Food For Thought to Fulfill Key Roles of Social Workers

Food For Thought For Social Work MonthDuring March we recognize and honor Social Workers for the value they bring to our seniors.

In a variety of roles, with their knowledge and experience in providing resources, social workers assist our seniors. Social Workers are inspiring to improve lives and assisting with problem solving as well as resolving issues that may negatively impact the community. I’d like to offer some food for thought to fulfill their key roles.

Over ninety percent of seniors want to remain in their home. They are comfortable living in the home and community with their memories where they raised their children, know the neighbors, are familiar with the grocery store and the pharmacy. They feel safe and warm in their familiar surroundings. With the home as their identity it gives them comfort being in their long time home. So let’s talk about a couple ways to help fulfill the desires of seniors, improve their lives and help them stay in their home and their community.

Home care services are an option to help seniors who need some assistance to remain in their home. Everything from short time-frames to 24 hour care, including recovery care and respite care or even nursing level of care is available. Home care services can help seniors live at home indefinitely. The one-to-one ratio of care versus 1.5 or more of care per person in a nursing home offers safety.

Their services offer:

  • Companionship and socialization – home care aides can watch TV with them, play cards, do their hobbies, take seniors to the movies or watch them at home, shopping, or even travel with them.
  • Ensuring meals are prepared and eaten even providing someone to talk with during the meal
  • Medication reminders
  • Bathing, housekeeping, running errands
  • Escorting to appointments
  • Anything needed to maintain their life in their home

An assumption is often that one needs to move to assisted living, a nursing home or care center. What is not realized is that rent in assisted living can be $3,000 to $4,000 per month. Additionally home care services are added on to the rent bringing the monthly costs to over $5,000 to $8,000. Nursing home care can run $6,000 to $12,000 a month depending on a single or double room, the facility amenities and level of care.

Wondering how to pay for home care and keep the seniors in their home? A reverse mortgage may be the solution. A reverse mortgage is a home equity loan with special terms for senior homeowners 62 and older. Reverse mortgage facts are:

  • Borrowers own home, no one else does.
  • Seniors can stay in their home as long as it’s their primary residence (in the case of a couple as long as one is still in the home).
  • Borrowers won’t lose their home because of a reverse mortgage if they abide by the terms of the loan – they don’t have to make monthly mortgage payments but do need to pay property taxes, hazard insurance and maintain the property or they may face foreclosure.
  • Funds are generally not considered income for tax purposes.
  • Loan is government insured and guaranteed to be there for them.
  • There is no personal liability to them or their heirs when the loan is repaid, as a non-recourse loan the loan is repaid from the property only.
  • They or their heirs get to keep any remaining equity after the loan is paid off if the home is sold for more than the loan balance.

Consider this…

  • They can access more funds if their mortgage is currently paid off or has a low balance.
  • Their cash flow improves when their current mortgage or lien payment is eliminated.
  • They’ll have extra cash for whatever they need or want!
  • They can still receive Medical Assistance, Elderly Waiver or other public benefits and do a reverse mortgage.

I have often heard how seniors and their families have benefited from using a reverse mortgage to pay for home care. “Once we realized that we could only relieve the stress on us by contracting 24-hour [at home] nursing care for grandma, a reverse mortgage was the only way to do it.” Liz wrote me. Another borrower, Robert, did not want to go to a nursing home, yet he needed long term care. George, Robert’s son, decided they should do a reverse mortgage to pay for the home health care needed to keep Robert at home where he had raised his children. Robert is happy because he is living where he chooses. George is happy the family can fulfill Robert’s wishes of staying in his home and still receive the needed care.

Ruth had ALS and wanted to stay in her home until she passed.  Working with her Social Worker and home care company she did a reverse mortgage. Last week I received a call from her daughter telling me her mom had passed away in her home as she desired.  The reverse mortgage had helped her fulfill the dream of her staying in her home and receiving the 24-hour care she needed.

Giving seniors the freedom to stay in their home fulfills their desires of remaining in their home close to their memories and familiar surroundings. Social Workers offering home care and reverse mortgage options fulfill the Social Workers role of inspiring to improve lives, assisting with problem solving and resolving issues as well as having a positive impact on the community.
Happy Social Work Month to all our social workers!

Originally posted in 2010, Updated 2015
© 2010-2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1c5

Related Articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Our Experiences with Getting Our Reverse Mortgage

Happy With Reverse MortgageActual reverse mortgage borrowers have good things to say about their reverse mortgage experiences.  Let me share what some of our Minnesota reverse mortgage borrowers have said.

Dave shared, “Having had an accident that eliminated my of my teeth, total dental implants was required.  Without a reverse mortgage I could not have raised the money to have the implants done.  It was a great relief to be able to smile again and eat sweet corn again.”

To increase his cash flow Bernie did a reverse mortgage and had this to say, “After talking with 2 other reverse mortgage representatives, receiving apologies for non-functioning DVDs, and talking to an attorney, I chose Reverse Mortgages SIDAC.  It is so helpful to deal with local persons.  Both Beth and Steve followed up with everything.  They were very helpful in personal visits and phone calls.  Beth has also been helpful with other senior issues.”

