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Category : Reverse Mortgage

What is a Jumbo Reverse Mortgage

A jumbo reverse mortgage can give seniors under age 62 access to millions of dollars. While reverse mortgages have a lot in common with traditional mortgages, there are significant differences. Let’s take a look at what a jumbo reverse mortgage is and how it can benefit you.

The Definition

A jumbo reverse mortgage allows you to borrow a higher loan limit than those provided by Federal Housing Administration’s (FHA’s) or Home Equity Conversion Mortgage (HECM). This program is solely offered by private lenders, not the government. As of 2021, the maximum claim amount for the HECM program is $822,375. 

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What Are The Requirements? 

The standard requirements for this kind of mortgage are usually the same as basic reverse mortgage requirements:


  • You must live in the home you’re financing for the majority of the year – primary residence
  • You must be able to cover your current loan balance and any cash you wish to claim with your equity

  • You must provide proof that is current with your property taxes and insurance
  • Your home must be maintained

Whether you’re getting a jumbo reverse mortgage in California or New York, the requirements will most likely be the same. 

What Are The Benefits?

A jumbo reverse mortgage can benefit you in many ways. Let’s take a look at some of the common benefits below: 

  • Larger line of credit or lump-sum payment – With this type of loan, you’re able to borrow up to 4 million dollars. Having more borrowing power gives you the ability to achieve other financial goals
  • You don’t have to pay mortgage insurance – 2% of the loan balance is paid upfront to cover the FHA mortgage insurance because jumbo reverse mortgages aren’t insured by any government agencies
  • You can qualify at a younger age – This type of reverse mortgage allows you to borrow when you turn 60, instead of 62. If you haven’t reached the general age requirement for a standard reverse mortgage and you’re not able to wait another two years to gain access to cash, a jumbo reverse mortgage would be a great option for you. 
  • Meet healthcare needs – As we get older, our health may take an unexpected turn. Healthcare can be incredibly expensive, especially if it becomes a long-term expense. A reverse mortgage can give you access to cash that you may need to take care of yourself in a facility or make your home more appropriate for your changing needs. 

retired couple embracing each other

Should You Get One?

After ensuring you fully understand the terms, conditions, and the fine print before making a final decision, you absolutely should get one if you agree with everything. If you want to pay off current debt, need extra cash to enjoy your retirement, or want to remodel your home, it’s definitely worth considering getting a jumbo reverse mortgage

 

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Category : Reverse Mortgage

Types of Reverse Mortgages

Wondering how many types of reverse mortgages there are? You’ve come to the right place. In this blog, we’re going to take a look at the 3 types of reverse mortgages and talk about which one may be best for you. Keep on reading to learn more about reverse mortgages. 

Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages are the least expensive option. This type of reverse mortgage is offered by non-profit organizations, as well as, both state and local government agencies, but is not available anywhere else. 

retired friends enjoying time together on the couch

The name of this type of reverse mortgage is quite literal. You can only use the funds received for this mortgage for one purpose, which is specified by your lending institution. For example, your lender may say your loan is specifically for home repairs, renovations, or property taxes. 

Proprietary Reverse Mortgages

A proprietary reverse mortgage is a private loan backed by a company that develops them. With this loan type, you will usually qualify for more funds and get a bigger loan advance. Proprietary reverse mortgages are not backed by the government, so mortgages like these are only attainable by private lenders. 

Home Equity Conversion Mortgages (HECMs) for Purchase

A HECM for Purchase is the best type of reverse mortgage if you’re looking to purchase a new home. This mortgage type will allow you to finance a home and purchase one, with just one transaction, all while never paying monthly payments. 

retired couple playing video games on couch

How Much Can You Borrow?

While you’re wondering what the 3 types of reverse mortgages are, you’re probably thinking about how much you can borrow. The exact amount you can borrow depends on the following factors:

  • Your age
  • The mortgage you choose 
  • The current value of your home, determined by a professional appraisal 
  • The current interest rates of your lending institution 
  • The results of your financial assessment 

Which One Will Work Best For You?

