We’re here to Help you
The economics of aging has shifted dramatically. Some retirees are living happily ever after, others may need to move in with family or work a part-time job, and others don’t feel they can retire at all. Financial resources are monitored closely and our biggest investment – our house – continues to drain these precious reserves each month. But why?
Now, you can turn that around! With a Reverse Mortgage, your house actually pays you – providing you with additional income so that you can indeed retire, pay for medical bills, spend valuable time with those you love, or anything else you’ve been waiting to do. Why not?
You have questions, specific questions about your unique situation. I can answer them, helping you move forward confidently. I am 100% there with you for every step of this process. In fact, I so strongly believe that a reverse mortgage can transform your life, I happily pay your closing costs. I have lived in Southern California for over 20 years, and relocated to Temecula in 2013 with my children. My family and I continue to be in touch with our friends, family and clients from Arcata to Imperial Beach, from Bolinas to Lake Tahoe!
Here’s my fine print: a Reverse Mortgage will not work for everyone. But if it IS going to work, it’s going to be PERFECT.
Let’s find out if it’s perfect for you and your family. Please click around, read on, and give me a call with your questions, comments, or to get started with an application today.
I do believe you can live happily ever after, too.
In Service,
Liv Kellgren
Owner/Broker Bless this Address
CalBRE 01908143
NMLS 1532728
What is a Reverse Mortgage?
Mortgage terminology can be confusing, and definitions needlessly complicated. So here, in simple terms, is the answer to a basic question: what is a reverse mortgage?
A reverse mortgage is a home loan that allows seniors to eliminate their regular mortgage (if they have one), receive cash payments monthly, a lump sum payment, or a line of credit against the value of their existing home equity. It can also be used to pay property taxes and homeowners insurance for the rest of the borrower’s life. These funds can be used for home improvements, paying off debt, or travel.
Reverse mortgages are also called Home Equity Conversion Mortgages, or HECMs, but frankly, we think “reverse mortgage” describes the loan much better than “HECM.”
Why would I consider a Reverse Mortgage?
A reverse mortgage is an excellent solution for seniors with moderate to high equity in their home who need some extra cash or financial relief without any credit requirements. The loans are available only to homeowners, at least one of whom is 62 years of age and older, and provide a number of benefits, including:
- Paying off a current mortgage, should you have one
- Allowing seniors to live in their home without making monthly mortgage payments*
- Providing tax-free** money for any use
- Ability to pay monthly bills and live comfortably
- Providing freedom from medical bills and debt
- Providing cash for remodeling or home renovations
- Retaining ownership of your home.*
What is a reverse mortgage? It’s a financial option that may allow you to enjoy a more comfortable retirement and maintain your independence.
Quick Facts about a Reverse Mortgage
This Reverse Mortgage FAQ answers the most common questions our clients ask during the loan process.
For more facts about your reverse mortgage situation, or to get answers to your specific questions, please contact us at (760) 579-9519.
“What is a Reverse Mortgage?”
A reverse mortgage, or HECM, is a government-insured loan program which allows homeowners 62 and older to access the value of their homes’ equity.
“What Does HECM Stand For?”
HECM stands for Home Equity Conversion Mortgage, and is the only type of reverse mortgage insured by the Federal Housing Administration.
“Who is Eligible for a Reverse Mortgage?”
Homeowners at least 62 years of age with moderate to significant equity in their homes who want to eliminate existing mortgage payments or receive additional cash.
“Does the Loan limit Cash-Out Use?”
This is one of the most commonly asked concerns in the entire reverse mortgage FAQ. The answer is no. Once the previous mortgage is paid, you can use the money for monthly bills, medical expenses, home renovations, once-in-a-lifetime vacations—anything you want!
“Do Both Spouses Need to be 62?”
No. Only one borrower needs to be 62, but loan proceeds are based on the younger homeowner’s age.
“I Still Have a Mortgage. Can I Take Out a Reverse Mortgage?”
Absolutely—the existing mortgage is paid at closing, and then you receive any remaining cash. You no longer have monthly mortgage payments, although as the homeowner you’re responsible for insurance, property taxes, and maintaining the property. There are some Reverse Mortgage programs that include a Life Expectancy Set Aside that can pay your taxes and insurance for you.
