Articles for people who would benefit from a reverse mortgage or for family members of people who would benefit.

Comparison Shopping

There are many motivating factors for making a large purchase. Perhaps you are just ready for a change. Maybe your current car/appliance/device is acting up. Possibly something is broken beyond repair. Most people first weigh the options between living with what they have, seeking appropriate repair services, and shopping for something new. There are costs, features, and other factors to take into consideration.

However, I find it interesting that there is often a lack of interest in exploring the financial options offered by a Reverse Mortgage. I suspect this may be due to one of three primary factors:

1) Many individuals are intimidated when it comes to talking about their financial situation. It may be because they don’t feel as savvy in this area as they do in their field of work and are worried they are going to be made to feel stupid by a financial professional. Other people may know they have made some mistakes in the past and would rather not lay those out for someone else to see because they feel that they will be judged.

2) While information about Reverse Mortgages is slowly becoming more mainstream, there still seems to be a negative aura surrounding the concept due to misinformation and stories about how these loans used to be administered before additional protections were put into place.

3) Past experience with aggressive lenders has turned many people off from speaking with a loan originator of any sort. They do not want to be put on a call list, barraged with sales flyers, or feel bullied into making a decision before they are ready.

These factors are keeping people from exploring what may be one of the most viable options for supporting their financial needs in their retirement years, which is a shame. When comparison shopping for financial options, it is vitally important to determine if there is a better way to leverage your most valuable asset – your home. It may be that you are in a great situation and should not change a thing. It could be that refinancing your traditional loan to another of the same sort could save you money. But, it is quite possible, if you are over the age of 62, that an entirely new product for you – a Reverse Mortgage – would be the best solution.

All that is needed to provide you with enough loan information to making an informed decision is your birthdate, address, and current loan information (if any). With these three pieces of information, I can provide you with estimates on a potential line of credit, guaranteed monthly cash flow, lump sum payment availability, or a combination that might suit your needs best. If you are concerned about sharing your personal information, a ballpark estimate can even be provided with a January 1st birthday of your birth year, a Zillow estimate you research on your property, and a rounded figure of current outstanding home loans.

Once you have these numbers to consider, you will be in a more powerful position to make the most informed decision possible about how to proceed with your financial plan. There is no obligation to move forward with a Reverse Mortgage, but at a minimum, you can be satisfied that you have done your homework and hopefully put as much effort into shopping for financial options that you did for your refrigerator!

Questions or Comments? Email Don HERE

Weighing The Risks

A recent Reverse Mortgage inquiry has brought up the topic of weighing the benefits and risks of Non-FHA Reverse Mortgages.

This particular couple has a 20-year age difference between them. He is 70 and she is 50. He works in a high-earning profession, but experienced an income interruption due to COVID. They hoped to get an FHA Reverse Mortgage to eliminate their existing mortgage payment, but do not have enough equity in their home to qualify due to the wife’s age. FHA Reverse Mortgages are calculated based on the age of the younger borrower and both spouses are required to be a party to the loan. This requirement made all the difference in their ability to qualify, but is meant to protect the younger spouse from being left in a bad financial situation upon the death of the older spouse.

This couple is now considering a non-FHA product which would allow them to remove her completely from the transaction and have the new loan is his name alone. If they move forward with this Non-FHA loan, and the husband passes away before his wife, the loan will come due at that time. The wife may not have the financial resources to refinance the loan into her name – with either a traditional or a Reverse Mortgage – which may leave her with no choice but to sell the home. However, their current situation doesn’t leave her any less exposed to a financial disaster since she would be unable to afford their monthly mortgage payments on her own if something happened to him.

There are two primary factors to be taken into consideration for this decision – their current circumstances and potential future circumstances.

Their current circumstances could be improved by the Non-FHA Reverse Mortgage because they would no longer be required to make monthly mortgage payments.

To improve potential future circumstances, they may need to consider purchasing life and/or disability insurance products that would protect her financially.

We do not sell insurance and therefore cannot provide recommendations on products, but we are happy to refer you to professionals who could help if you find yourself in a situation like this one.

Questions or Comments?  Email Don HERE 

Have You Considered Home Sharing?