Now that you know the different types of reverse mortgages and what they are, let’s talk about which one will work best for you. 

  • Single-Purpose Reverse Mortgages – If you want to renovate, repair your home, or pay property taxes, a low-cost single-purpose loan is best. Costs are low and it’s generally straightforward to be approved. Homeowners with low or moderate incomes usually qualify for these loans. 
  • ​​Proprietary Reverse Mortgages – A proprietary reverse mortgage may be best for you if you live in a high-value home and want to borrow a larger amount of money. The value of your home will put you in a better position to gain access to a higher loan amount.
  • HECMs – If you would like to downsize, move to a new neighborhood, or move into a home without stairs, a HECM is definitely the best option for you. This mortgage type will help to move into your new home while helping you liquify cash from your old one, all at the same time. 

Regardless of the types of reverse mortgage you choose, it’s important to ensure you understand all fees, costs, and the process of loan repayment.

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Category : Reverse Mortgage

How Much Money Do Seniors Get From Reverse Mortgages

If you’re interested in a reverse mortgage, you’re probably wondering exactly how much money you’ll gain. Is the transaction worth it? Will you benefit from it? Let’s take a look at how much money you may gain and how to calculate a reverse mortgage

How Much Does a Reverse Mortgage Pay?

The exact amount you’re eligible to borrow depends on how much equity you have readily available. Typically, you can only use up to 80% of your home’s equity based on its current appraised value. Alongside equity, the exact amount you’re able to be paid from a reverse mortgage also depends on your age, credit, and your interest rate. 

What Are the Different Types of Loan Payout Options?

While you can choose how you want the loan amount to be paid out when you’re approved for a reverse mortgage when you’re wondering how to calculate a reverse mortgage don’t overlook your payout method. Your payout method will contribute to how much you can get from a reverse mortgage in the end. 

 happy couple embracing each other outdoors

From a glance, getting paid out in one lump sum instead of monthly payments may seem to not make a difference. But, it can affect the principal amount of your loan. Receiving your entire reverse mortgage in one lump sum payment may mean you’re giving up some money in the future. When you choose a fixed monthly payment or a line of credit, you have the ability to receive a payout if the value of your home increases over time. However, when you receive one lump sum at the beginning, the opportunity for receiving a higher payout is usually taken off of the table. 

What Are the Costs?

While considering how to calculate a reverse mortgage, you must consider the costs required to begin the process. Reverse mortgages may include expenses such as origination fees, interest on the loan, set aside fees, and other closing costs. Set aside fees are fees that cover any necessary repairs, as well as an appraisal of your home. Depending on your location, pending complications, and the size of your home, appraisals can cost anywhere from $250 to $1,000. 

While the interest of your reverse mortgage is usually assessed and paid at the end of your loan term or when your home is sold, it is still a cost you must account for. Interest rates fluctuate over time. If your interest rate is 6%, you’ll be charged 6% of the loan value for that year. 

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The origination fee is the cost due to your mortgage lender for the service of processing your loan. Typically, the origination fee is 2% of the first $200,000 of the value of your home. Any amount above $200,000 is usually 1%. If the value of your home is $125,000 or less, your origination fee will usually not exceed $2,500. 

Conclusion

We hope that this blog was able to assist you if you were wondering how much you can borrow from a reverse mortgage or trying to calculate a reverse mortgage amount. Cheers to a happy retirement!

 

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Category : Reverse Mortgage

How a Reverse Mortgage Can Help You Buy a Home

While many retirees have little desire to leave their homes, others may be excited to create new memories somewhere else. The nest is empty, there may be too many stairs, and it may just be time to start a new chapter. A smaller, cozier, and age-appropriate home may seem appealing to many retirees. Let’s take a look at how you can buy a home with a reverse mortgage and how doing this can benefit you. 

The HECM for Purchase

Established in 1988, The Home Equity Conversion Mortgage (HECM) for Purchase was created specifically for the benefit of seniors. This reverse mortgage allows persons aged 62 and over to purchase a new principal residence using cash gained for their reverse mortgage. 

elderly couple hugging and smiling for photo

Most people are not able to buy a home in cash and that’s why mortgages exist. However, a traditional mortgage is usually only accessible to persons within a certain age group. If you’re a retiree and you want to purchase a new home, buying a home with a reverse mortgage may be the most feasible way to do it. 

