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!

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.

In prior columns, I argued that one of the significant disadvantages of HECM’s was the high initial closing costs. Giordano says that some financial institutions are offering reverse mortgages with closing costs as low as $250. However, the tradeoff is higher interest rates. In my opinion, if you intend to maintain a line of credit for a long period of time, then the HECM has significant advantages over the HELOC, if you can obtain a HECM with very low (or no) closing costs. (Editorial Note: Come shop with Sierra Foothills Reverse Mortgage located in downtown Grass Valley and I’ll shop EIGHT of the largest reverse mortgage lenders in the nation for YOU, and I’ll present you with your interest rate and fee options!)

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

• Federal Housing Administration

New Article Goes Main Stream: Pros and Cons of a Reverse Mortgage

Want to skip the article and learn more about Reverse Mortgages from a Grass Valley Specialist? Visit my website

http://www.SierraFoothillsReverse.com

I must admit, in the seven years I’ve specialized in reverse mortgage there have been some articles published about reverse mortgages that were so full of inaccuracies that it was truly jaw dropping. I had wished I could call the editor or writers of such articles and tell them to “take a hike”. In recent years our national organization, NRMLA: National Association of Reverse Mortgage Lenders, has become proactive in contacting news organizations to clarify or rebut articles which are untrue, misleading or carry outright mischaracterizations of the rules and options of a reverse mortgage. I think these efforts have been fruitful because in the last year I see news articles which are not necessarily “rah rah” reverse mortgage, but balanced and accurate about this loan product. I’ve included in this blog post one from the publication “Equities.com”  which is a concise and accurate discussion of the pros and cons of a reverse mortgage.

Yesterday I met with several home owners who were considering putting up there homes for sale so that they could unlock the thousands of dollars they have accumulated as home equity. One came to me via a referral from a past client, the other from a financial planner. Both were single individuals who dearly love their homes but had not previously considered a reverse mortgage because they were a bit “scary”. My monthly workshop seminars were not at convenient times for them,  so they came into my Grass Valley office and I spent and hour with each client explaining the program’s history, current status, the overall program rules and safeguards, and the types of reverse mortgage loans now available that would fit their particular retirement goals, then sent them off with an information packet and dvd to document and review what we discussed. The big sigh of relief and frankly amazement both clients expressed as they left my office was a professionally gratifying to me. Why? Because while a reverse mortgage may not be the path they choose, one or both may still decide to sell their home to unlock their accumulated equity rather than do a reverse mortgage to tap into it, I was pleased that two more individuals walked out of my office knowing that a reverse mortgage is no more “scary” than any other loan is “scary”.

MY NEXT SEMINAR WORKSHOP is on Thursday August 13th, catered lunch is provided, we actually have a fun and lively time, give me a call if you’d like to register to attend. (530) 497-3010,

Want to learn more about my credentials and back ground? GO TO:

http://www.SierraFoothillsReverse.com

Here is a reprint of the article I spoke of above

THE PROS AND CONS OF A REVERSE MORTGAGE, reprint from http://www.equities.com

For the past few decades, you have gradually invested in your home in the form of interior renovations, exterior upgrades, steady overall maintenance, and of course, the diligent payment of your monthly mortgage every month. Through the years, as your total mortgage balance decreased and your equity increased, you began to indulge in the sort of daydreams that are typical when anticipating retirement. Your mind often wandered to visions of strolling along the beach as you feel the sand between your toes, sprawling out on a hammock as the sunshine kisses your face, and laughing lightheartedly as a cool breeze plays with your hair. With your 9-to-5 job obligations behind you, a home that has been paid off, and your children all grown-up and self-sustaining, you are free to focus on the new adventure of this next stage in life. However, one question may come to mind more often than you would like: Can I afford the retirement I want?

Retirement and the Reverse Mortgage

Because of the equity you have built up in your home, your biggest asset is now holding the answer to a financially stable retirement. Your first step to financing your lifestyle through home equity is to research the best tool to access it. To access home equity, borrowers typically have three options:

1. Sell the home
2. Assume a 2nd mortgage
3. Take out a reverse mortgage loan

For many senior homeowners who want to age in their homes and who do not want to get locked into paying monthly mortgage payments again, the third option has proven to be noticeably popular.

A reverse mortgage is defined as a loan that helps senior homeowners who are 62 years or older access a portion of their home equity to use as cash. Of course, there is so much more to this loan than this simple definition. Since its inception in the early 1960s, this loan has evolved into a powerful financial tool in retirement. For the past half century, senior homeowners have been utilizing this option to access their equity and achieve the type of retirement they always wanted. However, when considering the reverse mortgage loan, or any financial product for that matter, it is always a good idea to educate yourself on the pros and cons. Knowing the advantages and disadvantages can help you to determine if this loan will be a good fit for your needs.

The Pros and Cons

The following are some of the pros and cons associated with reverse mortgage loans.

PROS:

• You may age in place while accessing a portion of your equity as cash.
• You retain ownership of your home as long as you fulfill all loan obligations such as paying property taxes, homeowners insurance, and basic home maintenance and repairs.
• The most common reverse mortgage, called a Home Equity Conversion Mortgage (HECM) loan is government insured by the Federal Housing Administration (FHA) which covers repayment of any difference between loan balance and home value.
• Consumers are protected from owing more than the value of the home when sold.
• This loan is non-recourse, which means the home is the only asset the lender can take to repay the loan.
• Costs, such as the mortgage insurance premium that comes with federal insurance, may be rolled into the total balance of the loan.
• Loan repayment is deferred to whenever the borrower permanently leaves the home; thus no monthly mortgage payment is required.
• You may use reverse mortgage loan funds for anything you desire, including home repairs, renovations, and upgrades.

