Three Things You Never Knew About A HECM Reverse Mortgage

Three Things You Never Knew About A HECM Reverse Mortgage

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaReverse mortgages are available to senior homeowners 62 and over, even married couples.  The borrower will live mortgage payment free and always retain the title to the home.  There are many myths and misconceptions that surround reverse mortgages – but there are also some not-so-known perks to the loans.  

Here are my top three:

1.) Most Reverse Mortgages are Insured By the FHA

It is normal for older adults to be concerned with the welfare of their children after their passing. This is one of the reasons many seniors balk at the idea of a reverse mortgage – they don’t want to “saddle their children with their debt.”  

Fortunately, there are safeguards in place to address this issue.

Almost all reverse mortgage are FHA insured. This means under current guidelines there is a large equity reserve that will always protect their home from going upside down.  Even if the homeowner lives to be 110, has used all the equity in the home, and the market has crashed – the heir will NEVER owe more than the home is worth.  FHA/HUD have guaranteed that they will cover the bank’s losses should the situation arise.  This leaves the homeowner and their estate protected against any possible losses.  

It’s important to also know that on the flip side, if the home is worth more than it sells for after the owners passing, the heirs will receive any excess equity available.  The bank will never take more than what is needed to pay off the loan. 

2.) Reverse Mortgages Have the Option of a Growth Line of Credit

For many years, there were only two ways to tap into home equity when obtaining a reverse mortgage – a lump sum or monthly installments.  This is has changed and HUD has added two new options – a Reverse Mortgage Line of Credit (HECM-LOC) which works similar to a Home Equity Line of Credit (HELOC), with the exception the borrowers will NOT be required to make repayments, and the other option is a Reverse Mortgage for Purchase, which allows seniors to use a reverse mortgage to make a home purchase. 

The line of credit is just as it sounds, it is a line of credit with funds that are available for the homeowner to take when they need it. But the major benefit to this line of credit is it also has a growth factor attached to it. This means that any money left in the line of credit will grow at a rate that is equal to the interest rate and mortgage insurance rates on the loan. 

Here’s an example:

Imagine your HECM-LOC has an interest rate of 4.5% and a mortgage insurance rate of .5%. The combined rate is 5.0%.  You have $100,000 in this line of credit which you don’t plan on using for 15 years unless you need it. That $100,000 is going to grow by 5% annually until you begin accessing those funds.

After year one this line of credit is up to $105,000. After year five the LOC is up to $127,500. And After 15 years the total funds in the line of credit are up to nearly $208,000. In 15 years, that 5% return has grown his available funds by 108%!

3.) A Reverse Mortgage Can Be Used To Purchase A Home

Although the Reverse Mortgage for Purchase program has been around for some years, it’s still relatively unknown – even in the real estate community. 

Reverse mortgages are an excellent option for retirees looking to buy a home near or far.  These loans require a down payment at the time of purchase, but beyond that there are quite a few differences than using a conventional mortgage.  

Borrowers are often able to purchase outside their expected “cash purchase” price range, because the cash is used as a down payment and the remainder of the purchase amount is covered under the reverse mortgage loan, while the borrower lives mortgage payment free.  The borrower will also always retain the title to the home, just as they would with a conventional mortgage.  These loans are also FHA insured, so everything discussed above still applies in that regard. The borrower can own other properties and still qualify as long as the home being purchased is their primary residence.  

Janice Cohen is a HECM Reverse Mortgage Specialist serving the Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Tips For Adult Children When Considering A Reverse Mortgage With Your Parents

Tips For Adult Children When Considering A Reverse Mortgage With Your Parents

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaIf you are concerned for your aging parents or relatives as their home becomes too much to manage or too difficult to move about,reverse mortgage may be an option.  It is common for adult children to look into the reverse mortgage process for their parents and help them make the right decision.  Here are some common questions and concerns you may have.

Questions to ponder:

1. Do I have the financial resources to help my parents with their medical and living expenses?
2. Is there a concern from other siblings as to inheriting the home or the equity?
3. What are my parents’ wishes as to staying home if medical care is needed for an extended time?

Common concerns:

  • Will Mom and Dad use up my inheritance?

While tapping into their equity, your parents’ home may be appreciating in value, which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.

  • Will the bank take their home?

No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.

  • How much money will they owe when the loan has to be repaid?

Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.

  • What happens to the equity if my parents or I decide to repay the loan by selling the house?

There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaining equity is retained by the owners or heirs.

  • What happens to my mom and dad’s house if they move into a senior care facility?

A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently (12 consecutive months). For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.

  • What happens if the loan balance becomes greater than the value of the home?

