Tag: reverse mortage

Reverse Mortgage and Your Taxes

Posted on by janjordan

reverse mortgage loveland colorado fort collins longmont greeley boulderThere 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 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 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 Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado. you.

I Have A Reverse Mortgage On My Home – Can I Still Sell It?

Posted on by lesley

reverse mortgage loveland fort collins greeley longmont westminster coloradoFor many that obtain a reverse mortgage, the plan is to stay and age at home, but sometimes reasons come up that the homeowner will want or need to sell the home.  Is this possible if there is a reverse mortgage on the home?  And what does it look like?

 

Can a home with a reverse mortgage be sold?

 

Yes, the home can still be sold at any time, just like with a traditional mortgage.  When the home is sold, the borrower will repay the loan balance and any outstanding closing fees from the proceeds of the sale.  Any additional funds from equity will be theirs to keep.

 

Are there penalties?

 

No, there are no penalties when selling a home that has a reverse mortgage loan on it.

 

How are the funds from the sale dispersed?

 

When the home is sold, repayment of the reverse mortgage loan will be first, followed by any outstanding liens or other obligations, then the homeowner will keep any additional proceeds.

 

Do I have to notify the reverse mortgage lender of my intent to sell?  

 

Not necessarily, but it is a good idea to start there and find out what the outstanding balance is.  Having all the facts upfront will help with decision making all around.

 

Bottom line: Selling a home that has a reverse mortgage loan against it is very similar to selling a home that does not have a reverse mortgage.  As long as you are aware of the few differences, it is a smooth process.

 

Reverse mortgages are available to seniors 62 and over as long as the home the loan is being used against is the primary residence and there is some equity available.  The funds are accessible to the borrower in a variety of ways including monthly installments, line of credit, lump sum, and even a tool to purchase a new home.

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

What is an FHA Insured Reverse Mortgage Loan?

Posted on by janjordan

reverse mortgage loveland fort collins greeley longmont westminster coloradoIf 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 Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Six Ways to Use a Reverse Mortgage to Protect Retirement Income

Posted on by janjordan
reverse mortgage loveland fort collins greeley longmont westminster colorado
Wade Pfau, Ph.D., CFA

Reverse mortgages have long been shunned by many financial professionals, often thought of as a lifeline for desperate and broke seniors.  This thinking wasn’t misplaced.  Reverse mortgages were often often only used for these type of scenarios.  But as retirement planners are facing the harsh reality of slower than anticipated growth in investments and a stagnant economy, they are fast beginning to understand how under-utilized home equity and reverse mortgages have been – and how they can be the missing puzzle piece for so many of their clients.

In some latest research, Wade Pfau, a professor of retirement income at the American College of Financial Services, examined six ways to use a reverse mortgage as part of retirement-income plan.

Here are those six strategies:

  • Use home equity first: With this strategy, you’d open a line of credit at the start of retirement, and use this line to pay for all your retirement expenses until the line of credit was fully used up. This allows more time for the investment portfolio to grow before being used for withdrawals after the line of credit is depleted, wrote Pfau.
  • Use home equity last: Here, you’d open a line a credit at the start of retirement and only use it after your investment portfolio was depleted.
  • The Sacks and Sacks Coordination Strategy: With this strategy, you’d open a line of credit at the start of retirement, and use the line of credit, when available, following any years in which the investment portfolio experienced a negative market return, wrote Pfau. No efforts are made to repay the loan balance until the loan becomes due at the end of retirement, he wrote.
  • The Texas Tech Coordination Strategy: This method is a bit more complicated. With this one, you’d open a line of credit at the start of retirement and then each year you’d analyze whether you can keep withdrawing money from your investment portfolio at the desired rate over a 41-year time horizon. If the remaining portfolio balance is less than 80% of the required wealth you’d tap the line of credit, when possible. And if the portfolio balances is greater than 80%, you’d pay down provided your portfolio did not fall below the 80% threshold the balance on the reverse mortgage balance. This, Pfau wrote, would provide more growth potential for the line of credit.
  • Use tenure payment: Here you’d open a line of credit at the start of retirement and a receive a fixed monthly payment for as long as the borrower is alive and lives in the house. And spending needs over and above that reverse mortgage payment would be covered by the investment portfolio when possible, Pfau wrote.
  • • Ignore home equity: This strategy makes no use of home equity, and Pfau only examines it to show the probability of a retirement-income plan succeeding when home equity isn’t used.