I recently had a discussion with a woman who works for a non-profit organization. Her role is to work with people who are seeking “affordable housing” and since many of those seekers do not own a home, she didn’t think my book, “Why A Reverse Mortgage?” was relevant to her work. However, I pointed out that many Reverse Mortgage borrowers live in homes with more bedrooms than they currently need and that many of them would like to have either more income, some help around the house, or both.

There are already organizations in the business of matching homeowners with boarders: Odd Couples Housing, Sunshine Home Share, and Silvernest come immediately to mind. While this might not be an option for all of this woman’s clients, it would certainly be an option for some of them. These services, which bring together homeowners with boarders, could relieve some of the demand on subsidized housing which typically have long wait lists. This is also a practical option for young people needing affordable housing as they work off student debt or adults of any age who are recovering from a life event such as a divorce or who have experienced an employment setback that caused a reduction in their income. For many of these boarders, this may the the solution they need to save money for a home of their own.

“Why A Reverse Mortgage?” describes many options to help people in addition to the senior homeowners who have a Reverse Mortgage. We need to get creative to address the issues of appropriate housing and my book provides some suggestions for how do to just that.

Comments or Questions? Email Don HERE 

Take Advantage Of This Opportunity!

Adults over the age of 62 are quite often still employed and may have a traditional mortgage requiring monthly payments. They are also often tasked with care or oversight of their parents or perhaps a sibling or special-needs adult child. These responsibilities make them vulnerable to both loss of employment and higher expenses which, in turn can put their housing stability and retirement at risk. My suggestion to those homeowners over the age of 62 is to consider refinancing to a Reverse Mortgage as a “financial insurance policy” against these risks.

Employees and business owners of all ages are at risk of changes in the economy, unexpected global events like COVID, or unexpected personal events such as a familial health crisis. The difference is that for those of us over 62 (whether we want to acknowledge it or not) is that it can be more difficult for us to replace our income than it is for younger workers. Someone’s income security is less about being able to keep their present job as it is the ability to replace the income.

While many people hope for a home that is paid off by the time they reach 62, the reality is that most still have a monthly mortgage payment. At age 62 and beyond, homeowners have the option of refinancing to a Reverse Mortgage, which has no monthly payment requirements. However, if a Reverse Mortgage borrower would like to make payments to lower their balance, they are able to do so. What this means is that while jobs and health are stable, the homeowner can continue paying down their mortgage debt just as they would have done with a traditional mortgage. However, because these payments are not required, they have the option of stopping them if there is a job loss, a decrease in other income or a need to rearrange finances to accommodate other priorities. Depending on their equity and the structure of their loan, they may even be able to start receiving payments from their loan to help supplement the monthly balance sheet.

Think about the freedom that can offer!

My book, “Why A Reverse Mortgage?” describes how borrowers have benefitted from a Reverse Mortgage in this way. Give me a call at 303-469-1254 for answers to your questions and a free proposal specifically for your situation.

Comments or Questions?  Email Don HERE

 

You Might Inherit The House, But You Don’t Inherit The Loan

I am often asked about how property and loan transfers take place when an owner dies. It is important to understand that the title to the property and the loan are two separate transactions, regardless of the type of loan on the property.

Title to the property can be transferred from the deceased to another entity with a will, beneficiary deed, trust, or other legal instrument. Since I am not an attorney, I am not going to go into the relative merits of each of these methods of transfer here. If you would like to speak to an attorney, please give me a call for a referral if you need one. 303-469-1254.

As I mentioned, transferring title to a property is a separate transaction from transferring interest in a loan. Reverse Mortgages are typically due when the borrower no longer lives in the property as his/her primary residence. Traditional “forward” mortgages typically have a “Due on Sale” clause that causes the loan to come due when ownership transfers for any reason.

This means that when a property is transferred due to a death, the new owner gets title to a property that is subject to a loan that must be paid off. The recipient of the property can choose to pay off the loan(s) by 1) refinancing the property with a new loan, 2) selling the property and paying off the loan, or 3) paying off the loan with other monetary resources.

The recipient of the property should expect minimal cooperation from the old mortgage lender if prompt action is not taken to pay off the existing mortgage. The lender is typically under no obligation to extend a loan to the new owner and it is up to the new owner to find a way to pay off the old loan. Otherwise, the new owner should expect the old lender to foreclose on the property.