The reverse mortgage (aka: Home Equity Conversion Mortgage or HECM) is a FHA insured non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM reverse mortgage borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.

  • What are the risks my parents would be taking in receiving a reverse mortgage?

A reverse mortgage doesn’t affect regular Social Security or Medicare benefits. To find out if it impacts other federal or state assistance or medical programs, contact your reverse mortgage lender, tax attorney, or counseling agency.

  • Are there restrictions on how my parents spend their money?

Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren’s educations, vacations, new cars, home improvements or to eliminate debts. The money can be used for anything they desire.

Reverse mortgages are available to senior homeowners 62 and over – even married couples. They will live mortgage payment free, always retain the title to the home, and because these loans are FHA insured, no one – including heirs – will find themselves saddled with the debt after the owner passes. There are also various solutions for adult children or other family members who may want to keep the home in the family.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Understanding Elder Law

Understanding Elder Law

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaElder law is a relatively unknown segment of law and is often overlooked when seeking legal solutions.  But for some seniors and their families an elder law attorney may be exactly what they need.  Elder law is very broad and includes things like estate planning, probate, guardianship, real estate, nursing home neglect and a dozen other areas of law that affect the elderly. Typically one lawyer will not have expertise in every area, but will instead work with a network of attorneys who can supplement in specific areas when needed and vice versa.  Also, keep in mind just because an individual is elderly does not mean they need an elder law attorney.  Elder law is focused on legal problems specific to the elderly.  Concerns with other areas of law may best be handled by attorneys dedicated to those areas.

An elder law attorney should be educated and informed on reverse mortgage.  It is common for them to receive questions from clients, former clients, and their families about reverse mortgage when establishing estate plans or when they are considering a reverse mortgage for the first time.  Although reverse mortgages can be an excellent and safe tool for many homeowners, they are not for everyone and are most effective when used as part of a financial and estate plan.  It is highly encouraged to make sure any question receives an adequate answer when considering reverse mortgage – and often elder law attorneys are part of that equation.  This can also help with avoiding reverse mortgage scams.

Here are a few questions to ask when seeking out a an elder law attorney:

  • How long has the attorney been practicing?
  • What percentage of the attorney’s practice is devoted to elder law?
  • Does his or her practice emphasize a particular area of elder law? (for instance, guardianship or other specific work)
  • How much elder law training has the attorney had, and from what organizations?
  • Is the attorney a member of the National Academy of Elder Law Attorneys?
  • Will the attorney be able to work within your time limitations?

In addition to a legal network, an elder law attorney should be familiar with the “elder network”, a network of public and private community resources to assist seniors in various capacities.  This should include a reputable reverse mortgage lender.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Will A HECM Reverse Mortgage Affect Social Security, Medicare & Pension?

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaWill A HECM Reverse Mortgage Affect Social Security, Medicare & Pension?

A very common concern among seniors and adult children when considering a reverse mortgage is how it will affect social security, medicare, and even certain pensions.  For many seniors, these benefits are a large part of their income. Fortunately, because the funds from a reverse mortgage are NOT considered taxable income, a borrower’s benefits will not be affected when taking out a reverse mortgage.

On the other hand, borrowers who have Medicaid, TANF, Food Stamps or SSI may see those benefits affected by this additional income.   Because these programs are government sponsored programs with strict approval guidelines based on all sources of income, even non-taxable income, there is a possibility the additional cash flow will need reported.  Other supplemental and assistance programs would need to be addressed on a case by case basis.  Working with a reputable reverse mortgage lender and required third party counseling will ensure all your questions are answered thoroughly and honestly.

Reverse mortgages are available to homeowners 62 and older.  The proceeds can be received as a lump sum, as monthly installments, or a reverse line of credit and can be used for any purpose the borrower sees fit.  This FHA insured loan allows the borrower(s) to live mortgage payment free.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

What Happens To A HECM Reverse Mortgage After The Owners Pass?

Agoura Hills, Oak Park, Calabasas, Chatsworth, Canoga Park, Woodland Hills Reverse Mortgage HECM Janice CohenA common question and concern surrounding reverse mortgage is what will happen to the home after the homeowners pass away?  Will the bank take possession?  Will it be allowed as inheritance?  Will it be possible to keep the home in the family?  Will the family of he deceased be held liable?  These are very valid concerns – so I’d like to offer some clear and concise guidance.

