The Struggle to Survive
Most senior citizens in the United States live on fixed incomes. Struggling to make ends meet, many are forced to choose between spending limited income on expensive medications or groceries. What’s more, with millions of Baby Boomers entering their Golden Years, the senior population is expected to grow by nearly two-thirds in the coming decade. And, while the retirement crisis is national in scope, the picture is bleakest for California seniors, who face higher than average costs of living and limited access to pensions or 401(k)s.
In Diamond Bar, California, where Reverse Mortgage Certified is based, we understand the strain. And it is our great pleasure to help Southern California senior citizens find an elegant solution to their financial problems: Reverse Mortgage.
Reverse Mortgage: What it is
As with a traditional mortgage, a reverse mortgage is a loan that uses the borrower’s home as collateral. But, unlike a traditional mortgage, borrowers do not have to repay the loan while they remain in their home. Another difference between the two types of loans is that reverse mortgages are only available to borrowers who are at least 62 years of age and have already paid off their forward mortgage or will be able to pay it off using proceeds from the reverse mortgage. A reverse mortgage allows senior citizens to take available equity out of the house through lump-sum withdrawals, regular payments, or a line of credit. Home Equity Conversion Loans (HECM) loans do not need to be paid off until the borrower dies, sells the house, or moves.
More than one million senior households have gone through the federal reverse mortgage program since it was created 30 years ago. The federal reverse mortgage program enables older adults to use available equity in their homes to supplement retirement savings and support aging in place. But administrators in the Department of Housing & Urban Development (HUD) were concerned that senior borrowers were spending their money too quickly – without saving cash to pay for property taxes and insurance. So, in 2015, they introduced new underwriting standards, which greatly impacted the industry.
Due to the change, lenders are required to consider an applicant’s financial and credit risk profile in deciding whether to approve a loan. While this type of underwriting is standard practice for forward mortgages, the requirement was new relative to Home Equity Conversion Mortgages (HECMs). Under the 2015 update, applicants who fail to meet required criteria can be: 1.) denied a loan; or 2.) required to set aside a portion of the available principal in an escrow account – known as a Life Expectancy Set Aside – to be managed by the lender, to cover future property tax and insurance payments. Since the change, associated defaults have been reduced by nearly three-quarters. In all, the measure has made loans safer for borrowers as well as the fund.
On October 2, 2017, HUD will again enter the reverse mortgage fray, enacting stricter borrower guidelines. Under the new rules, a 62-year-old borrower getting a reverse mortgage with a five percent interest rate would be able to draw 11 percent less money from a home than under current rules. For an 80-year-old borrower, the reduction would be 12 percent. Another key set of changes involves the insurance premiums that borrowers must pay when they first take out a reverse mortgage and the annual premiums they pay over the life of the loan. The new rules require higher initial premiums in most cases but lower annual premiums in subsequent years. So, if you are considering applying for a reverse mortgage, now is the time to act! Call Manny4Reverse today.
About Reverse Mortgage Certified
In truth, after a lifetime of hard work and sacrifice, we would love to help homeowners improve their financial situation by taking out a reverse mortgage. Wouldn’t you rather get a check each month rather than having to scrimp and save to pay the mortgage? If you own your own home, you may be eligible. If you have questions about how much reverse mortgage capital you might qualify for, contact Manny LaFosse, your certified reverse mortgage consultant.
Residents of Los Angeles County and North Orange County should look to the experts at Reverse Mortgage Certified for great rates and information about the reverse mortgage loans as well as several other available financial options. Call our senior hotline today to find out if a reverse mortgage may be right for you or for someone you love (855) 444-9798.