“Do Some Homes Not Qualify for a Reverse Mortgage?”
Vacation homes, secondary residences, and rental properties of more than four units do not qualify for a reverse mortgage. For other refinancing options for these properties, please call us directly (760) 579-9519.
“What Upfront Costs Come with the Loan?”
Although most costs are financed as part of the loan, you will pay your counseling fee ($150-200) and you may need pay for your appraisal. If you need help paying for your appraisal, we may be able to help.
“How is the Loan Repaid?”
When the loan comes due, you (or your estate) will repay all cash advances, upfront costs, and additional interest. Most often, the house is sold on the market, just like any other home would be, and sales proceeds will go toward paying off the loan. Any difference in sales proceeds will remain with your estate.
“Can I Owe More than the House is Worth?”
A reverse mortgage is a non-recourse loan, meaning the original owner never owes more than the home is worth. Insurance is included in the Reverse Mortgage.
“When does the Loan Come Due?”
The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away.
“Ok. So, what’s in the fine print?”
- Any homeowner can apply for a home equity loan. A homeowner must be at least age 62 to be eligible for a Reverse Mortgage.
- A home equity loan must be repaid in monthly payments over 5, 10 or 30 years. A Reverse Mortgage is typically not paid back until the homeowner moves out of the property for 12 consecutive months, or passes away.
- A home equity loan requires stable income and a solid credit score. A Reverse Mortgage does not consider a minimum income or credit score.
- A home equity loan that charges no closing costs may have a higher interest rate over the life of the loan. A Reverse Mortgage charges upfront closing costs but generally has lower interest over the course of the loan; This loan is repaid to the lender when the homeowner moves out of the property for 12 consecutive months, or passes away.
Reverse Mortgage Options and Obligations
Reverse Mortgage Help allow homeowners to access their equity in several ways. You can receive money as a lump sum, a line of credit, a monthly payment, or any combination of the three depending on the loan program that you choose. You retain the title to your home, and are responsible for all property taxes, insurance costs, and house maintenance—all of which can be paid out of cash secured by the loan.
For homeowners’ protection, Reverse Mortgage Help are designed so you cannot owe more than your house is worth. The loan itself does not come due for as long as you live in the house as your primary residence and as long as you keep your property taxes, insurance up to date and the home adequately maintained.
Your Reverse Mortgage offers three different loan options:
HECM Fixed
HECM Line of Credit
HECM for Purchase
A HECM for purchase loan differs from other reverse mortgages. Instead of access existing equity, the loan gives seniors an opportunity to purchase a home without making monthly mortgage payments.*
How does a Reverse Mortgage Work?
As with any financial agreement, it is important that homeowners get a thorough explanation of what the Reverse Mortgage program involves. This is in the best interest of both lenders and borrowers, as a complete understanding of the loan prevents misunderstandings and miscommunication. So here it is:
Some seniors are what’s commonly referred to as “house-rich, cash- poor.” They have significant equity invested in their home, but limited resources to pay monthly bills or unexpected expenses. A couple may own their home outright and still fear losing it because of limited resources and high debt loads. The worst part is the money is there, it’s just locked up in the value of the home. A reverse mortgage pays off your existing mortgage, should you have one, by allowing you access to the home equity you’ve worked so hard to build. Any money left after paying off your existing mortgage is available, tax-free, to use as you see fit.
Why Not Just Take Out a Home Equity Loan?
You may wonder why, if you have a significant amount of equity, you shouldn’t just take out a home equity loan rather than a reverse mortgage. If you’re financially comfortable then yes, a home equity loan can be a practical solution, but it comes with a significant drawback—monthly payments. Home equity loan payments begin as soon as you secure the loan, and can put a strain on a senior’s limited income. In contrast, a Reverse Mortgage does not become due until you either no longer live in the house, sell the home, or pass away. Because you won’t be making loan payments, you don’t have to worry about defaulting on the mortgage, and federal protections prevent you—or your heirs—from owing more than the appraised value of the home.