Larry and Karen* did the reverse mortgage to stabilize their finances.  They found Reverse Mortgages SIDAC to be friendly, courteous and respectful of them.  Additionally they shared they found that all pertinent information was discussed regarding reverse mortgage options and costs and the details were explained so they understood them.  They also felt that they were informed of what to expect during the processing and kept informed of the status through the process.  In addition they said they received explanations of the forms that were signed at closing.  Overall they shared their experience was positive.

Mike shared, “Without the help and knowledge of Beth Paterson who first told me about the reverse mortgage to buy I would never have been able to get our beautiful new townhome, which my wife needs because of her mobility to navigate a lot of stairs.  I owe Beth a big debt of gratitude.  She is the best!  She is knowledgeable and she cares and worked tirelessly for us.”

Wayne recommends us stating, “Reverse Mortgages SIDAC is very customer focused and will settle for no less than what the applicant request’s objectives are.  They knew the “system” very well and lead the borrower though it step by step.  Above all, Reverse Mortgages SIDAC is respectful and honest.”

Helping them out of foreclosure, Gary and Cathy* said, “Thanks so much! Beth and Steve you guys are the best!”

Satisfied Reverse Mortgage BorrowerYvonne wrote, “My experience with Beth and Steve was very enjoyable.  I was always able to reach one of them.  I paid off my mortgage, so eliminated the monthly mortgage payment!  It has made a big difference in my quality of life to have that additional income every month.”

To supplement her income, Marilyn did the reverse mortgage, sharing, “I didn’t really want to have to do this reverse mortgage because I’m too proud.  But thank goodness it was there for me.  Steve was so very helpful as was Beth.  At closing all documents were in order perfectly.  I’m very glad I reached out to this company.  Everything went so well.”

Bonnie did the reverse mortgage to “secure my retirement” allowing her to retire.  Of her experience she said, “Beth and Steve were wonderful!  Caring, efficient, thoughtful. All are words that describe them and their service – I had contacted a nationally advertised company but did not feel at all comfortable with them.  I went with Reverse Mortgages SIDAC because they are local and knowledgeable about Minnesota and my needs here.”

“Having Beth and Steve to guide me through every step of the process was the blessing that made a reverse mortgage possible.  We were able to complete the process in time to obtain the maximum possible funds under the old system, making my dream of remodeling possible,” Matthew stated.

These are just a few of the experiences reverse mortgage borrowers have had.  Keep them in mind as you hear about reverse mortgages and are considering one.  Work with a reverse mortgage originator who is local, specializes and has experience in reverse mortgages, is ethical adhering to the NRMLA pledge and takes their time to give you the details so you understand the reverse mortgage and will have a positive experience and find the benefits.  If you’re in Minnesota, give us a call.

*Some names changed to protect privacy.

© 2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-1bu

Reverse Mortgage Borrowers Remain in Control

 

Reverse Mortgage borrowers remain in control of their homeWhen sitting down with a new prospect the other day I asked what they had heard or thought about reverse mortgages.  Bob responded that reverse mortgage borrowers lost control of their home and their money.  Have you heard this too?  I want to correct this misconception for you.

Reverse mortgage borrowers remain in control of their home.  They own the home, title remains in their name, just like with any mortgage.

They have the option to paint the home the color of their choice, plant trees or landscape as they choose, and to decorate the inside as they desire (or not make changes).

I had one borrower ask if they could paint their house purple.  With a chuckle I responded  they could although the neighbors may not like the color purple.  The point is, as the homeowner they have the option to choose what color they want to paint their house.

Borrowers are, however, responsible for maintaining the home.  This is to the homeowners best interest anyway, and whether they have a reverse mortgage, a conventional mortgage or no mortgage at all.  Maintaining means things like no bare wood or chipped paint, roof replaced when needed, foundation and structure is sound, electrical and plumbing in working order.

In their will or trust the reverse mortgage borrowers still choose who will inherit the home or equity of the home.

While the reverse mortgage borrowers will be using the proceeds for their needs or wants during the term of the loan, when the home is no longer their primary residence, the loan is due and payable.  The loan is generally paid back from the sale of the home with no personal liability to the borrower or their heirs.  If the home is sold for more than the loan balance the borrower or the heirs receive the difference.

If an heir wants to keep the home, they have this option – they would just need to pay off the reverse mortgage balance.  This can be done through a conventional mortgage, their own funds or if they were the beneficiary on an insurance policy.

Note that if the loan balance is higher than the fair market value, the borrower or their heirs only need to pay 95% of the fair market value of the home, they do not need to come up with the difference.  With the FHA HUD insured Home Equity Conversion Mortgage (HECM) the FHA Mortgage Insurance will cover the difference for the lenders.

They have the option to sell when they want and choose the real estate agent.  If they have passed away then their estate chooses the real estate agent.

The way one wants to receive their reverse mortgage proceeds is also their choice.  They can receive the funds in a line of credit, monthly payments, lump sum or a combination of these.

And how they use these funds is in their control – lenders cannot dictate how one spends the proceeds from their reverse mortgage.  Borrowers can and have used their reverse mortgage funds to pay for home repairs, purchasing a new car, traveling, home care or whatever one needs or wants… it’s their choice.