Two Birds, One Stone

Using a reverse mortgage to purchase a new home will allow you to accomplish two goals with one transaction – attain a more fitting principal residence and a reverse mortgage all in one go. This process also helps you to save money because you only pay one set of closing costs. Closing costs can definitely add up to be a hefty expense at the end of the day. Complete two business transactions, for the price of one with a HECM for Purchase.

How Does it Work?

Buying a home with a reverse mortgage takes a few simple steps, let’s take a look at them below:

  • Borrowers will provide a down payment from the sale of their previous home or other acquired savings 
  • Borrowers may meet a loan-to-value ratio requirement with a substantial down payment
  • Borrowers must provide verification of personal income and funds
  • Equity earned from the down payment and the value of your new home will then be used to calculate your exact reverse mortgage loan amount
  • Finally, a portion or all of the reverse mortgage funds will then take care of the remaining costs of the new home, identical to the process of a traditional mortgage 

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The Benefits

For some retirees, the biggest benefit of buying a home with a reverse mortgage is being able to completely avoid monthly mortgage payments, unlike a traditional mortgage. Using a reverse mortgage to purchase a new home is great for senior borrowers who have a fixed income but would like to attain a new home. 

Conclusion

A reverse mortgage is an exceptional choice for retirees looking to own a new home. If you’d like to downsize, move to a new neighborhood, have less space, or have more space, consider purchasing a new home with a reverse mortgage

 

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Category : Reverse Mortgage

Paying Off a Reverse Mortgage After Death

While a reverse mortgage may seem like a dream come true to a retiree, it’s important to remember that reverse mortgages also involve heirs. What happens to reverse mortgages when the owner dies? Let’s take a look at reverse mortgages after death and what you and your heirs can expect. 

What a Borrower’s Death Means

When taking out a reverse mortgage, it’s always best to come up with a plan with your heirs before death. After death, the lender will give the heirs a notice that the debt is due. The lending institution usually requires to be notified of a plan within 30 days of receiving the notice. How long heirs have to pay off reverse mortgages after death will vary. However, after notice is given, heirs typically have 6 months to complete the transaction and pay off the debt in full. 

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Can Your Heirs Inherit Your House?

Yes, homeownership is possible for heirs even if there is an outstanding reverse mortgage in place when the owner dies. However, heirs will not be able to receive the title of the property while your property is still subject to the reverse mortgage. For example, if the homeowner dies after receiving $200,000 of reverse mortgage funds, the heirs will inherit the home while it is subject to $200,000 debt. Alongside the debt, heirs will inherit interest and any fees that have occurred and these fees will continue to rise until the reverse mortgage debt is fully paid off.

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How Can Your Heirs Repay the Debt

The big question when you’re thinking about reverse mortgages when the owner dies is, how exactly can your heirs repay the debt? Those who inherit a home that is subject to a HECM reverse mortgage get four options:

  • Payback the loan – Heirs can choose to keep the home by repaying 95% of the appraised value themselves. The remaining 5% balance will be covered by FHA insurance 
  • Sell the home – Your heirs can choose to repay the loan by using the proceeds made from its sale to pay off the debt
  • Turn over the home – Your heirs can fully give up their rights to the home by turning over the home to the lender by deed
  • Do nothing – Your heirs can choose to take no action, which will result in the lender foreclosing the home

Conclusion

Unlike a traditional mortgage, a reverse mortgage does not only affect you. When the owner dies a reverse mortgage affects quite a few family members. Before signing off on one, discuss options and plans with your heirs. After you have passed, you want to ensure that your heirs are able to efficiently deal with dissolving your reverse mortgage. Regardless of the option they choose after death, it is important that everyone is on the same page long before death ever occurs. Contact us to learn more today.

