Purchase Reverse Mortgage or Post Sale Reverse Mortgage?

Seniors sold sign

I often see clients considering downsizing and selling their existing home to purchase a more modest home.

The decision: “Do I sell my existing home and pay all cash for the replacement home and THEN get a reverse mortgage line of credit or, do a reverse mortgage for purchase on the replacement home?

As well as being a licensed loan officer I am a real estate broker and have known in theory that it is risky to pay all cash on the new home and close escrow ASSUMING the replacement home will qualify for a reverse mortgage post sale, but have not had actual examples until, unfortunately, this year where I had several examples.

I did not meet with the individuals in these examples prior to the purchase of their replacement home; they came in post close of escrow to inquire about taking out a RM credit line. The sale of their prior home did not cover the price of the replacement home, causing them to dip heavily into savings accounts to pay all cash. In doing preliminary research on their properties I had to deliver the bad news: their replacement properties would not qualify for a reverse mortgage and they were shocked.

How could a reverse mortgage for purchase process, rather than paying all cash, have protected these folks? The RM for purchase process protects an individual via the real estate purchase contract contingency clause, giving them several weeks or more to go through the loan qualifying process with a loan officer, appraiser and underwriter working on their behalf to determine if the property and they will qualify for a RM. If the property and they receive loan approval they can confidently close escrow knowing their financing will be in place. However, if going through the process it is determined the subject property or they will NOT qualify for a reverse mortgage, the individual can walk away during the contingency period and not lose their earnest money deposit.

It’s wise to see a loan professional well in advance of selling an existing home and looking for a replacement as there are numerous RM pre-approval steps required.

 

Shawna McDonald, License Loan Officer, has completed hundreds of reverse mortgage loans and is approved with 10 reverse mortgage lenders. She is available by appointment. Sierra Foothills Reverse Mortgage 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. Her website is www.SierraFoothillsReverse.com. NMLS #271335 | CalBRE #00585530 Borba Investments Inc. Company NMLS #76801 |Company BRE # 01446165 These materials are not from, and were not approved by HUD or FHA

 

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Reverse Mortgages & Long Term Care Insurance

beach What does this picture of the beach have to do with reverse mortgages and long term care? Nothing, but I have to get out of this heat and to a beach soon, just so you know…..

Ok, onward. I recently wrote an article for The Union, our general circulation newspaper here in Grass Valley, California exploring the topic of seniors’ potential long term care needs, long term care insurance, and reverse mortgages, written from the prospective of how my client expressed to me her thoughts on taking out a reverse mortgage credit line for her “maybe” future need of in home care vs. taking out a long term care insurance policy:

Recently a client reinforced the trend I’m seeing for clients’ to use a reverse mortgage credit line as not only a source of income as needed, a standby source of emergency funds, but also as an alternative to long term care insurance premiums.

It is estimated that approximately 70% of people turning 65 will need long-term care at some point in their lives. It is an uncertain expense, no life crystal ball. There are various methods to fund the cost: long term care insurance, Medicaid, self funding through savings, liquidation of personal assets, and/or a reverse mortgage credit line.

Genworth Financial, a long term care insurer, estimates approximately $45,750 annually for in home health aide, $80,300 annually for shared nursing home rooms, while assisted living costs vary dependent on the level of care.

Long term care insurance did not appeal to her: paying premiums for an insurance she was not sure she would ever need, coupled with the risk of rising premiums.

Medicaid would require her to liquidate nearly all her assets to qualify, wanting assets for heirs, she ruled out this option.

She owns her home outright, has retirement income and IRA assets, yet she decided to obtain a RM credit line loan as a standby in the event she needs in home care. The growth feature of the RM credit line was an added bonus: on amortization charts she was able to see how her reverse mortgage credit line borrowing ability grew over time. What was also appealing to her: she did not have to use her reverse mortgage credit line unless in home care was required, and if it was, then she controls the decisions and spending for care, thus eliminating having to negotiate with an insurer, and that she will only accrue an interest charge on funds actually borrowed.