Reverse Mortgage borrowers remain in control of their homeThe reverse mortgage provides control for borrowers to have funds so they can make their own choices.  For example, where they want to live (in their own home vs government subsidized housing), who they want to care for them (vs the government deciding which home care agency they can use).

Reverse mortgage borrowers do remain responsible for paying their property taxes, having home owners insurance, maintaining the property and paying home owner association dues if applicable, just as they do with or without a conventional mortgage.

Losing control of your home or money with a reverse mortgage is a misconception.  In reality reverse mortgage borrowers have control and in some cases even more control than without doing a reverse mortgage; having funds available gives them more choices and options.

Originally Posted in 2011; Re-posted in 2014
© 2011-2014 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Zd

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Think you don’t need a reverse mortgage? Think again… Maybe you’ll WANT one.

Benefit from Reverse Mortgage for Financial and Long Term Care PlanningI sometimes have people say to me they don’t need a reverse mortgage.  Have you said or thought this?  Have you thought  a reverse mortgage should be a last resort or one should wait until they are older before doing one?   Let’s explore how a reverse mortgage can help you with your retirement planning and long term care planning needs.   And why doing a reverse mortgage now rather than later may be to your advantage.  You might then decide you want one.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for homeowners 62 and over.  There are no income or credit score qualifications for the interest rate and no monthly mortgage payments required.  Homeowners maintain the title; the reverse mortgage lender does not own the home.  Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home.  Reverse mortgage borrowers are highly protected – more so than with any other loan.

The Loan Amount, referred to as the Principal Limit, of the HUD insured Home Equity Conversion Mortgage (HECM) reverse mortgage is based on the age of the youngest borrower, the lesser of the home value or FHA Lending Limit, the program chosen and the Expected Interest Rate.  HUD allows certain types of properties to qualify: single family homes, duplexes or 1 to 4 unit properties as long as the home owner is living in one of the units, townhomes, FHA approved condos, and manufactured homes that meet HUD’s requirements.

Let’s compare doing a reverse mortgage now to waiting before doing your reverse mortgage.

TODAY

10 Years from Now

 

Barb wrote: “Having a Reverse Mortgage has given me monetary independence and I never realized how important having cash available would be until I fell in October 2013 and broke my right shoulder. Without the Reverse Mortgage money I would have been ‘up a creek without a paddle’.  Financial independence
saved the day.”

AGE

63

73

HOME VALUE

$200,000

$263,000
(based on Moody’s
Analytics Factors)

AVAILABLE (Approximate net after fees)

$92,729

$130,626*

  • Based on open-ended credit with current Expected Interest Rate of 5.21%; Closing costs of $5,871 plus FHA up-front Mortgage Insurance Premium of .5%; drawing 60% or less in 1st 12 months; annual FHA Mortgage Insurance Premium (MIP) is 1.25%.
  • The Expected Rate is used to calculate the Principal Limit/Loan Amount and for estimated projections on the loan.
  • Growth Rate in this example based on assumption of Expected Interest Rate of 5.210%.  Actual Line of Credit Grows based on current interest rate plus 1.25%.  So if interest rate is higher, funds in the line of credit will grow faster.
  • These are estimates, the actual amounts are based on many factors. Different assumptions would result in different numbers.

* If the interest rate is higher, and it is likely that it will be in the future, less funds would be available.

While it may look like it’s to your advantage to wait until you are older, look at what happens if you do the revolving credit reverse mortgage now and leave the funds in a line of credit for your future use.

Funds in the reverse mortgage Line of Credit grow and this is the advantage of doing the reverse mortgage now.  Here’s an example of future funds available if at the age of 63 you draw less than 60% in the 1st 12 months and you have $92,729 in your line of credit initially:

Line of Credit Available*

No Draws

After Draw of $5,600 Each Year

 

Jerry stated, “The Reverse Mortgage enables us to live in our home without mortgage payments.  Line of credit will grow for our future needs.  The whole package is a win-win for my wife and me.”

 Age 68

$136,488

$92,557

 Age 73

$188,364

$101,624

Age 83

$358,756

$134,739

  • Based on open-ended credit with current Expected Interest Rate of 5.21%; Closing costs of $5,871 plus FHA up-front Mortgage Insurance Premium of .5%; drawing 60% or less in 1st 12 months; annual FHA Mortgage Insurance Premium (MIP) is 1.25%.
  • The Expected Rate is used to calculate the Principal Limit/Loan Amount and for estimated projections on the loan.
  • Growth Rate in this example based on assumption of Expected Interest Rate of 5.210%.  Actual Line of Credit Grows based on current interest rate plus 1.25%.  So if interest rate is higher, funds in the line of credit will grow faster.
  • These are estimates, the actual amounts are based on many factors. Different assumptions would result in different numbers.

Consider the amount you will have in the line of credit available for your retirement needs or long term care needs when doing the reverse mortgage now.

You can pull all or some of the line of credit funds out as you desire or the payment plan can be changed during the life of the loan, for example, you may change from having some or all of your funds in the line of credit to receiving monthly payments.(1)

Even when you use some of the funds each year you will be taking advantage of having the additional money you need annually plus still having funds in your line of credit for future use.