Reverse Mortgage Explained through Financial Counselors
We offer home equity conversion mortgages, or HECMs – the only type of reverse mortgage insured by the Federal Housing Administration. To ensure loan applicants have had all aspects of a reverse mortgage explained to them, the FHA requires that borrowers receive financial counseling from third-parties approved by the U.S. Department of Housing and Urban Development. Your counselor will make certain you fully understand how reverse mortgages work, and give you a clear understanding of your financial options before you apply for the loan.
8 Truths about Reverse Mortgages
1. A REVERSE MORTGAGE DOES NOT SELL YOUR HOME TO THE BANK!
Lenders are not in the business of owning homes — they want to make loans and earn interest. The homeowner keeps the title to the home in their own name. What the lender does is add a lien onto the title so that the lender can guarantee it will eventually get paid back the money it lent.
2. HEIRS CAN INDEED INHERIT THE HOME!
The estate inherits the home as usual, and there is a lien on the title. The lien is whatever proceeds were received from the Reverse Mortgage plus accrued interest. For example, someone takes out a Reverse Mortgage and owes $50,000 after 5 years. Then the homeowner decides to relocate or passes away and the estate sells the house for $250,000. The lender gets $50,000 and the estate inherits $200,000.
Additionally, a Reverse Mortgage is a “non-recourse” loan which means that the HECM borrower (or their estate) will never owe more than the loan balance or value of the property, whichever is less; and no assets other than the home can be used to repay the debt. Non-recourse simply means that if the borrower (or estate) does not pay the balance to the lender, the mortgagee’s remedy is limited to foreclosure and the borrower (or estate) will not be liable for any deficiency resulting from the foreclosure.
3. THE HOMEOWNER CANNOT BE FORCED OUT OF THEIR HOME!
The HECM Reverse Mortgage was created specifically to allow seniors to live in their home for the rest of their lives – Most people choose to “Age in Place”. Because the homeowner typically receives payments from a Reverse Mortgage instead of making payments to a lender, the homeowner can never be evicted or foreclosed on for non-payment. However, it is the homeowner’s responsibility to maintain the home in good condition, keep property insurance current, and pay the property taxes.
4. THE HOMEOWNER CANNOT “OUTLIVE” A REVERSE MORTGAGE!
The Reverse Mortgage becomes due when all homeowners have moved out of the property for 12 consecutive months, or have passed away.
5. THE HOMEOWNER’S SOCIAL SECURITY AND MEDICARE ARE SAFE!
Government entitlement programs such as Social Security and Medicare are not affected by a Reverse Mortgage. However, need-based programs such as Medicaid can be affected. To remain eligible for Medicaid, the homeowner may choose to manage how much is withdrawn from the Reverse Mortgage per month, to ensure they stay below Medicaid limits. You should consult with a qualified financial advisor to learn how a Reverse Mortgage could impact eligibility of some government benefits.
6. THE HOMEOWNER DOES NOT PAY TAXES ON A REVERSE MORTGAGE PAYMENT!
The proceeds from a Reverse Mortgage are not considered income and therefore are not taxable. Furthermore, the interest on a Reverse Mortgage can be tax deductible at the time of repayment. Consult a tax adviser for more information.
7. THERE ARE MINIMAL OUT-OF-POCKET EXPENSES!
Typically the only out-of-pocket expense is the cost of the counseling, which is currently done via telephone. If requested, some lenders will agree to pay the appraisal fee upfront and finance the cost into the loan.
8. IF YOU’VE BEEN PAYING OUT TO A HOME EQUITY LOAN, A REVERSE MORTGAGE PAYS YOU BACK!
The only similarity between a Reverse Mortgage and a home equity loan is that both use the home’s equity as collateral. Other than that, a Reverse Mortgage reverses the flow of money back into your pocket, and into your life!
Reverse Mortgage Counseling
What is counseling and why is it required?
To qualify for a Reverse Mortgage, all borrower(s) must go through counseling. Counseling ensures that you are aware of all of your financial options before you start the reverse mortgage process.
Reverse mortgage counseling is facilitated by a third party who is approved by the United States Department of Housing and Urban Development (HUD). You don’t have to worry about finding a counselor on your own. We will provide you a list of HUD-approved counselors in your area and can explain in more detail what they will ask, and why.
Why is counseling done by a third party?
