home equity loan Archives - Colorado Reverse Mortgage Specialist

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Reverse Mortgage and the Alternatives

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

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

Reverse Mortgage

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

Home Equity Loan

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

Downsize

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

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

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.

Dispelling Myths About Reverse Mortgage

Posted on June 11, 2015 by janjordan

A reverse mortgage is a specialized form of loan for those 62 years and older. It offers a way to entertain the lifestyle you imagined, from long held dreams of RVing or travel, to the changing desires that come with events like children moving to different states, or just simply the ability to age in financial comfort.

All the hard years of work can be given to you in the form of cash from the equity of your home. This means all the years of mortgage payments to keep your home asset can be accessible to you now. Your home can actually be put to work for YOU.

When you take a reverse mortgage you retain ownership and the title. Very little will change from all the previous years of homeownership, except you will have the ability to cash in on all the value that has been accruing during your years of dependably paying to live there – while living mortgage and loan payment free.

A reverse mortgage is also called a Home Equity Conversion Mortgage (HECM). This unique type of loan comes with peace of mind since the FHA backs it with a 100% guarantee that you will never owe more than the actual market value of this cherished possession. When you take a reverse mortgage the loan does not come due until the last borrower passes away or moves permanently, and at that time there are options available to keep the home in the family or sell it.

More protection is offered as well, as HUD counseling is not only offered, it is required. The counseling is from an accredited independent third party and takes place before any costs for the loan are set in motion. While this may seem like a requirement, it is more of a privilege so you can understand all the details of reverse mortgage.

The funds from a reverse mortgage can be accessed via a lump sum, monthly installments, line of credit, or even to purchase a home. There are no limitations as to how the money is spent – that is completely up to the borrower.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado. Contact Jan and learn if reverse mortgage is right for you.

Reverse Mortgage Terms to Know – Part I

Posted on March 25, 2015 by janjordan

If you’re considering a reverse mortgage, you’ve likely read a handful of short articles on them, or Home Equity Credit Mortgage (HECM). You probably have a sense of what a reverse mortgage is and what it is not. So you read longer more detailed articles and meet with a lender, only to find yourself in a sea of words that leave you swirling. Like any type of contractual agreement in America, reverse mortgage has its own language to give clear definition to the acting agencies, the building blocks involved and the rights and responsibilities of all parties involved.

The following will help you speak the reverse mortgage language, starting with the basic overarching terms.

A Reverse Mortgage is a loan taken in lieu of home ownership. It gives cash advances to the borrower and does not require repayment until the last borrower passes away or leaves the home permanently. The loan is capped by the value of the home at the time of repayment. The acronym HECM means Home Equity Conversion Mortgage and is the only program of its kind backed and insured by the Federal Housing Administration.

A Mortgage refers to a legal document. The document makes a home available to a lender to repay a debt. A Non-Recourse Reverse Mortgage is a home loan where the amount owed cannot exceed the home’s value at the time of loan repayment. This type of reverse mortgage is FHA insured. Another type of reverse mortgage is called a Proprietary Reverse Mortgage, which have grown quite uncommon. Proprietary reverse mortgages are privately insured by the banks and mortgage companies that offer them. They are not subject to all the same regulations as HECMs, and for this reason borrowers should ensure they understand these loans thoroughly and beware of scams. They are also occasionally called “jumbo” reverse mortgages.

The value of a home, which implies subtracting out any money owed on it is called Home Equity. And Home Equity Conversion is the process of turning the equity into cash. It allows the one receiving to stay in their home without making monthly payments while there, or still alive. It takes what is due to the borrower wrapped up in the years of paying for their home and makes it available immediately.

For seniors 62 and older, regardless of credit or income (until April 27 2015), a reverse mortgage is an option. Utilizing the equity of the asset you already have can help fund the retirement of your dreams – or just your retirement. You will always retain the title to your home and will live mortgage payment free. How you decide to use this asset is up to you, and a common misconception is that your home will be lost after you pass. With proper education via required third party counseling and retirement planning, this does not need to be the case.

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.

Baby Boomers Have Largest Home Equity, Study Finds

Posted on August 28, 2014 by janjordan

Although Zillow’s Negative Equity Report for the second quarter of 2014 may have some negative numbers (for instance there are more than 8.7 million homeowners with a mortgage still remaining underwater), there are a few highlights to mention.

First, while approximately 18.7 percent of Generation X homeowners are underwater on their mortgage only 10.9 percent of Baby Boomers are underwater. In addition, the national negative equity rate continued to decline falling to 17%, down an incredible 14.4 percentage points from it’s peak in 2012. Negative equity has fallen for nine consecutive quarters as home values have risen. This number is expected to fall to 14.9% within the next year.