Comments or Questions?  Email Don HERE 

 

The Hidden Costs of Downsizing

Many people purchase who purchase a large home in their 40s or 50s have then intention of “downsizing” when they are ready to retire. That larger house is purchased because their income is typically at it’s highest during those years and many families still have growing kids living with them, so the space is needed. However, one of the biggest problems with this plan is that when it is time to retire, the process of downsizing might not actually save them any money after transaction and moving costs. About 20 years ago a realtor told me that in order to save money when downsizing, there must be a property value reduction of at least 1/3. In other words, if someone’s home is currently worth $600,000 and they want to downsize to save money, they need to find a new home at or below $400,000. If the move is from a house into a condo or townhome, the price reduction must be even greater in order to offset the costs of the new home’s HOA fees.

I’m not suggesting that you shouldn’t move, but I am suggesting that you explore all of the costs before putting the existing home on the market. In many cases, a Reverse Mortgage can free up enough cash flow to hire help with chores or care and allow you to stay in the home you love. It is probably less expensive to hire someone to maintain your existing home and yard that it will be to pay the HOA fees on the new condo. Accessibility concerns can also be addressed in an existing home by using the money from a Reverse Mortgage to consider installing an elevator, chair lift, widening doors or whatever other modifications might make you safer and more comfortable as you age.

Moving may also mean homeowners forfeit their senior tax exemption.

In my opinion, the most important consideration when buying a home, at any age, is to ask yourself if it would be suitable as a last home. I know more than one person who spent their entire adult life in the same home. It has become very popular to think of a home as “temporary”, but I would suggest that returning to the idea of considering a home as a one-time purchase might be a good idea.

Comments or Questions? Email Don HERE

Older Homeowners At Risk Of Falling Behind

I recently found an article describing how 918,400 older borrowers were either behind on their mortgage payments or at risk of falling behind in July, 2021. The obvious question to me is, “If CFPB can identify these borrowers, why aren’t they being screened for and offered FHA Reverse Mortgages?”. (Read the article for yourself HERE).

I understand that not all will qualify, but since the U.S. mortgage industry as a whole only closed 4,203 FHA Reverse Mortgages in July, 2021, it is apparent that there is a huge gap between the need of older homeowners and the help they are being offered.

My book, “Why A Reverse Mortgage?”, explains how some borrowers have been helped and the huge financial difference this option has made for them. At the same time, FHA condo approval requirements and other FHA appraisal, property, and qualification requirements seriously restrict access to this solution for borrowers at all income levels. As I describe in the book, an individual’s cash flow is often much better when they choose to stay in their home with an FHA Reverse Mortgage than if they choose to sell and apply to live in subsidized housing. An added benefit is less strain to taxpayers because subsidized housing is funded through taxes while the FHA Reverse Mortgage program is self-funded, requiring no tax money from Congress.

Comments or Questions?  Email Don HERE

Back In The Swing Of Things!

I realize that I have not written a blog post for more than a year. The Covid-19 shutdown and writing a book have distracted me from my normal routine of writing for this blog. Now that the book, “Why a Reverse Mortgage?” is available from your favorite book seller, I intend to return to posting current content based on my meetings with prospective borrowers, networking partners, and others. I’m looking forward to reconnecting and sharing information with all of you!

COVID-19: What Is The Impact On Refinances and Reverse Mortgages?

There is quite a bit of commentary being shared by industry professionals and news organizations regarding the impact of temporary COVID-19 regulations and current economic trends on the housing, mortgage and real estate industries.

At Orion Mortgage, our specific expertise is on mortgages and we specialize in refinances (traditional, VA and Reverse) for Colorado homes. So how do those temporary regulations and current economic trends impact what we do and, as a result, impact your options for refinancing?

Let’s address temporary regulations first:

The Governor has ordered a temporary halt to evictions and foreclosures. Some tenants or borrowers may misunderstand and think their monthly payments have been cancelled because of this order, but this is not the case. The Governor can temporarily stop the legal action, but consequences are likely to follow if payments simply stop being made.

If you are a renter having problems making your monthly payments, you need to reach out to your landlord.

For homeowners with a monthly mortgage payment, the CARES Act provides a mortgage forbearance option for FHA, VA and USDA loans. You should contact your loan servicer (their number is on your monthly mortgage statement) to make sure you fully understand the terms and expectations of forbearance.