So what did Pfau find?

Generally, strategies which spend the home equity more quickly increase the overall risk for the retirement plan, he wrote. More upside potential is generated by delaying the need to take distributions from investments, but more downside risk is created because the home equity is used quickly without necessarily being compensated by sufficiently high market returns.

Meanwhile, he wrote, opening the line of credit and that start of retirement and then delaying its use until the portfolio is depleted creates the most downside protection for the retirement-income plan.

Reverse mortgages are available to seniors 62 and over as long as the home the loan is being used against is the primary residence and there is some equity available.

How to Use Home Equity for Retirement Security

Posted on by janjordan

Reverse Mortgage Colorado Financial PlanningDid you know home equity can be used to reduce the overall risk of your retirement plan?  Your house is a great asset that for many years has been overlooked in financial planning for seniors. This is making a sharp turn lately as retirement experts are beginning to understand how tapping into home equity via a reverse mortgage should never be underestimated.

Let’s take a look at where most seniors sit currently when it comes to retirement…

• Only 22 percent of workers are very confident they will have enough money in retirement.
• 45 percent of Americans have saved exactly nothing—zero.
• The expected lifespan of women is 20 years past the age of retirement, and two years longer than men.
• The average retiree can expect to spend $220,000 in out of pocket health care costs during retirement.
• Medicare pays for an average of 62% of a seniors health care costs, leaving 38% to come out of pocket.
• 36% of up and coming retirees will rely on Social Security as their sole income.

A reverse mortgage can help in many different ways – and the how the funds are spent is entirely up to the borrower.  Whether it’s a monthly payout or a line of credit, when combined with other retirement planning tools, reverse mortgage can allow retirees financial security during the years they worked so hard to enjoy.  Reverse mortgages are available to senior homeowners 62 and over – even married couples.  They will live mortgage payment free, always retain the title to the home, and because these loans are non-recourse, no one – including heirs – will find themselves saddled with the debt after the owner passes.  There are also various solutions for adult children or other family members who may want to keep the home in the family.

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.

What Happens to a Reverse Mortgage After Owners Pass?

Posted on by janjordan

The Reverse Mortgage Appraisal Fort Collins Loveland Longmont Greeley ColoradoA 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?
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.

 

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.

 

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 Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Reverse Mortgages Helping the Elderly Age at Home

Posted on by janjordan

reverse mortgage colorado fort collins loveland greeleyAs traditional forms of elder care continue to be overshadowed by numerous other options, reverse mortgage is often helping senior individuals stay in their homes while they age.  Since reverse mortgages can open up opportunity to turn home equity into liquid cash, without having to move or make a mortgage loan payment, seniors and their families are using this opportunity to pay for care that would otherwise not be covered by basic Medicare or Medicaid.

 

Traditionally, “long term” elder care takes place in a nursing home or assisted living facility.  Medicare or Medicaid will often cover these expenses. but there is little public assistance for “in-home care”, although it varies from state to state.  As economic woes lend to retirement fears, reverse mortgage is more commonly being utilized for what it can do best, provide security for those most in need and offer a longer-term lifeline without disrupting the lives of the recipients.

 

Studies have shown that the benefits of aging in place can be enormous for the right candidate.  Not only can a move be both emotionally and physically challenging on a senior, especially one with medical concerns, it’s known that the quality of life tends to increase when seniors maintain their independence and their community ties.  Benefits include:

  • Comfort.  We all know the saying “There’s no place like home”, but this is often especially true when a senior has lived in a home for years or has lost a spouse.  Uprooting from such familiarity can have drastic affects.
  • Community Ties.  More often seniors are developing strong community ties well into their retirement years.  Family and friends are wonderful for grounding an aging loved one.
  • Independence. Remaining independent keeps seniors healthier than ever realized before.  It also allows them to continue doing many of the things they have always done and enjoyed.
  • Mentality. Our home life strongly impacts how we feel mentally. If a senior stays home to age they are likely to feel much better and happier than one that has been put into a nursing home or assisted care facility.

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Reverse Mortgage For Purchase – What You Need To Know

Posted on by janjordan
Colorado Reverse Mortgage
Colorado Reverse Mortgage

We’re all familiar with the two most common options to purchase a home – take out a mortgage loan or pay cash.  But for seniors 62 and over, there’s another option – the Reverse Mortgage for Purchase program (aka HECM for Purchase).