For baby boomers looking to incorporate a reverse mortgage into their retirement strategy this is very positive news. As retirement planners are working with seniors to develop long term plans to help ensure retirees do not run out of money during their often decades long retirement years, a reverse mortgage line of credit is being considered as a part of the strategy. Since retirees can not only use a reverse mortgage as a line of credit, but also live mortgage payment free, it’s a fantastic option when utilized in a timely and appropriate fashion.

On the other hand, for baby boomers looking to relocate, downsize, or purchase their dream home once they hit retirement, a reverse mortgage for purchase is a very viable option. And with lower negative equity rates across the nation, it is easier to make transitions like this. Not only do the positive housing numbers point to faster sells, but also with nearly 90% of baby boomers having neutral or positive equity in their homes, it means increasingly larger down payments if they are wishing to use all or some of those funds for a reverse mortgage for purchase.

Traditional Reverse Mortgages and Reverse Mortgage for Purchase are available to seniors 62 and over regardless of income or credit. The funds can be received via fixed monthly payments, a one-time lump sum payment, a line of credit – (or a combination of the above), or the purchase option. There are no limitations as to how the borrower can spend the funds. And with retirees living more active and adventurous lives, the more creative, the better!

Reverse Mortgages Can Eliminate House Payment

Posted on August 14, 2014August 18, 2014 by janjordan

Just yesterday, Fox Business published a very thorough article outlining how and why a senior may want to use a reverse mortgage to pay off an existing conventional mortgage loan. After discussing the positive recent changes the reverse mortgage industry has seen, including using it as a retirement planning tool, the article discussed different scenarios and how they would work.

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 income and credit are irrelevant. 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. These loans are FHA insured.

Here is a common scenario from the Fox Business article:

Barbara is a 75-year-old widow with a house worth $400,000. She owes $25,000 on a home equity line of credit, with no other mortgage debt.

Based on her age and the home’s value, she can get a reverse mortgage for up to about $245,600 (the principal limit). Closing costs, including FHA initial mortgage insurance, reduce the available amount to around $234,900.

Under FHA rules, she can get a reverse mortgage, pay off the HELOC balance and take out up to around $111,600 in cash during the first year. A year later, the remainder would be available to her.

A common question with reverse mortgage is who technically owns the home? The borrower does. They will retain the title and can make modifications or upgrades to the home. The borrower is also responsible for paying property taxes, homeowners insurance, utilities and any HOA fees.

In addition, with both HELOC (home equity lines of credit) and Making Homes Affordable home loan modifications geared up to have some major resets, it’s important for seniors and their lenders to be aware that a reverse mortgage may be great solution to eliminate the associated payment all together.

Can A Reverse Mortgage in Greeley, CO Provide Guaranteed Cash Flow For Life?

Posted on July 14, 2014 by janjordan

Did you know the average retiree in Greeley, Colorado lives off $1,230 per month from Social Security and a small nest egg? Often times that nest egg only lasts for a portion of the retirement years while their retirement may actually last for two to three decades. This is why financial advisers and retirement planners are beginning to incorporate a reverse mortgage into retirement portfolios at the beginning of retirement, rather than using them as an emergency life line once the “nest egg” has been exhausted.

Through the use of a strategic FHA insured reverse mortgage, retired homeowners are able to use the equity in their homes as an available line of credit for life – without being required to make a monthly mortgage or loan payment. That’s right – a reverse mortgage CAN provide Colorado’s seniors with guaranteed cash flow for life – as long as they continue to live in the home and keep their property taxes, homeowners insurance, and HOA fees up to date. The funds can be used for whatever the borrower deems fit – additional income, medical expenses, vacations, home repairs or modifications, gifts, etc.

Reverse mortgages are available to homeowners 62 and over with no income and credit requirements. This FHA insured loan offers funds through a lump sum or monthly installments without a monthly mortgage or loan payment. 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 Cheyenne and Laramie, Wyoming. Click here to contact Jan and learn if reverse mortgage is right for you.

Reverse Mortgage in Retirement : Now or Last Resort?

Posted on May 15, 2014May 27, 2014 by janjordan

Research suggests that many baby boomer and beyond retirees will not be in a financial position to avoid using home equity as part of their retirement strategy, meaning they will be increasingly turning to reverse mortgage. Senior homeowners are more commonly seeking advice from their retirement planners on whether to consider a reverse mortgage now proactively, or later as a last resort. So, what is the right answer?

A recent study compared the efficacy of two simple strategies: (1) establish a reverse mortgage line of credit at age 62, under current lending and interest rate environments – but do not use the line of credit until the retirement investment portfolio is exhausted. Or option (2) wait until the investment portfolio is exhausted, if ever, and establish a reverse mortgage line of credit then, and subsequently begin to use the proceeds to support income needs until that line of credit is exhausted.