When the last homeowner passes, whether we’re talking about you or a loved one, the home will transfer into the estate or a specific person according  to the wishes expressed in the homeowner’s will.  At this time there are three main options:

1.  Pay off the remainder of the loan

Depending on the amount of equity that still exists in the home, the financial situation of the family, and just the overall ability of those involved, this may or may not be a feasible option.  It’s not uncommon for a portion of life insurance to be used in this manner.  Because these loans are FHA insured, if the loan is repaid, it will never be more than the home is worth – even if the housing market is in a deep low spot.

2. Obtain a conventional loan.

Many mortgage brokers are familiar with the reverse mortgage process and the right broker will be able to help those in need identify the best route in obtaining a conventional loan and keeping the home.

3. Sell the home

The final option is to sell the home.  When there is not a desire to keep the home, the heirs can sell the home.  When the home is sold, the loan will be repaid and any remaining equity from the sale will go to the heirs.

If there are no heirs or the heirs are not interested in the home, no one will be held liable.

One last note, as long as the communication lines remain open, the bank will typically allow up to one year to help with the transition.  This one year is allotted in three month increments.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

How Adult Children Can Help Their Parents With A Reverse Mortgage

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaPerhaps your parents raised you in the home they are now ambling about. As you see them begin to slow, or have to jump on a plane every time they wish to see you, thoughts of helping them to have an easier time come across your mind. After all they deserve at this time of their life to relax, do what they wish to do, and be able to manage their health and their finances with comfort.

Considering a reverse mortgage is one good option. It gives more wiggle room to work with when balancing the growing needs of health, home, and retirement.

As you discuss the future and it’s possibilities, there are a few questions to ask yourself and everyone else involved.

First, do you or other siblings have concerns about inheritance and/or equity?  Your parents probably care that all of you feel you have received from them as they pass. While this discussion is not always easy, it is undeniably beneficial. Talking will give clarity, which in turn provides direction. It also gives everyone a chance to be heard.

Second, do you have financial resources to help your parents?  Health needs as we age are difficult to determine but it is important to build in a buffer for the unexpected.  The stress of aging is enough in and of itself, being able to take care of the costs should not have to be an additional worry for those that raised you.

Another good question that only your parents can answer is, ‘What are my parent’s wishes about staying in their home, especially if their medical needs grow?’ For some they are ready to let go of the home of their youth and family, wanting to change and simplify their lifestyle. For some being closer to you is the most important desire. And for some staying in their home as long as possible is the most important wish that could be fulfilled. Since the decision about reverse mortgage as a way to fulfill desires is a big one, looking toward the future and developing a plan will only benefit everyone – and ultimately make your parents’ happy.

Reverse mortgage is an individualized, specialized loan for those 62 and older that allows seniors to tap into the equity of their home while living mortgage and loan payment free.  The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. If you are planning ahead let your specialist guide you creatively to suit your needs and desires.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Is In-Home Senior Care Right For You?

In today’s fast-paced society, seniors are more independent than ever before.  Many develop strong community ties, visit with nearby family frequently and even open their homes to out-of-state family, embrace a close circle of friends, and through options such as reverse mortgage, are able to stay in their homes comfortably for far longer than ever before.

But what happens when living at home alone becomes a concern for these seniors and/or their adult children?  In the past, it typically meant one of two things: move-in with family or move to a senior care facility.  Often times though, a move like this can be detrimental in itself.  In-Home Senior Care may be all that is needed to alleviate concerns and keep everyone happy.

What is In-Home Senior Care?

In-Home Senior Care is an option where a caregiver visits the home during scheduled days/hours in order to attend to specific needs.  This offers peace of mind to both the family and the senior.  It also helps seniors continue to lead an independent lifestyle while still receiving the assistance needed, without burdening busy family members.  The care providers receive specialized training to ensure they are adequately equipped to care for seniors with varying needs.

What Types of Assistance Will In-Home Caregivers Offer?

The types of assistance that is offered by an in-home caregiver will vary based on both the needs and the care company, but most often include:

  • Safety supervision
  • Socialization
  • Transportation
  • Light housekeeping
  • Helping care for pets
  • Grocery shopping
  • Cooking
  • Running errands
  • Medication reminders
  • Walking assistance
  • Helping get dressed
  • Stand-by bathing/showering assistance
  • Grooming
  • Reading aloud from books, newspapers and magazines
  • Range of motion exercises
  • and lots more

Serving as a family caregiver for an aging loved one often is rewarding, yet involves sacrifice and stress.  It also frequently takes a financial toll on the caregiver with an estimated $5,500/year spent on out of pockets expenses, not to mention lost wages due to missed work.  Considering working with an in-home caregiver may be a better option all around.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Finding a HECM Reverse Mortgage Lender

For many retirees, a reverse mortgage is a feasible option to living the golden years they always dreamed of, or for others it may be a path to living within a budget without the constraints and worry of excessive financial distress.  In order to qualify for a reverse mortgage, the individual must own their home, be at least 62 years old, and have some equity in the home.  In general, the older the borrower (or the youngest borrower in the case of married couples) and the more valuable the home, the more reverse mortgage funds will be available.  Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in the home.  Once a basic understanding of how a reverse mortgage works, the next step is finding a lender.