 

Looking for a home in Fort Collins, Loveland or Longmont, Colorado but finding it’s a bit out of your price range?  Because the borrower is responsible for only the down payment on the home and will have NO mortgage payments, a Reverse Mortgage for Purchase can help with this too.

 

What is needed to qualify for a Reverse Mortgage for Purchase loan?

  • you must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not)
  • the home you are purchasing must be your new primary residence
  • must meet the FHA’s new reverse mortgage credit and income guidelines
  • you must have your “required investment” (down payment) from a HUD allowable source. The funds cannot be borrowed. The required investment can come from the sale of a currently owned home or asset, a gift or inheritance, or money you have had for at least 90 days.

Who owns the home that I am purchasing?

 
As the borrower and homeowner, you will always retain the title to the home, just like any other type of home loan.

What will my personal ongoing obligations be after purchasing a home?

 

It’s very similar to if you owned your home free and clear – you will NOT have a monthly mortgage payment.  But as the homeowner, you will be responsible for paying property taxes, home owner’s insurance, HOA fees when applicable, and basic upkeep including home maintenance and utility payments.

When will the loan become due and payable?

 

With a Reverse Mortgage for Purchase the loan does not reach “maturity” until:

  • the last remaining borrower passes away
  • the homeowner sells the home
  • the last remaining borrower leaves the home for 12 consecutive months due to illness
  • the homeowner defaults on property taxes or insurance

Will I need to sell my my current home residence to qualify?

 

Simply put, no. As long as the loan on your current residence is not an FHA loan and your required investment comes from a HUD allowable source, you can keep your current residence – but the new home will need to be your primary residence. Your lender will ensure you are financially stable enough to support the ongoing obligations on all properties you own. If you decide to keep your current residence as an investment, rental, or vacation property – or you are awaiting the sale of home, it is rarely a problem.

What types of properties can I purchase?

 

Single family homes, town homes, and FHA approved condos are all eligible properties. The home being purchased will need to be the buyer’s primary residence.

Can I use the loan to build a new home?

 

These loans cannot be used as construction loans. Homes must have a Certificate of Occupancy issued before a loan application can be started, but as long as that is in place, it is fine if the home is new construction.

How is the “Required Investment” amount determined?

 

The “required investment” or down payment is determined by a calculation set by HUD based on:

  • The lesser of the sale price or appraised value
  • The age of the youngest of the borrowers
  • The current expected interest rate

What may disqualify me from a Reverse Mortgage for Purchase loan?

  • Foreclosures within the past 3 years.
  • Unresolved bankruptcy
  • Unpaid Federal obligations – i.e. federal taxes, defaults on prior government backed loans (such as student loans or government backed mortgages)
  • Income too low to support multiple properties
  • Unpaid judgments or tax liens

What is the HUD required “Reverse Mortgage Counseling”?

 

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These third party, not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process.  The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.

 

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.

 

Finding A Reverse Mortgage Lender in Colorado

Posted on by janjordan

reverse mortgage colorado loveland fort collins longmont greeley boulderFor 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 or have a substantial amount of equity in it and be at least 62 years old.  In general, the older the borrower (or the youngest borrower in the case of couples) and the more valuable the home, the more funds are 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 red flags.  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 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 Funds In-Home Senior Care

Posted on by admin

reverse mortgage colorado fort collins loveland greeleyReverse mortgage has long been used to help seniors convert home equity into cash, and the funds can be used for anything the borrowers sees fit.  The reason homeowners are looking to tap into these funds varies widely, but they’re commonly used to pay for extraordinary out of pocket medical expenses, including in-home senior care.

 

A common question is whether the amount of money received will be enough to cover the medical needs.  Often it is – whether it is covering actual medical costs, live-in care, or drop-in care.  The amount of money available to the borrower depends on the borrower’s age, the appraised value of the home, any outstanding mortgage balance, and current interest rates.

 

To best determine how much money will be needed for in-home care is to do some research.  Find out what options are available from your local home care services.  Talk to more than one.  Get referrals from those you know and trust.  Ask for an estimate of cost.  Work with a reputable reverse mortgage specialist to ensure no one is being misled.  They will be able to help break down the numbers long term to determine what is right for you.

 

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.