Should she not need in home care, her untapped RM credit line will revert to inheritable equity for her heirs upon the home’s sale. As with all reverse mortgage loans she retains ownership and control of her home.

Shawna McDonald, Loan Officer, has successfully completed hundreds of reverse mortgages and is approved with 9 reverse mortgage lenders, ensuring clients receive low fees and great rates. Her office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N Grass Valley, (530) 497-3010. Her website is www.SierraFoothillsReverse.com.

The opinions expressed here are solely those of Shawna McDonald, Loan Officer/Real Estate Broker Associate. Copyright © 2016. Shawna McDonald NMLS #271335 CA-BRE # 00585530 DBA Sierra Foothills Reverse Mortgage, Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ Company MLS #76801

 

 

Purchase Reverse Mortgages Grow in Popularity

Senior in a new home

BUYING A HOME IN RETIREMENT ~ But I Thought I’d Have to Pay all Cash !

 

This real estate season of 2016 I am seeing home buyers 62 years of age and older utilizing in greater numbers the Reverse Mortgage Purchase Loan; a loan that expands home buying power and conserves a nest egg from the sale of an existing home. Here’s an example:

Wanting to downsize, Karen and Jim are retired 76 year olds whose home sold for $550,000.Their replacement home costs $400,000, however their retirement income does not qualify for a conventional loan, they thought their only option was to pay cash, doing so leaves them $150,000 from their home sale, not as large a nest egg as hoped for.

Enter the RM Purchase Loan:  income qualifying is to prove ability to meet on-going property taxes, home insurance, (and HOA) obligations; thus qualifying for a RM Purchase Loan is less stringent than for a conventional loan. On a home valued at $400,000, Karen and Jim’s down payment is $171,000 (43% of the purchase price), a far cry from paying all cash of $400,000. The balance of the purchase price plus fees is their RM mortgage. Just as with all reverse mortgages, they will be monthly mortgage payment free.

 THE BIG NEWS: instead of having a nest egg of $150,000 from the sale of their original home had they paid all cash for the replacement home, the RM Purchase Loan allowed them a residual nest egg of $379,000. Could a RM Purchase Loan have been used to buy a higher priced home than their original home of $550,000? Generally speaking yes; folks I have worked with have obtained their dream home with a RM Purchase Loan.

A RM Purchase Loan is titled with Karen and Jim as owners of the home, (they do NOT give up ownership of the home, a common RM misconception). The home can be sold by them or heirs, the reverse mortgage paid off, and they or heirs keep the remaining equity. As with any home loan, it is required that property tax, maintenance, and home insurance obligations be kept current.

This is an exciting program opening up more possibilities for seniors, give me a call if you would like to see your personalized loan scenario and obtain program details.

Shawna McDonald, Loan Officer has successfully completed hundreds of reverse mortgages. Approved with 8 of the largest reverse mortgage lenders in the nation, she is available by appointment; her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main St. Suite N, Grass Valley, (530) 497-3010. The website is www.SierraFoothillsReverse.com.

INMLS #271335 BRE 00585530 Borba Investments, Auburn, CA Company NMLS #76801 Company BRE #01456165

Clearing Up Common Misconceptions About Reverse Mortgages

SPRING IS HERE !

Misconceptions: The Lender Owns My Home

False. You remain on title as the owner of your home. You can decide to sell at any time. You are responsible for maintaining the home, paying property taxes and insurance, and HOA dues if applicable, all of which are standard clauses in any home loan.

 Misconceptions: My Kids Will Have To Repay My Loan out of Their Own Funds

False. Reverse mortgages are non-recourse loans. Which means that when the home is sold to repay the RM debt any remaining equity after the sale of the home goes to the original owner(s) or if they have passed away, the remaining equity goes to the designated heir(s). If the loan balance exceeds the sale price, there is no debt liability to the heirs, FHA insurance pays the remaining debt liability.