The Principal Limit or Loan Amount is based on age with the older one is receiving more funds.  At the current Principal Limit Factors the increase is approximately 1% for each year.  This is lower than the line of credit growth rate.  With this taken into consideration, in just 5 years the funds in the line of credit with no draws will likely be higher than if you wait the 5 or 10 years to do a reverse mortgage.

Lucy* stated, “Having done the reverse mortgage has given me a new sense of security.”

Have No Monthly Mortgage Payments, Lower Interest Expense, Funds for Needs or Wants for Retirement Planning or Long Term Care Planning or Needs

In addition to a lower interest rate(2) with a reverse mortgage, eliminating your monthly payment will improve your cash flow because you don’t have to pay out that monthly payment each month.  While the loan balance will rise because you are not making payments, the reverse mortgage is non-recourse which means there is no personal liability to you or your estate if the loan balance is higher than what the home can be sold at fair market value in the future.  When the loan is being repaid, if the loan balance is lower than what the home can be sold for, the borrower or the estate receive the difference.

You have the funds to use during the term of the loan for whatever you need or want.  By doing the reverse mortgage earlier you have use of funds that otherwise would go toward your monthly mortgage payments.  Why not improve your cash flow sooner than later?

You do have the option of making payments with your reverse mortgage – it’s just not required.  You can choose when, how often and how much you want to pay.

If you make the payment(s) on the reverse mortgage, the payments will reduce the loan balance.  And with the adjustable rate, open-end reverse mortgage the payment will increase the Line of Credit meaning the funds are available in the future.  And over time the funds available are likely to exceed the home value at the time the reverse mortgage was initiated.  Additionally, using Moody’s Analytics, the line of credit is likely to grow faster than the home is appreciating.

Consider if you do the reverse mortgage now, let the line of credit grow and in 8 years you have a medical situation.  If you have a conventional mortgage you’ll have to balance paying mortgage payments with paying medical bills.  With the conventional mortgage if you don’t pay your mortgage in a few short months you are likely to be facing foreclosure.

If you are choosing to make monthly mortgage payments on the reverse mortgage, you could stop the payment being they are not required and therefore eliminating the risk of foreclosure from not making the monthly mortgage payments.  You have the option of resuming making payments if you choose.  You still need to pay your property taxes, keep hazard insurance on your home and pay home owner association dues if applicable.

Take advantage of doing the reverse mortgage now while the interest rate is low.  And then when the interest rate does increase, the line of credit will grow even faster (the growth rate is determined by the interest on the loan plus 1.25%).  The line of credit will grow regardless of the home values increasing or decreasing.

In waiting to do a reverse mortgage until you feel you have a need, you are taking risks.  For example:

Reduced Loan Amount or Principal Limit

Over the last few years HUD has reduced the calculation of the Loan Amount (Principal Limit).  We don’t know if HUD may find it necessary to decrease this again and/or increase the FHA Mortgage Insurance Premiums.  Waiting may mean less funds are available if HUD reduces the Loan Amount or Principal Limit.

Higher Expected Interest Rates Equals Less Funds Available

With FHA Reverse Mortgages the Expected Interest Rate is calculated weekly and is used to determine initial funds available.  The Expected Interest Rate is considered a long term projection of future interest rates.  As the Expected Interest Rate changes to a higher rate, in the future less initial funds could be available to borrowers.  It is unknown as to the timing of when the rates may rise but at some point they will likely go up.

Properties that qualify

HUD already has restrictions on condos that are not FHA approved making it difficult to do a reverse mortgage on condos.  (The spot condo approval was removed in 2010.)  We are seeing lenders add manufactured homes, log homes, berm, and rural homes to their list of ineligible homes.  While there are still some lenders who continue to lend on these properties based on HUD’s requirements, this may change in the future and they are likely to tighten the underwriting requirements for these types of properties.  If you are in one of these properties you should look at doing a reverse mortgage now while it’s still an option.

Higher Valued Home Owners Should Do A Reverse Mortgage Before The Lending Limit Is Reduced

Currently the FHA HECM (Home Equity Conversion Mortgage) Lending Limit is $625,500.  At some point this rate could be reduced to a lower national limit or be based on a lending limit in the county where one lives (as is currently with a Forward FHA).  What this means is that if your home is valued more than the Lending Limit amount you can receive is based on the Lending Limit rather than the home value.  For example if your home is appraised at $700,000, currently we would use $625,500 to determine the reverse mortgage Principal Limit.  A lower Lending Limit would make a big difference on the amount one can receive.  If you have a higher valued home look at doing your reverse mortgage now instead of waiting.

Reverse Mortgage Financing Retirement

What would it be like for you to have security knowing you readily have funds available in your Line of Credit during your retirement years and the benefit of improved financial health?

You may not need a reverse mortgage now but it may benefit your retirement and long term care planning if you do one now.


(1)Consult with an Elder Law Attorney or financial consultant regarding the impact of pulling all your funds from a line of credit will impact Medicaid.
(2)Historically the HECM open-end credit reverse mortgage interest rate has been lower than what one can generally qualify for with a conventional mortgage.

