however the borrower deems fit – additional income, medical expenses, vacations, home repairs or modifications, gifts, etc.

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.

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

What About Deductions on Interest?

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.

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.

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.