 Misconceptions: You Can’t Get A Reverse Mortgage If You Have a Mortgage

False. A Reverse Mortgage must be in first lien position, which means your existing mortgage will be repaid out of the proceeds of the RM loan, with the difference going to you as either a lump sum or set up as a residual line of credit to be drawn and spent over time at your discretion. If there is no mortgage on the home just a RM credit line is set up.

 Misconceptions: If You Are Not Low Income, You Do Not QualifyFalse. In fact an increasing number of Americans, upon advice of their financial planners, are obtaining Reverse Mortgage lines of credit to safeguard their retirement investments from excessive draws and the tax liability these draws may incur. Reverse mortgage proceeds are not taxable.

Misconceptions: If I Live Too Long I Can Get Evicted

False. You, the homeowner, cannot get evicted regardless of your age, this is a lifetime loan, provided you adhere to the rules of your loan: pay property taxes and insurance, maintenance and HOA dues; these are all requirements of real estate loans in general.

Misconceptions: I Can’t Use the Money at my Discretion

False. It’s your money. Whether you want to remodel or pay for upkeep of your home, pay for your child’s wedding, go on vacation, or leave some or all of the credit line funds untapped and available for emergencies, there are no restrictions on what you can do with your funds.

 

Shawna McDonald Loan Officer, has successfully completed hundreds of reverse mortgages and is approved with 8 reverse mortgage lenders, ensuring clients receive low fees and great rates. Her full service office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. Her website is www.SierraFoothillsReverse.com.

The opinions expressed here are solely those of Shawna McDonald, Loan Officer/Real Estate Broker. Copyright © 2016. All Rights Reserved. Shawna McDonald NMLS #271335 CA-BRE # 00585530 DBA Sierra Foothills Reverse Mortgage and Borba Investments Inc, DBA MLS Reverse Mortgage Auburn, CA NMLS #76801 BRE #01456165 ~ HUD approved lender.

The Changed Faces of Reverse Mortgage Loan Clients

fall leaf candles  I  hope that when I retire I can do crafty things like, say in October, make leaf lined candle jars, because I just never seem to have time  while working full time at what I love:  helping Grass Valley, Nevada City and Penn Valley seniors stay in their homes monthly mortgage payment free, with a reverse mortgage, the “peace of mind” loan. Truth be told, I love what I do so much that I just may never get to craft leafy type things anytime soon.

If you want to skip this blog post and go directly to my website or contact me for an appointment, here you go: http://www.SierraFoothillsReverse.com or (530) 497-4010.

This is a non-technical post, lately I’ve done mostly technical type blog posts about different aspects of reverse mortgages, but as I enter my 8th year of full time specialization in reverse mortgages I’m reflecting on the changed faces of whom I am helping with the “peace of mind loan” once the loan is complete.   I have had almost all my clients of late call it such when we’ve either paid off their existing mortgage, created a credit line for them, or a combination of both, a few opt for lifetime incomes. When I check back in with clients, to a person, they all express the same things: that they were losing sleep over a depleted savings accounts and worrying about the inevitable repair, health crisis, or need for a newer car, all things in the back of their minds they knew could not be covered by savings, and that this loan had restored their peace in life and ability to enjoy life fully without nagging worry and sleep loss. Or, for the some of my clients, who could cover these types of expenses, but to do so the concern was they had to take more than mandatory draws out of a retirement fund, and then often they worried that they had “wasted money” to pay for a tax consequence in doing so.  Or the worry over NDFA, (No Damn Fooling Around) industry acronym for property taxes are due in November, must be paid by December, due in February must be paid by April. Ugh, worry over property taxes or the ever increasing fire and casualty costs that come with living in our beautiful mountain area, that’s no fun.