Some information used in this article obtained from nu62(sm)

*Name changed to protect privacy

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future

Topic first published 2009; Updated 2014
© 2009-2014 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/pxPEm-FD

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Without The Reverse Mortgage Money I Would Have Been “Up The Creek Without A Paddle.”

My reverse mortgage was a good decisionI recently received the following letter from a reverse mortgage client of mine outlining why a reverse mortgage was a good decision.

Dear Beth,

I am writing about why a Reverse Mortgage was a good decision for me.  I have had mine since 2010.  My husband died in 2009 and although I was able to keep up with my monthly bills, I would run short of cash when Auto Insurance, Fire Insurance, Property Tax and other unexpected bills would arrive.

My family would always be willing to help me with those bills but I did not want to be a burden to them.  My daughter-in-law Nancy belongs to a Women’s Group with you, Beth Paterson, and suggested that I may want to look into a Reverse Mortgage.  The family was with me throughout the whole procedure and they agreed that it was a good choice for me.

Having a Reverse Mortgage has given me monetary independence and I never realized how important having cash available would be until I fell in October 2013 and broke my right shoulder.  I needed care-givers two times a day.  Without the Reverse Mortgage money I would have been ‘up a creek without a paddle’.  I simply filled out a form, mailed it to the mortgage company and they transferred the needed funds into my bank account.  Financial independence saved the day.

Barbara H.

A reverse mortgage is a mortgage like any other mortgage, using the equity in one’s home, but has special terms for homeowners 62 and over.  There are no income or credit score qualifications for the interest rate and no monthly payments required.  Senior homeowners maintain the title as the reverse mortgage lender does not own the home.  Borrowers are responsible for paying their property taxes and insurance as well as maintaining the home.  Reverse mortgage borrowers are highly protected – more so than with any other loan.

The HECM Adjustable Rate program allows for borrowers to receive their funds in monthly payments, line of credit, lump sum or a combination of these.  The monthly payments can be structured as tenure payments, for life of the loan, or as they need.  The line of credit grows so more funds become available in the future.  There is also a HECM Fixed Rate option which is favorable if one is pulling all their funds out in a lump sum.

As a non-recourse loan there is no personal liability when repaying the loan, the loan is repaid from the property only.  This means if the loan balance when due and payable is $200,000 but the home can only be sold for $150,000 the borrower or the estate do not have to come up with the $50,000 difference.  The loan is generally repaid from the sale of the property when the home is no longer the primary residence of the borrower, usually when they move, die or sell.  If the home is sold for more than the loan balance the remaining equity goes to the borrower or the estate.

Barbara has the line of credit option which, with the growth rate, has grown over time.  The line of credit is there for situations like hers.

Are you or do you know someone who would like to have access to funds providing financial independence and not rely on others?  Consider a reverse mortgage!

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future

©2014-2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Z2

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Veterans Who Have Served Our Country Have Found The Reverse Mortgage Has Served Their Needs

Veterans who have served have been served by reverse mortgagesThrough the years I have had the honor of assisting veterans to be able to stay in their home using a reverse mortgage.  Three in particular come to mind.

Earl was a World War II Veteran who had some memory and health issues but wanted to remain in his home.  His Power of Attorney set up the reverse mortgage which allowed him to have funds to bring in some home care assistance and stay in his home.

Jack was also a World War II Veteran.  He and his wife did the reverse mortgage to be able to supplement their retirement funds and to remain in their home.  They decided to leave their  reverse mortgage funds in the line of credit so they would have funds for their future needs whether it be emergency funds or to pay for care needs.

Jim was a Veteran of the Koran War.  Jim and his wife used their reverse mortgage to pay off their conventional mortgage which improved their cash flow since they no longer had a monthly mortgage payment to make.  They had some additional funds in a line of credit.  When they sold an RV they took the money from the sale and made a payment on their reverse mortgage.  The pre-payment reduced their loan balance but also increased their line of credit funds giving them a larger amount available for their future needs.

When meeting with my clients I always enjoy hearing their life stories. These three were no exception.  When meeting with them I have enjoyed and been humbled hearing their stories of their service.  One was involved in the bombing of Japan.  He shared that years later he met a Japanese Veteran who was fighting on the other side.  And as they talked they found a bond, with no anger or bitterness.

These three veterans have all found the FHA HUD insured Home Equity Conversion Mortgage (HECM) has served them in their retirement years.
Veterans who have served have been served by reverse mortgages
On this Veteran’s Day I want to say thank you to these and my other clients as well as all who served in the armed forces so that we may have our freedoms.  As they have fought for our country’s freedom, it’s been an honor for me to be able to serve them so they have their freedom to remain in their home with funds for their needs and desires.

©2013 Beth Paterson , Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Z1

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Seniors, want to purchase your new home with no monthly mortgage payments? Use A Reverse Mortgage.

Using a reverse mortgage to downsizeAre you over 62 and want to downsize?  Move to a townhome so you don’t have to do the yard work?  Move to a one-level home?  Move closer to your children?  Move to a larger home to have space for when the family comes to visit?  Do you want to move to your new home but don’t want to have monthly mortgage payments?  The HECM for Purchase program may be your financing option.