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Category : Reverse Mortgage

Reverse Mortgage Qualifications for California Residents

If you’re a retiree living in the beautiful state of California, you may be interested in a reverse mortgage. Reverse mortgages have been proven to be beneficial to many people every single year. Let’s take a look at the reverse mortgage qualifications for California residents. 

How Can I Qualify for a Reverse Mortgage in California? 

In California, reverse mortgage qualifications are standard and there are no special requirements. Like other states, there is a required financial assessment and counseling that must be approved by the Department of Housing and Urban Development. To qualify for a reverse mortgage, you must:

  • Be 62 years of age or older
  • Have paid at least 50% of your mortgage or fully own your home
  • Reside at the property you wish to take a reverse mortgage out on as your principal residence for the majority of the year
  • Have absolutely no delinquent federal debt
  • Be up to date on all of your home maintenance expenses, such as property taxes, insurance, and homeowners association (HOA) fees

palm trees standing tall in California

How Does it Work?

When you take out a reverse mortgage, you borrow against the equity of your principal home. By doing so, retirees are able to gain access to cash that may have been otherwise inaccessible. After passing the reverse mortgage qualifications and being approved, you can use your cash for:

  • Home renovations or repairs – Make your home more age-appropriate and finally have the kitchen you’ve dreamed off
  • Purchasing a new home – If you would like to downsize or move to another neighborhood, taking out a reverse mortgage gives you an opportunity to do so, without making monthly payments
  • Securing retirement – If you find yourself having less cash than you planned for after retirement, taking out a reverse mortgage is a great way to gain a lump sum or monthly payments from your assets 
  • Eliminating existing debt – Use the cash from your reverse mortgage to eliminate any existing debt that has become unaffordable such as medical bills and credit card debt

How Much Will I Get Paid?

After meeting the reverse mortgage qualifications, you may wonder how much cash you’re actually going to get paid. The exact amount you will receive depends on how much equity you have available in the current value of your home, your exact age, your interest rate, and the loan payout option you choose. We recommend getting a free quote to get an idea of how much you may receive from your reverse mortgage.

retired grandmother looking at cellphone with granddaughter

Do I Meet the Reverse Mortgage Qualifications? 

If you’re not sure how you can qualify for a reverse mortgage in California give us a call today. We would be more than happy to walk you through the process and ensure you fully understand everything there is to know. Contact us to learn more about the reverse mortgage process.

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Category : Reverse Mortgage

What is Reverse Mortgage Counseling

If you’re interested in pursuing a reverse mortgage, it’s important to note that participating in housing counseling from a government-approved agency is mandatory. Both the government and your lending institution want to ensure that you are 100% ready before you officially sign off on a reverse mortgage. It’s important to think of this process as helpful and not invasive. Counseling will make certain you’re not blindsided by any part of your reverse mortgage. Let’s take a look at what housing counseling is and how it can benefit you. 

The Definition

Reverse mortgage counseling is the process of educating clients on what exactly a reverse mortgage is and what they can expect during the time of signing, as well as, in the future. Counseling must follow HUD guidelines and take place with trained counselors. During your counseling sessions, the following may be discussed:

  • Eligibility requirements.
  • Potential financial implications.
  • Payment provisions.
  • Reverse mortgage appropriateness based on current personal and financial needs.
  • Possible alternatives.

etired couple enjoying time on the swing

Why is it Important?

Reverse mortgage counseling is important because it ensures you fully understand all of the necessary requirements needed to make an educated decision. During counseling, you’ll also learn about the different types of reverse mortgages. Giving you an opportunity to make a decision based on which one may work best for you. 

Reverse Mortgage Counseling Requirements

The requirements for reverse mortgage counseling are as follows:

  • Be at least 62 years of age – Some reverse mortgages, such as a jumbo reverse mortgage allows clients to be 60 years of age, instead of 62. However, 62 years of age is usually the standard to participate in reverse mortgage counseling
  • Have paid off the majority of your mortgage or fully own your home – Most lending institutions require clients to have at least 50% equity to qualify for a reverse mortgage
  • Have no outstanding federal debt – You must have no delinquent debt
  • Must reside in the home you wish to take out a reverse mortgage – The home in which you’ve taken out a reverse mortgage must be your principal home and you must live there for the majority of the year
  • Be up to date – You must be current with all of your property taxes, insurance, homeowners association (HOA) fees

retired couple enjoying time playing video games on the couch

Is a Reverse Mortgage the Best Choice for You?