Conclusion: The results showed an estimated 30-year survival advantage for early establishment. This holds true under various future interest rate and home appreciation scenarios for real withdrawal rates between 4 percent and 6 percent. However, postponing the establishment of an HECM line of credit should be considered when the adviser and/or client has good reason to believe that home occupancy after loan origination is likely to be short. In a recent blog article, I discussed how a reverse mortgage line of credit increases each month, and the feature is more valuable the longer the borrower wants to stay in their home. Read it here.

Get the full report on this study from Journal of Financial Planning here.

Seniors 62 and over are eligible for a reverse mortgage regardless of income or credit. Use of home equity as part of a retirement planning strategy is becoming more and more realistic as baby boomers face an uncertain economy. Contact me for more information.

3 Things to Do with a Reverse Mortgage in Colorado

Posted on March 10, 2014June 17, 2014 by janjordan

One of the best parts of a reverse mortgage is the borrower(s) can do anything they’d like with the funds – while also living mortgage payment free. In Colorado, seniors are more active than ever, whether it be traveling, home improvements, or visiting with family and grandchildren often. As several Colorado cities always make the list of the best cities to retire (including Fort Collins & Loveland in this survey and Firestone, Parker & Louisville in this one) there couldn’t be a better time or place to enjoy life.

Here are 3 fulfilling options seniors are using their reverse mortgage funds for:

Take that trip they always dreamed of – After years of working hard, saving for retirement, and raising a family, some reverse mortgage borrowers are using a portion of their funds to take the bucket list vacation they’ve always dreamed of. This option becomes less probable as they age and makes for a fantastic celebration by the more active seniors.

Visit with loved ones – Whether it’s a sister who hasn’t visited in 10 years, or children and grandchildren, or long lost friends, using reverse mortgage funds to visit with loved ones is a very common today. Travel can be expensive and it holds us back far too often from the visits that mean the most to us, especially as we age.

Make home repairs or upgrades – After a life of caring for others, senior homeowners often find parts of their home may have been neglected. When using a reverse mortgage to tap into home equity without a subsequent loan payment borrowers often make those repairs or upgrades they have been longing for. Whether it’s a sunroom addition or a kitchen remodel, or just dutiful repairs, this is never a bad option.

Reverse mortgages are available to homeowners 62 and over with no income and credit requirements. This FHA insured loan offers funds through a lump sum or monthly installments and eliminates monthly mortgage payments. 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. And 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. Click here to contact Jan and learn if reverse mortgage is right for you.

How to Alleviate HELOC Payment Shock with Reverse Mortgage

Posted on January 27, 2014June 17, 2014 by janjordan

At the peak of the housing boom thousands of Loveland and Fort Collins homeowners tapped into their biggest asset – their home – and took out a home equity line of credit or a HELOC. Many of these loans are set to amortize after 10 years, meaning these borrowers are about to see some serious payment shock as their loans readjust and their payments now include interest and principal. The Office of Comptroller of the Currency estimates that 60% of all HELOC balances will start amortizing between 2014 and 2017, and resetting to higher payments could cause a jump in delinquencies. In addition, analysts at Moody’s Investor Services are warning banks of impending losses, worrying this situation may prove problematic, just as payment adjustments during the 2008 housing crisis did.

For retirees already living on a fixed income, borrowers may scramble to make these adjustments fit into their budgets. But homeowners 62 and over have another option – reverse mortgage. With a reverse mortgage seniors have the ability to not only alleviate any impending HELOC payment shock but also live mortgage payment free throughout retirement – all with minimal income and credit requirements. Once a homeowner has obtained a reverse mortgage, they are able to receive their funds in a one-time lump sum or as monthly payments made directly to them.

This scenario is also something to consider for homeowners currently considering a HELOC to make home repairs or improvements. Considering the difference between a home equity loan and a reverse mortgage is important when developing a long term plan. Learn more about HELOC vs Reverse Mortgage here.
Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

Frequently Asked Questions – Part 2

Posted on March 1, 2013June 23, 2013 by janjordan

This is the second in a three part series of frequently asked questions about Reverse Mortgage. You can find Part 1 here and Part 3 here. If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Can I get a Reverse Mortgage even if I have an existing mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. The existing loan will be paid off first with the reverse mortgage funds, then the remainder of the funds will be given to you. This scenario would apply as long as the amount of the reverse mortgage is larger than the existing loan. For example: if you owe $100,000 on an existing mortgage and you qualify for $125,000 under the reverse mortgage program, under these circumstances you would still have $25,000 left over to do with as you wish AND you would no longer have a mortgage payment.

Continue reading “Frequently Asked Questions – Part 2” →