Often in the initial meeting or workshop seminar the clients I meet have worried faces, when the loan is complete there is a spring again in their step, a look on their faces of a weight lifted. Years ago I owned a successful real estate company in Sebastopol in Sonoma County, few women back then in all of Sonoma County had accomplished this, I was proud of having done so. Of course I was happy when the day came to hand over the keys to excited new homeowners, but nothing compares to the feeling I get now when I call clients to tell them we’ve just completed their reverse mortgage loan, and then a week or so later we meet for me to give them a thank you gift, because that is when I see happier faces and hear them feel free to express to me their feelings of relief and peace of mind restored, that’s their gift to me.

hammock

It’s a small community, even further down the line I run into my clients here and there post loan, that’s when I receive another  gift from clients, when they tell me how their life has changed post reverse mortgage: what new things they now can do, share with me a picture or two of a trip to see grandchildren, a motorhome taken out of storage and pictures of a trip, (where as before the gas had become too much of a budget buster to take trips at all), a falling apart deck now repaired and used for bbq’s and family gatherings, one set of clients whose mortgage was paid off through a reverse mortgage were still working part time well into their 70’s to cover the monthly payment, their comment was “we now have time to lay in a hammock and read a book overlooking the pond on our land, in our home”. Yes, I’m the lucky one indeed.

~Shawna McDonald, Loan Officer NMLS #271335, Real Estate Broker 00585530

Sierra Foothills Reverse Mortgage 412 E. Main Street, Grass Valley 530-497-3010

http://www.SierraFoothillsReverse.com

Chicago Tribune: Reverse Mortgages Becoming Better Options for Seniors

The “windy” city’s largest newspaper recently printed this article. I was just thinking how lovely it would be if our next national reverse mortgage lenders convention were in Chicago, they have some pretty amazing restaurants, not that they let us out much from seminars when we attend one of these conventions, maybe I could stay a little longer !  I like the citizens’ feistiness too, here is a picture of seniors protesting cuts to Medicare. We boomers and our protests….carry on!

Senior citizens in Chicago Illinois protesting cuts to MediCare

If you are not interested in this article but would like to learn more about my 7 years of reverse mortgage experience and local Grass Valley Reverse Mortgage office click here:  http://www.SierraFoothillsReverse.com or even easier, just call me: 530-497-3010.

Ok, I’m back on task…Reprint form Chicago Tribune recent article:

Reverse Mortgages are Becoming a Better Option for Seniors

Elliot Raphaelson, Tribune Content AgencyThe Savings Game

In past columns, I have generally been skeptical of reverse mortgages. However, the Reverse Mortgage Stabilization Act of 2013 introduced more customer safeguards. And some lenders are offering better terms and lower upfront costs.

If you do your homework, you might find a reverse mortgage that provides you with benefits that other financing alternatives do not provide. A more reliable line of credit is one of the more important potential advantages.

I highly recommend “What’s the Deal with Reverse Mortgages?” (People Tested Media), a new book by Shelley Giordano, principal of Longevity View Associates, a reverse mortgage consulting firm, and chair of the nonprofit Funding Longevity Task Force. It will help you understand options such as fixed vs. variable loans, the nuances of using credit lines and all of the mortgage fees.

Giordano discusses the merits of home equity lines of credit (HELOCs) vs. those of home equity conversion mortgages (HECMs, FHA-insured open-ended reverse mortgages). HELOCs, she argues, have significant disadvantages. Borrowers have to repay principal and interest, whereas reverse mortgage borrowers are under no such obligation. Financial institutions can cancel HELOCs if they believe that borrowers have insufficient income or assets. Borrowers with a HECM line of credit don’t have this vulnerability.

The Reverse Mortgage Stabilization Act of 2013 provides some safeguards for both consumers and lenders. The act introduced financial assessments as the basis for HECM loan approvals. These assessments were developed to ensure that individuals would have the financial wherewithal to maintain their homes, pay real estate taxes and homeowner insurance. Prior to this reform, reverse mortgages had a high rate of foreclosure. As long as individuals can meet these requirements, and maintain residence in the home, they will not face foreclosure.