CONS:

• The cons of a reverse mortgage included the fact that you may not live anywhere else other than your home for more than 12 consecutive months. If you do, the loan becomes due and payable.
• Depending on an assessment of your financial profile, you may be required to set aside a portion of your funds to pay your financial obligations.
• If your heirs want to keep the home, they will need to find an alternative method to repay the loan that does not involve selling the property, such as taking out a new loan to repay the reverse mortgage balance.
• A lien will be placed on the home until the loan is repaid at maturity.

Is the Reverse Mortgage Loan Right For You?

Along with reverse mortgage pros and cons, it is also important to know the circumstances in which this loan may or may not be a good fit.

There are a few instances where this loan may not be the most beneficial solution. Because one of the loan terms include a requirement that you reside in the home as your primary residence, if you anticipate the possibility that you may move away in the foreseeable future, such as into a nursing home or a family member’s home, the loan may become due and payable.

Moving out of your home soon after completing the loan is also inefficient due to the closing costs you had already spent. In addition, if you are not comfortable with paying, or cannot afford to pay your property taxes, homeowners’ insurance, and basic home repairs then this loan may not be for you. Since there are no monthly mortgage payments required for a reverse mortgage, failing to fulfill these other financial obligations may lead you to defaulting on the loan.

However, if you desire to access a portion of your equity while aging in place, you have no plans to sell your home or move out in the foreseeable future, and you want to eliminate your monthly mortgage payments, then a reverse mortgage may be the financial solution for you. With features that allow you to defer repayment, it is a versatile solution to increase your monthly cash flow and supplement your social security income and pension – all with the protection of federal insurance.

Now that you know more about the pros and cons of a reverse mortgage, as well as the circumstances regarding whether this loan may or may not be a good fit, you can make a more educated decision on if it may benefit your needs. For more help, speak with a reverse mortgage expert from a reputable industry lender. Armed with their knowledge and yours, you will be well on your way to funding the retirement of your dreams.

The Reverse Mortgage Credit Line: Growth Feature, Government Guaranteed & No Monthly Payments

Seniors Look to the Reverse Mortgage for all Sorts of Purposes  Including Travel

This is a reprint from an article I wrote for the Grass Valley Union Newspaper

A trend I see in my local Grass Valley Reverse Mortgage office: seniors establishing a reverse mortgage credit line not because they “need to”, but on standby as part of their overall retirement financial picture for the peace of mind it gives and maybe just a wee bit of extra travel. Financial planners in increasing numbers are suggesting the reverse mortgage as part of client retirement plans and an excellent way to stop 401 draws, beyond the required, as a way to allow retirement accounts to grow again during this time period of a stock market rebound. A common question I’m asked: “does the RM credit line work like a regular credit line?” It does, and it doesn’t.

A RM credit line allows a borrower to access funds for any purpose, as does a conventional credit line. They are also similar in that borrowers continue to own the home and borrowers are required to keep property taxes, maintenance and insurance current. However, unlike a conventional line of credit, there is no monthly repayment, it is insured by the government, and the dollar amount a senior is eligible for is guaranteed for life, it may never be reduced or the account closed at a bank’s discretion, which unfortunately is a trait of conventional credit lines.

 A RM credit line has another aspect: the “credit line growth feature”. That is to say: the dollar amount that may be borrowed grows larger over time as the borrower ages. When I teach my monthly workshops here in Grass Valley we go in-depth on this feature. In short for this article: the RM program guarantees continual growth on the unused portion of the credit line at the current interest rate on the reverse loan plus 1.25%. The reverse mortgage itself, as well as this credit line growth feature, was the brain child of President Ronald Regan and his financial advisors.

 Let’s look at the numbers in action!

“Betty” is 72 years old, $475,000 home appraisal, and per the HUD formula her credit line eligibility is approximately $273,000. The current interest rate that will accrue on spent funds is 3.4% plus 1.25% for the ongoing FHA mortgage insurance premium, for a total of 4.65% approximately. Her growth rate on funds she has not spent will also be 4.65%. (The combined rate on spent funds will always equal the rate of growth on funds reserved in the unspent credit line.)

Betty initially borrows $42,000 to pay off her first loan, interest rate of 6%, a credit card, interest rate19%, a car loan, 8% and rolled in initial loan costs . Her remaining credit line is approximately $225,000. She has swapped out higher interest rates on these accounts for the 4.65% total RM rate and will no longer have monthly payments on them.

OK ~ DRUM ROLL: In this scenario how much will her credit line borrowing ability have grown in 5 years? It will have grown from $225,000 to $282,000 approximately. In 10 years? Her borrowing ability will have grown to $355,000 approximately. (Spending out of the credit line is of course allowed, this example is a simplified one.)

The RM credit line allows seniors the financial ability to “age in place”: keep their home, privacy, and sense of control. The reverse mortgage may also be used to fund secure living in a dementia community for one homeowner/borrower as long as the other homeowner/borrower keeps the home as their principle residence. It’s a good idea to get the credit line in place while all borrowers are competent and able to fully understand the program.

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

Why not call to reserve a place in my next complimentary reverse mortgage workshop? Given monthly, these workshops are a fun way to learn about reverses in a relaxed atmosphere, with a complimentary catered meal. In addition, you’ll leave the workshop with a comprehensive packet of information including a dvd. Typical feedback from participants is that they leave feeling more confident that they have the facts about reverse mortgages and were able to get their questions answered one on one with a skilled specialist ~ licensed loan officer.

The opinions expressed here are solely those of Shawna McDonald, Loan Officer/Real Estate Broker. Copyright © 2015. All Rights Reserved, duplication and distribution prohibited. 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.