Where to find a lender?

Reverse mortgages are marketed in every possible way.  Television, radio, mailers, internet, etc.  Although not all of these methods ensure trouble, some of them can be scams.  When seeking a reverse mortgage lender, it’s important to speak with people you trust.  Ask around at your bank or financial institution.  Speak with a financial or retirement adviser.  Talk with neighbors or friends who have utilized a reverse mortgage.  Seek information from the local Chamber of Commerce or Senior Centers.   Utilize other resources that may be available in your community.

What to look for in a reverse mortgage lender?

Working with a reputable reverse mortgage lender is critical.  It can be risky to get involved with a lender who does not offer all the details or who is just looking to make a “quick sell”.   A reputable lender will have strong connections in the community, working closely with a network of professional organizations.

Accreditation and ratings?

Seek out a lender that is a member of the National Reverse Mortgage Lenders Association (NRMLA).  Members of the NRMLA must conform to a strict code of lending ethic.  Look for a lender that is affiliated with the  Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Follow your gut.

When it comes down to it, always follow your gut.  Just because a lender may meet all this criteria doesn’t mean they will be right for you.  If you do not feel comfortable or feel your questions are not being adequately answered, there is nothing wrong with seeking out a different lender.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Can I Sell A Home With A Reverse Mortgage?

Typically when a senior takes out a reverse mortgage loan on a home, they intend to age there.  But on occasion and for various reasons, the homeowners wants to or needs to sell the home before the loan comes due and payable.  So, what now?

Although this is an important factor, it’s not nearly as daunting as it sounds.  Here’s where to start:

Step 1.) Locate your reverse mortgage loan documents and find any pertinent information regarding the sale of the home.  It will vary from lender to lender.  Most (but not all) reverse mortgage loans are FHA insured.  This means even if you owe more on the loan than the home is worth, you will never owe more than the home sells for.

Consult with a real estate or elder law attorney if you have questions or concerns.

Step 2.)  Contact the reverse mortgage lender to get a payoff quote.  This combined with a home appraisal will give you a good idea of what the sale will look like and what amount of funds you could potentially walk away with.

Step 3.)  Find a real estate agent.  When seeking out an agent, be sure to provide your reverse mortgage loan information up front and look for someone who has experience with such a sale.

Step 4.)  Prepare the home for sale.  From here, everything is similar to any home sale.  You want to prep the home, keep it clean for showings, update anything you may need, etc.

Step 5.)  Sell the home, pay off the reverse mortgage loan (consult with a real estate or elder law attorney if you have questions when paying off the loan), then reap the rewards.  Congrats!

Reverse mortgages are available to seniors 62 and over all over Southern California.  To learn more, contact a reputable reverse mortgage lender.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Considering Options: Nursing Home vs Reverse Mortgage

In our society, the elderly and nursing homes go hand in hand.  But when speaking with elderly people, one of their biggest fears is being placed into a nursing home.  Who can blame them?  According to National Center on Elder abuse, one study interviewing 2,000 nursing home residents reported that 44% said they had been abused and 95% said they had been neglected or seen another resident neglected.  When considering the psyche of an older senior, nursing homes or convalescent homes mean “end of life”.   Often times adult children don’t know a better solution as the needs of the parents increase, the home is no longer suited for their parent, and/or they do not have the funds or the time for in home care.   Reverse mortgages have been helping seniors in need for years.  But now as retirement planners are realizing the benefit the can offer long term, they are now being used more proactively.

Reverse mortgage is a great method to finance in-home care to avoid nursing homes, pay for medical care, and even fund home modifications.  For seniors who are looking to situate long term and prepare to live their golden years in their own home, a move to a new residence closer to family or more suited for senior life may be in order.  The reverse mortgage for purchase is perfect option for these situations.  Reverse mortgage for purchase allows the purchase of a different residence using a reverse mortgage while still employing the perks of a traditional reverse mortgage – living mortgage payment free.  In addition, reverse mortgages do not affect social security, pensions, or medicare.

Both reverse mortgage for purchase and traditional reverse mortgage are available to seniors 62 and over.  The home must be the primary residence and it must be a HUD approved property type.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.