The FHA insured reverse mortgage program that allows those 62 and older to purchase their new home and then not have monthly mortgage payments is called  HECM (Home Equity Conversion Mortgage) for Purchase.  The features and terms as well as the steps for the HECM for Purchase are the same as with the regular reverse mortgage.  However, because it is a unique process, there are a few points you and all parties involved need to be aware of to make it a smooth transaction.

  • The properties that qualify for the HECM Home Purchase include single family, 1 to 4 family dwelling units if the borrower/owner resides in one unit, FHA approved condos, manufactured homes that meet HUD’s standards.
  • To run our calculations we use the lessor of the final appraised value, sales price, or FHA mortgage limit for a one-family residence.
    • If the purchase price is $190,000 and the appraised value is $200,000, we would use the $190,000.  Or if the purchase price is $210,000 and the appraised value is $200,000, we use the $200,000.
  • The proceeds available to the borrower are calculated the same way as with any reverse mortgage, having all the closing costs (origination and FHA MIP, reports, title and escrow/settlement fees) included in the loan so there are no out of pocket expenses other than the appraisal and potentially any inspections.  The Net Principal Limit is the amount available to the borrower.
    • Note: When I’m working with those exploring homes, I run several calculations at various possible home values so when the borrower and their real estate agent are looking for a home, they will have an idea of the home value and the cash the borrower will need at close.
  • The borrower will need to have the difference between the Net Principal Limit (loan amount) and the purchase price available.  For example:
    • If the purchase price and the appraised value is $200,000 and the Net Principal limit is $124,000, the borrower will need $76,000* to purchase the $200,000 home.
    •  If a borrower has $100,000 in funds they want to use to purchase the same $200,000 home, they could combine their $100,000 with the $100,000 from the reverse mortgage proceeds to purchase the home and then have $24,000 in their reverse mortgage line of credit when using the adjustable rate, LIBOR, program.  (The fixed rate requires you to pull all available funds at close.)
      • Borrowers must use cash on hand, cash from the sale, liquidation of assets or Gift funds (must meet HUD’s approved funding sources and source of funds needs to be documented).
        • The additional funds cannot come from Builder incentives, Seller financing, Seller contributions or concessions, any person or entity that financially benefits from the transaction or third party that is directly or indirectly reimbursed by any of the parties benefitting in the transaction or Credit Card advances, sweat equity, trade equity, rent credit.  Cannot use loan discount points, interest rate buy downs, closing cost down payment assistance, gifts or personal property given by the seller or any other party involved in the transaction.  Seller can pay their share of taxes and Home Owner Association fees if applicable.
  • The borrower may choose any of the options/interest rate options:
    • HECM LIBOR
    • HECM Fixed Saver
      • For calculation purposes our rates change every week.  The rate cannot be confirmed until the week of closing.  However, we have a Principal Limit Rate Lock (on the index of the LIBOR which means we can use the rate at the time of application or closing, whichever is the most favorable to the borrower, to determine the loan amount available.)  For the process of planning how much will be available to the borrower, I initially use the rate and amount of the program chosen at the time of application.
  • Rather than using all reverse mortgage funds, more personal funds can be used for the purchase so the reverse mortgage can be set up with a Line Of Credit Option (HECM LIBOR option only)
  • Seller has to be the owner of record for 90 days prior to the date of the sales contract (based on when recorded).  (This is to protect against property flipping.)
  • Prior to completing an application HUD requires the Certification of Occupancy.
  • The Original Purchase Contract or Certified Copy of the Purchase Contract is needed for underwriting.
  • Counseling must be completed by a HUD approved HECM counseling agency that has been approved to provide reverse mortgage counseling.  Minnesota requires that the counselor be located in Minnesota.  We will provide a you a list of HUD approved counselors.
  • The property must be livable at the time of closing.  Any required repairs must be completed prior to closing by the seller – no repairs or repair set asides are allowed.
  • Funds are provided at closing, as there is no rescission period.Move closer to family using a reverse mortgage
  • The new property has to be the primary residence and occupancy must happen within 60 days of closing.
  • One’s existing home may be retained as rental property or if purchasing current home prior to the sale of existing home income verification will be required to document the ability to maintain both properties.  (This is prevent the practice of “buy and bail.”)

Using the reverse mortgage to finance the purchase of your new home may be your solution to meeting your goals without having a monthly mortgage payment.

*You may also need funds for property taxes, initial hazard insurance premium, home owner association dues, etc.

©2013 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-YY

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgage Protects Retirement Plan

Reverse Mortgage provides money when there's too much month at end of moneyHave you seen the sign, “Too much month at the end of the money?”  That applied to Pat and Mary’s situation.  In their mid 70’s, Pat and Mary planned for their retirement and have a good plan in place. But as their life changed they found there wasn’t enough money to last through the end of the month.  Creating the needed additional funds for each month from their retirement plan would impact their resources for their future.  Therefore their financial planner suggested they look into using their home equity and explore a reverse mortgage.