While considering reverse mortgage counseling, you may wonder if a reverse mortgage is the best choice for you. A reverse mortgage may be a good option for you if:

  • Your retirement account is short on cash 
  • You want to repair or renovate your home
  • You have existing debt that has become a burden
  • You want to sustain your lifestyle 
  • You want to purchase a new home

If you’re interested in pursuing reverse mortgage counseling in California or would like to take out a reverse mortgage, contact us to learn more today. 

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Category : Reverse Mortgage

What is the Reverse Mortgage Age Requirement

Many retirees find reverse mortgages to be exceptionally beneficial. While gaining access to cash, retirees are able to renovate their homes, travel, assist beloved grandchildren with college tuition, and so much more. If you’re interested in a reverse mortgage but you’re not sure if you meet the age requirement, you’ve come to the right place. Let’s take a look at the reverse mortgage age requirement and other requirements that you may need to prepare for. 

Reverse Mortgage Minimum Age

At most lending institutions, to qualify for a reverse mortgage, you must be at least 62 years of age. While some lending institutions may allow for some wiggle room and you can be a little younger, 62 is usually the standard age. To find out the exact age requirement, visit your local lenders and learn about their exact requirements. 

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Have Home Equity

Alongside meeting the reverse mortgage age requirement, most lending institutions require you to fully own your home or have at least paid a large amount of your mortgage. While the exact percentage of outright homeownership will vary with each lender, most will require you to have no less than 50% of equity in your home to qualify for a reverse mortgage. 

Principal Residence

The property you wish to take a reverse mortgage on must be your principal residence. Meaning, you must reside there for the majority of the year. Luckily, because of the reverse mortgage age requirement, most retirees have no issue with this requirement. A lot of retirees have lived in their homes for decades and have no desire to move. 

happy retired woman dancing in her home

You can enjoy having cash from your reverse mortgage all while living in a home you’ve created beautiful memories in. If you’re not interested in moving, a reverse mortgage is a great option to liquify your assets. 

No Delinquent Federal Debt

In order to qualify for a reverse mortgage, you must have no delinquent federal debt. Debt is usually considered delinquent after they go beyond 31 days past due. A reverse mortgage can be used as a method to get out of debt. You’ll gain access to cash that may have otherwise been inaccessible. Allowing you to pay off any outstanding debt that you would like to decrease or completely eliminate. 

Current Home Maintenance Payments and Credit Checks

Alongside the reverse mortgage age requirement, you must also ensure that you are current with all of your standard home maintenance payments. Home maintenance payments usually include property taxes, insurance, and Homeowners Association (HOA) fees. The lending institution of your choice may also perform a credit check and other eligibility requirements. 

Conclusion

While the reverse mortgage minimum age is usually the first thing on the list to be checked off, it is not the only thing. If you’re 62 or over and you’re interested in a reverse mortgage, ensure that you will qualify by making sure you’re in good standing in all other areas as the reverse mortgage age requirement is just the start. Cheers to a happy retirement!

 

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Category : Reverse Mortgage

6 Benefits of Reverse Mortgages for Seniors

The benefits of reverse mortgages for seniors allow access to many things that may have otherwise been inaccessible. You can gain an immense amount of cash, which is a valuable tool. Utilize your reverse mortgage to the best of your abilities. Want to know more about how reverse mortgages work for seniors? Let’s take a look at a few benefits of a reverse mortgage and why it may be a great choice for you.

There Are No Monthly Payments

Unlike a traditional mortgage, there are absolutely no required monthly payments for a reverse mortgage. Alongside required monthly payments, you may also receive penalties for late payments made to lenders for a traditional mortgage. You won’t have to worry about any of this with a reverse mortgage. As long as you live in your principal home, you will be the one receiving payments, not your lending institution.