As for how economic trends may impact on your options for refinancing:

Is now a good time to do a traditional (forward) refinance? Our answer hasn’t changed much from prior to COVID-19. That depends on your current mortgage, your financial situation and your future goals. We always recommend an annual mortgage review and are happy to have that conversation with you free of charge and with no obligation to move forward. This conversation will either provide you with peace of mind knowing that you are already in a great mortgage situation or with options to consider for a refinance.

Since the majority of our refinance business involves Reverse Mortgages, we have paid particular attention to what is happening in this arena. For borrowers who already have their Reverse Mortgage in place, there seems to be less financial anxiety. Borrowers don’t need to worry about monthly mortgage payments, and for those with a line of credit, they know it is guaranteed not to be cut or closed, unlike borrowers with a HELOC or those depending on credit cards.

For homeowners who have been on the fence about getting a Reverse Mortgage or have heard negative comments from their personal bank (probably because they aren’t offering this particular product) or friends/family who are relating second- or third-hand stories, we are happy to answer your questions and address your concerns.

We’ve come across a video that does a great job presenting the difference between a Home Equity Line of Credit (HELOC) and a Reverse Mortgage line of credit (known as a HECM – Home Equity Conversion Mortgage). The speakers in this video throw around some industry jargon, so if you would like clarification on anything that is said, give us a call – we’re always happy to help translate!

There is also reference made to a “Platinum Product” in this clip. This is a specific non-FHA Reverse Mortgage product. We have this and similar products available, but have not generally recommended them for the same reasons Mr. Andelman discusses in the video. That being said, we can provide these non-FHA products. They generally are attractive for borrowers with homes valued above $1,000,000 and who don’t mind paying higher interest rates.

At Orion Mortgage, Inc., our top priority is to match each borrower to the loan that best suits their financial circumstances and ultimate goals.

As always, if you have any questions about this video, our comments or refinancing your Colorado home, please contact us at 303-469-1254 or email Don@OrionMortgage.net

VIDEO:

https://hecmworld.com/reverse-mortgage-news/exclusive-interview-martin-andelman-heloc/

The Impact of Current Events on Reverse Mortgage Decisions

In this time of financial uncertainty, we are seeing renewed interest in Reverse Mortgages for three primary reasons:

Concern over the rapid drop in the value of financial investments. With the stock and bond markets exhibiting high volatility and large drops in value, people who have a Reverse Mortgage line of credit can use the line instead of selling depressed financial assets.
Concern over a potential drop in real estate values. We just received an application from a borrower who wants to close as soon as possible to be ahead of any drop in the real estate market.
Interest in a “payment optional” loan. People often think of a Reverse Mortgage only as a way to get money from the equity in their home. It is also a loan that allows the borrower to make payments to reduce the loan balance when they are employed, and either skip payments or draw money out when employment is interrupted. This can be an excellent option for anyone over 62 that is still employed. This works best if the loan is in place before employment is interrupted.

For those who have a Reverse Mortgage in place, now is a good time to review the current loan for a possible refinance. You may already be receiving mailings and other solicitations to refinance based on public record data. Rather than calling one of these unknown entities, if you are curious about your options, we are happy to provide a free, no-obligation analysis of your loan to see if a refinance makes sense.

Factors that make refinancing an existing Reverse Mortgage a viable option:

• The property has increased in value enough so you could have access to more money.
• Interest rates have dropped so you could access more money or slow the liquidation of your equity.
• You have a fixed rate HECM now and would like to have a line of credit or monthly payments.

There are many ways to structure a new Reverse Mortgage, depending on your situation:

• Some borrowers qualify for a no cost refinance where the lender pays all the closing costs and no closing costs are added to the loan balance.
• Non-FHA Reverse Mortgage products with closing costs as low as $125. All other closing costs are paid by the lender.
• Traditional cost structures where the closing costs are added to the loan balance to get the lowest rate.
• Borrower-paid taxes and insurance OR a life expectancy set aside to pay taxes and insurance.
• We have other variations between the above.
• Fixed rate and adjustable rate products.
• Products that work best with an initial draw of $100,000 or more and others that require no draw at closing.

Call Don Opeka at 303-469-1254 to learn more!