Third Party Counseling is required by law to make certain that the information we give you is unbiased. The counselor makes sure you understand the Reverse Mortgage program and other possible financial options. They want to make sure you are truly making the best decision for yourself. By the time you speak with a Counselor, you will feel confident in the program you’ve selected, we will make sure of that.
What can you expect during the counseling process?
The counseling appointment can be facilitated over the phone or in person and it typically takes about an hour. All you have to do is choose a counselor from the list and call to make an appointment. We ensure that you are well informed about the entire Reverse Mortgage process, including what to expect at the counseling appointment. Your counselor will take you through the Reverse Mortgage process, explain exactly what a Reverse Mortgage is, and talk to you about your finances, in-depth.
Your counselor is required to review your housing and financial options, inform you of the possible effects of a Reverse Mortgage on any state and federal programs, and the impact that a Reverse Mortgage could have on your family and heirs. Having a third party also explain your options and going over the details of a Reverse Mortgage only helps to ensure that you are educated about your choices! The job of a counselor is to not direct you toward a specific solution, specific product or a specific lender. They just make sure you have considered all the alternatives.
A mortgage is one of the largest commitments you will ever make, and the same is true for a Reverse Mortgage. After counseling, if you feel that a Reverse mortgage fits your lifestyle and goals, then you will send your completed counseling certificate to us, and we will guide you toward the next step in this process.
It’s that simple!
Which Reverse Mortgage is best for you?
A home equity conversions mortgage, or HECM, is simply the Federal Housing Administration’s official term for a Reverse Mortgage. We offer three types of reverse mortgages, all of which are insured by the FHA. A HECM requires the borrower to be 62 years of age or older, have moderate to significant equity built up in their home (with the exception of the HECM for purchase loan), and use the home as their primary residence. Other than these requirements, loans can be customized to your individual needs.
1. The HECM Fixed Rate
A Reverse Mortgage fixed rate loan disperses money in one lump sum after the loan closes, with interest locked into a specific rate for the loan’s lifetime. These are excellent mortgages for people who need to pay for mandatory obligations, such as paying off mortgage balances and property liens, meeting repair requirements, and covering the closing costs associated with Reverse Mortgage Help. Money remaining after obligations are paid is available for the borrower’s immediate use.
2. HECM Line of Credit
One of the most popular types of Reverse Mortgage, the HECM line of credit is available to anyone who qualifies. With a line of credit, you can choose a number of ways to receive your money. You can:
- Lower your closing costs by limiting your initial payout based on the FHA’s pre-determined limit
- Opt for smaller amounts of cash disbursed on a monthly basis
- Have full access to your line of credit at any time
Your personal needs determine which option you choose. You can also select a combination of these options, such as receiving monthly payments with access to the full line of credit should you need it, making an HECM line of credit an extremely flexible reverse mortgage option. As an added bonus, an unused line of credit may grow over time.
3. HECM for Purchase
A “for purchase” mortgage differs from the previous loan options. Instead of allowing access to a home’s existing equity, for purchase loans allow seniors to buy a home with a Reverse Mortgage. Doing so allows the borrower to move into a new home with no monthly payments, providing seniors with opportunities to move closer to family or purchase homes which better meet their needs.
What is a Reverse for Purchase?
Since a Reverse Mortgage, also known as a HECM (Home Equity Conversion Mortgage) is a financial tool that was created specifically for homeowners age 62 or older, it includes the possiblity of purchasing a home as well. The Reverse for Purchase program allows seniors to purchase a home with a Reverse Mortgage and never make any monthly payments as long as you live in the home. Just like with a traditional Reverse Mortgage, you will remain responsible for property taxes and insurance.
With a Reverse for Purchase, you can purchase a home that meets your physical needs, move closer to family or move to a warmer location. Whatever the reason, the Reverse for Purchase makes it possible for seniors age 62 and older to purchase or build a home that better suits their life and does not require a monthly mortgage payment as long as you live there.
By using a Reverse for Purchase, you can bypass the need to ever have a traditional mortgage. In order to purchase a home with a Reverse for Purchase, you will need a minimum of 45% of home value as a down payment. Exact percentage is determined by age. The older you are the less you have to put down.
Call today! 760-579-9519
* – Homeowner may be responsible for property taxes, insurance and maintenance.
** – This is not tax advice.