A mortgage just like any other mortgage, the reverse mortgage offers special terms for senior home owners 62 and older.  With the FHA insured reverse mortgage, Home Equity Conversion Mortgage (HECM), the most popular and only one available in Minnesota, there are no income or credit score requirements to impact the interest rate and no monthly mortgage payment requirements. *(See note below about Financial Assessment.)

The funds available can be received in a lump sum, monthly payments, a line of credit, or a combination of these.  The monthly payments can be structured as tenure payments (as long as you occupy home as primary residence) or as one needs as long as the home is the primary residence of at least one of the borrowers.  Funds in the line of credit grow so more funds can be available in the future.

The loan is due and payable when the home is no longer the primary residence of the borrower(s) such as they move, sell or die, or on their 150th birthday.  As a non-recourse loan, if the loan balance is higher than what the home can be sold for, the borrower(s) or their estate don’t have to pay with the difference, the FHA Mortgage Insurance Premium (MIP) covers the difference.  And if the home is sold for more than the loan balance, the borrower(s) or their estate receive the difference.

After being educated about the reverse mortgage including the positives and negatives, rather than using their retirement funds so they could be protected for their future needs, Pat and Mary decided to do a reverse mortgage.

Doing the Standard Adjustable Rate HECM, they set up the proceeds available to receive a portion in monthly payments, with the balance in a line of credit that they can use if and when they need it.

Receiving the monthly payments allows them to live comfortably, meeting their living expenses without running out of funds before the end of each month.

The line of credit grows at the rate on the reverse mortgage plus 1.25, i.e. if the rate is 2.5% the growth rate will be 3.75%.  If the interest rate goes up, the growth rate does also.  This means that more funds will be available in their unused portion of their line of credit.  They can use these funds for an emergency such as car repairs, a new furnace, medical expenses or for other needs and desires such as making a trip for a family reunion or out of town wedding.Relaxing with Reverse Mortgage in place

With the reverse mortgage in place providing monthly cash flow and a line of credit for other needs, Pat and Mary’s retirement funds can be protected for their future.  They are living their retirement years with a good plan along with funds for their current needs.  Now they have more money at the end of the month – what a way to live in retirement!

*As of April 27, 2015 income and credit are used for the Financial Assessment to determine borrower’s ability and willingness to pay property taxes and insurance into the future

©2013-2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:   http://wp.me/p4EUZQ-D7

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgage Features and Terms Summary

Reviewing Reverse Mortgage DocumentsThere are many loan documents with the reverse mortgage (all mortgages actually) and it’s hard to remember all the details through the life of the loan.  To help you have a better understanding initially as well as be a reference in the future, this article summarizes the reverse mortgage features and terms.

  • A reverse mortgage is a mortgage or lien against your property allowing you to use the equity in your home.
  • Monthly mortgage payments are not required however you are responsible for property taxes and hazard insurance.
  • Through FHA, the Home Equity Conversion Mortgage (HECM) is a government insured program and regulated by HUD.
  • As a loan against your property, the funds are not considered income so Social Security and Medicare are not affected; and generally SSI and other public benefits are not affected; Medicaid can also be received under certain situations – consult with legal services for your situation.
  • Generally the funds received are considered tax free – consult your tax advisor regarding your situation.

Who Owns Your Home  

  • You retain title and remain a vested owner of your property.
  • You retain all rights and responsibilities of home ownership, including property maintenance, tax and insurance payments, etc.

Borrower Protection

  • Should the lender default, FHA will assume the responsibilities of the lender and guarantees funds are available to borrowers according to terms of the loan.
  • As FHA loan, interest rates are lower than they otherwise would be on a reverse mortgage.
  • Non-recourse: Borrower/Homeowner or the estate will never be obligated for more than the fair market value of the property.

Adjustable Interest Rate – HECMs

    • If you have selected an adjustable rate product, your interest rate may change over the life of the loan.
    • There is a lifetime cap on the rate; for the monthly adjustable rate it is 5 or10 points (depending on the lender) and for the annual rate it is 5 points over the initial rate at the time of closing.
    • The interest rate may adjust annually (maximum of 2 points with each annual change) or monthly. The current and future rates will be provided on your monthly statement.
    • The rate is based on the LIBOR index.

Interest is charged against your loan balance only. Unused line of credit and/or unused term/tenure payments will not accrue interest.

Fixed Interest – HECMs    

  • If you have selected a fixed rate product, your interest rate is fixed and will not change over the life of the loan.

Ongoing Costs

  • Interest accrues only on amounts borrowed.
  • Monthly charge for FHA Mortgage Insurance Premium (MIP) –  .5% (1.25% on loans closed prior to 10/2/2017) per year on loan balance (added to loan balance).
  • All costs, charges, and accrued interest are added to loan balance.
  • Essentially you are borrowing these funds each month because you are not paying them monthly; this is why the loan balance increases over time.

Line of Credit (if applicable)    

  • Available credit of unused portion of line of credit grows over time at the current applied interest rate plus .5% (1.25% on loans closed prior to 10/2/2017).  This is not interest, but a growth rate.
  • Interest is not charged on unused portion of line of credit.
  • Line of credit funds advances must be requested in writing from the lender/servicer.  Lender has 5 business days to process your request.