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You Have Tax Liability

Reverse mortgages work for seniors because you can enjoy tax liability. Money received from a reverse mortgage is not considered to be income, according to the IRS, it is classified as a loan advance. While other retirement income like distributions from a 401(k) or IRA payment is taxed, funds received from your reverse mortgage are not. 

Helps Secure Retirement

A great benefit of reverse mortgages for seniors is that it helps to secure retirement. If a retiree doesn’t have access to a substantial amount of cash but they have equity, a reverse mortgage can help them to liquify their assets. If you would like to travel, invest, renovate your home, or assist grandchildren with college, a reverse mortgage is a great option. 

retired couple enjoying a cup of coffee at their home

You Don’t Have to Move

Reverse mortgages work for seniors because you don’t have to move. A lot of retirees have a personal connection with their home and have no desire to leave it behind. If your home means a lot to you and your family but you want to liquify your asset, a reverse mortgage is a noteworthy option. To liquify assets, some people may sell their home and move to other neighborhoods, or downsize. A reverse mortgage offers you the opportunity to stay in the home you love, while still gaining cash to enjoy retirement. 

You Can Pay Off Existing Loans

Reverse mortgages work for seniors by allowing you to pay off existing loans. If you have outstanding loans that you would like to decrease or completely eliminate, a reverse mortgage will give you access to the cash you need to do that. Use some of the cash you receive to pay off existing loans and use the rest of it to enjoy life. 

Conclusion

The benefits of reverse mortgages for seniors have been proven to make life more enjoyable for many retirees. If you’re retired and need access to more cash in order to enjoy a higher quality of life, a reverse mortgage is something you may want to consider.

 

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Category : Reverse Mortgage

Pros & Cons of Reverse Mortgages

Quite a few retirees consider taking out a reverse mortgage. While a reverse mortgage may be a dream come true and work well for some people, for others it may not. Whenever you’re making a big decision, it’s always best to outweigh the pros and cons. Is a reverse mortgage a bad idea? Let’s take a look at the pros and cons of reverse mortgages

What is a Reverse Mortgage?

A reverse mortgage is a process of borrowing against the current value of your home in exchange for a line of credit or cash from a lending institution. Reverse mortgages typically do not require monthly payments. The loan is often repaid if you or an heir sells the home sometime later. 

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Pros

Now that we understand what it is, let’s get into the pros and cons of reverse mortgages:

  • Helps secure retirementReverse mortgages are a great option to secure retirement. If retirees don’t have an exorbitant amount of cash savings but have equity within their homes, a reverse mortgage can give them access to cash that would otherwise be inaccessible. 
  • You don’t have to move – A reserve mortgage allows you to liquefy your asset without having to move. If you’re in need of cash but you have no interest in selling or downsizing, a reverse mortgage is a route you may want to take. 
  • You can pay off existing loans – You can use proceeds from your reverse mortgage to assist you in eliminating or decreasing existing loans. 

proud grandfather playing with young grandchild

Cons

Is a reverse mortgage a bad idea? The pros and cons of reverse mortgages will have different meanings to each individual. If you’re wondering what are the downsides of a reverse mortgage, take a look at the following information: 

  • Possible foreclosure – Before considering a reverse mortgage, you must ensure that you can comfortably afford your property taxes, homeowners insurance, HOA fees, and all other costs associated with owning your home. You must also ensure that you reside in your principal home for the majority of the year. If at any point these things don’t happen, you could default on the reverse mortgage and lose your home to foreclosure. 
  • Heirs could inherit less – When you pass away, heirs will be required to pay the full loan balance or 95% of the home’s appraised value. Reverse mortgages usually require your home to be sold to repay the debt, meaning your heirs will not be able to inherit your home or cash from the sale as an asset.
  • They can be complicated – There are a lot of rules that you need to make sure you understand before signing off for a reverse mortgage.

Conclusion

Regardless of what the pros and cons of reverse mortgages are, it’s important to fully understand the terms and conditions. A reverse mortgage may be worth it to you if your home is increasing in value considerably, you plan to stay in your home for a long time, and you can cover the costs of your home. Cheers to a happy retirement!