The Act of 2013 also addressed a prior disadvantage. Previously, if the only individual named in the mortgage agreement died, the surviving spouse would have to repay the outstanding loan in order to remain in the home. Under the new provisions of the act, a non-borrowing status (NBS) was created that allows the widow(er) to defer due and payable status provided that within 90 days after the death of the last surviving borrower, he or she establishes legal ownership or other ongoing legal right to remain in the property.

For seniors looking to alleviate tight budgets, I believe that options other than reverse mortgages should be considered, such as downsizing or selling and renting an apartment. Consider your health. Reverse mortgages lose their primary advantage if you cannot stay in the residence over the long term. If it is important for you to leave home equity to your heirs, then reconsider using a reverse mortgage, because there is no guarantee that there will be any equity left after your death.

(c) 2015 ELLIOT RAPHAELSON. DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.

Copyright © 2015, Chicago Tribune

Wall Street Journal: Reverse Mortgages Can Help Buffer Against Market Swings

golf swingNo No I’m not writing about that kind of swing, (but wow, look at all that green grass, in our drought stricken dog days of August, this looks inviting.)

Seniors on a Swing  No, No, I’m not writing about THAT kind of Swing……

I’m writing about a trend I see with my reverse mortgage clients and that was echoed in the recent WSJ article below:          The reverse mortgage credit line being utilized as a valuable tool in an overall retirement plan strategy: to have it on standby when the stock market takes wild swings like it has the last few weeks, to supplant monthly income from the credit line and halt  portfolio draws when it makes sense to halt portfolio draws for a period of time while the market has time to stabilize and recover. This use of the RM credit line as a safety net buffer keeps clients’ retirement life style uninterrupted with a sudden reduction in stream of income.

Once thought of as a “loan of last resort”, increasing numbers of savvy financial planners are encouraging seniors to establish a standby reverse mortgage line of credit as a hedge against the market swings such as we saw last week. Reverse Mortgage Daily expanded upon the WSJ article and I’ve included it here for your review:

(If you would like to skip the article and go directly to information on my Grass Valley, CA reverse mortgage office, and services I offer here locally to Nevada County please click on this link: http://www.SierraFoothillsReverse.com. As Nevada County’s ONLY office specializing exclusively in reverse mortgages, I bring to the table 7 years of RM experience and over 400 successfully navigated and closed reverse mortgage loans)

WSJ: Reverse Mortgages Can Help Buffer Against Market Swings

Reverse mortgages have a place in the conversation about retirement and market swings, prompted by the recent global selloff resulting from Chinese currency pressures. At least, that’s the message presented by Prof. Wade Pfau, of American College of Financial Services in Bryn Mawr, Pa., who was interviewed by the Wall Street Journal this week.

Buying into market dips may be prudent for young investors, WSJ’s Money Beat blog notes, but for those approaching—or already in—retirement, the same rules do not apply.

“That’s not merely because stocks can take years to recover from losses and you have fewer years left as you age,” columnist Jason Zweig writes. “The problem is what retirement researchers call ‘sequence risk.’ The order in which stocks earn good or bad returns can matter—a lot.”

If they rely solely on stock withdrawals, retirees can be forced to sell their investments during market downturns, which can take a toll on the value of their assets.

That’s where a reverse mortgage could come in for some, Pfau tells the WSJ.

“Another possibility, [he says], is to consider taking out a line of credit under the Home Equity Conversion Mortgage program guaranteed by the federal government, using it only during periods when the value of your stock portfolio is declining,” the article writes.

The strategy is one that some financial planners have recommended as a “standby” strategy to weather market swings.

“This way, you reserve the right to borrow against your home at reasonably competitive rates,” WSJ writes. “But you would draw on the money only at times when you would otherwise have to lock in losses on your stock portfolio.”

Written by Elizabeth Ecker http://www.reversemortgagedaily.com

Comments by Shawna McDonald, Loan Officer, NMLS 271335 Sierra Foothills Reverse Mortgage of Beautiful downtown Grass Valley: 412 E. Main Street, Grass Valley, 530-497-3010