Term/Tenure Payments (if applicable)

  • If you have selected monthly Term or Tenure Payments, these monthly advances will be paid to you on the first business day of each month beginning the month after loan closing.
  • Interest is not charged on un-advanced monthly term/tenure funds.

Prepayment

  • Although monthly or periodic mortgage payments are not required, you may make full or partial payments at any time.
  • Please contact the lender/servicer for payment address and information.
  • Partial payments reduce the loan balance due.
  • Partial payments on adjustable rate HECM’s will create or increase the line of credit and these payments can be borrowed in the future.
  • Payments on fixed rate HECM’s are permanent payments.
  • Payment in full will terminate the loan and eliminate any available term/tenure payments and/or line of credit.

Due and Payable

  • No payment is required until/unless one of the following occurs:
    • Borrower(s) no longer occupy the home as a primary residence.
    • Borrower(s) no longer owns the home.
    • All borrowers have passed away.
    • Property taxes are not kept current.
    • Homeowner’s/Hazard insurance is not kept current.
    • Flood Insurance (if applicable) is not kept current.
    • HOA dues (if applicable) are not kept current.
    • Required repairs are not completed.
    • Property is not properly maintained.
    • Title vesting changes are made.

Upon Death of Borrower(s)

  • If there is a surviving borrower(s) continuing to occupy the home, the reverse mortgage continues without any changes.  If a sole borrower dies or there are no surviving borrowers or a non-borrowing spouse, the reverse mortgage becomes due and payable in full. (Non-borrowing spouses see HUD Mortgagee Letter 2015-15 and check with the servicer regarding their rights)
  • Heirs/estate should contact the lender/servicer within 30 days to provide notice of the death.
  • A reverse mortgage is not transferrable to the heirs or estate.
  • The loan may be repaid from sale of property.
  • If heirs wish to keep the home, they may satisfy the debt by paying the lesser of the mortgage balance or 95% of the FHA appraised value of the home at that time.
  • Most lenders are allowing up to six months for heirs to settle the estate and repay the reverse mortgage (but timely communication with the servicer is required).  Where justified, HUD, who regulates the HECM,  may approve extensions beyond this time up to a total of 12 months.

Your Responsibilities

  • Pay property taxes.
  • Maintain homeowners insurance on property.
  • Maintain flood insurance (if applicable) on property.
  • Pay HOA dues (if applicable).
  • Complete required repairs timely.
  • Maintain property.
  • Not make changes to title vesting.
  • Return the annual occupancy certificate to lender.
  • Provide proof your property taxes have been paid annually.
  • Provide proof your property insurance has been paid.

When To Notify Your Lender

  • If you change your insurance provider.
  • If you change your bank for direct deposits.
  • If you are putting the property into a Trust.
  • Any other changes to the property.
  • If there is a claim from your property insurance.
  • When a Power of Attorney (POA) is being implemented to make decisions on your behalf.

©2013-2015 Beth Paterson and Greenleaf Financial, LLC, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-Cr

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

“Own Your Future Minnesota” Campaign Launched – How are you personally preparing for your long-term care needs?

Own Your Future MinnesotaThe Own Your Future Minnesota campaign is part of a national educational campaign of the U.S. Department of Health and Human Services that promotes personal preparation for long-term care.  The campaign is to bring awareness as well as urge Minnesotans of the need to plan for their later years when they are likely to need long-term care.

Own Your Future is important to Minnesota!  Between 2010 and 2030 Minnesotans over age 65 will grow by 107%. Those over 65 have a 70% chance of needing long-term care.  In 2030 over 325,000 elderly would need to be served if Medicaid (Medical Assistance) had to serve all with insufficient income. This could cost $5 Billion by 2030.  Because of the enormous growth in the aging population and the number without resources, Medicaid will be strained to provide support for all these individuals.

Own Your Future Minnesota is encouraging people to have discussions, and be aware of options to pay for their long-term care including considering personal savings, long-term care insurance, life insurance options, annuities, and using ones home equity including reverse mortgages.  Additionally they are encouraging people to discuss and plan their advance care which refers to their legal documents.

With the October 2nd launch, Governor Mark Dayton and Lieutenant Governor Yvonne Prettner Solon are urging all Minnesotans age 40 to 65 to own their future by mailing a letter to them.

“Planning for long-term care helps to ensure choice, control and peace of mind for the individual,” said Lt. Gov. Yvonne Prettner Solon. “The sense of security and comfort that comes with having a plan is something all Minnesotans should enjoy.”

The first phase of Minnesota’s Own Your Future initiative includes a new website, public service announcements, internet advertising, community meetings and other employer and grassroots organizations.  The website offers options for planning at various ages, tools for your planning covering your personal, financial, housing and advance care planning, as well individual’s stories.

Future phases of Own Your Future will look at development of affordable financial products to help people pay for long-term care and evaluation of possible changes to Medicaid to better align with and encourage private payment for long-term care.

As a member of the Advisory Panel, and on the speakers bureau, through the coming year I will be doing presentations around the Twin Cities to bring clarity on what is long-term care, the impact it has on individuals and their families, why plan ahead along with options and resources to consider.

I’m proud and excited to be part of this important state initiative as the reverse mortgage industry representative.

©2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-YS

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.