Planning for Long Term Care

long-term-care-insurancePlanning for long term care can be a confusing, overwhelming process. Long term care, “is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or other facility… You can select a range of care options and benefits that allow you to get the services you need, where you need them.”1 For some, long term care insurance is a necessary addition to their retirement plan.

Even if financial reasons are not a concern, long term care offers an extra level of convenience, both for the person using it and for their family.2 For example:

  1. The assistance provided by a third party to help with care funding and care coordination is often very helpful for families with multiple children who may struggle to agree on care options for their loved ones.
  2. Some like to think of long term care insurance as a coupon or discounted rate for care services. The insurance will not cover all of their costs, but it will provide a significant discount.
  3. Long term care provides “guilt-free” care. Many people have difficulties with the idea of paying cash for their care. It seems easier to allow insurance to cover all or most of those costs than to write a personal check.
  4. Many long term care policies come with care coordination. Care coordinators work with the policy holder, their families and medical providers. They can be a helpful resource and a good place to start when care is needed.

There are plenty of options to consider when purchasing long term care insurance and research is required to make the best decision possible for your needs. There are also some common mistakes policy owners make when shopping for long term care insurance2.

  • Overbuying benefits- Purchasing insurance to cover 100% of possible care needs can come with a substantial cost. Speak with your financial adviser to see what options you have and discuss the best value for you.
  • Not taking into account possible tax incentives- You may be able to pay the premiums through Health Savings Accounts and deduct them as a health insurance expense through a business.
  • Medicaid planning- Medicaid should be viewed as a safety net, not a crutch. Medicaid benefits will continue to be strictly controlled in the future.
  • Predicting future performance- New long term care policies tend to have lower rates due to the current lower interest rates.
  • Not conducting periodic policy reviews- Policies need to be regularly reviewed to see if the pricing and benefits are still reasonable.

Long term care choices are abundant, but working with a financial advisor you trust and evaluating your lifestyle and finances ahead of time will make the process easier.

If you’re looking for a way to enhance your financial security, one option is through a Home Equity Conversion Mortgage (HECM) loan, also known as a reverse mortgage. A HECM reverse mortgage allows homeowners age 62 and older to convert a portion of their home equity into cash that can be used for any purpose such as paying off debt, paying for home renovations or funding extra expenses such as long term care. For more information or to talk with a reverse mortgage advisor, call 866.751.6105 today.

Save Money By Breaking These Habits

money-saving-habitsWe all have little habits that are costing us money. When added up through the years, how much money could you save if you kicked these common money-draining habits1?

Aggressive Driving. Not only is fast, aggressive driving bad for your stress levels, but it takes a toll on your vehicle. Consider the cost of more frequent brake jobs, new tires and other regular maintenance. Speeding tickets can be costly and can increase your insurance rates. If fast driving is an issue for you, consider focusing on calming music while driving.

Brand Name Products. From cleaning products to pet food. Check the labels and see if a generic brand has the same ingredients and you could enjoy substantial savings.

Dry Cleaning. Check your clothing labels to make sure you’re not dry cleaning clothing that could really be cleaned at home. Hand washing and air drying is preferable for some items. Or, try using a dry clean at home kit for items that must be dry-cleaned.

Late Fees. If you find yourself regularly paying late fees, you may want to reconsider how you pay your bills. Automatic payments set up through your bank ensures that your payments are always on time.

Extended Service Plans. You may want to reconsider purchasing an extended service plan as most people rarely use them. The manufacturer’s warranty is generally sufficient.

Incandescent Light Bulbs (traditional bulbs). Compact Fluorescent Lamps (CFLs) last about 5 times longer than traditional bulbs and use about 75% less energy.

Oil Changes. If you’re still changing your oil every 3,000 miles, you may want to check your manual. Newer cars can go 5,000 to 7,500 miles between oil changes. You’ll be saving yourself some hard earned cash.

Bottled Water. Not only is drinking bottled water harmful to the environment, but water from the tap is far less expensive. Don’t like the taste of tap water? Try a water filter either at one of your faucets or a pitcher you can keep in the refrigerator.

ATM Fees. If you’re finding yourself regularly using out of network ATMs, consider switching banks to something more convenient or open a separate account at a new bank. Using an out of network ATM could cost you $250 per year if you get cash just twice a week.

If you’re looking for ways to supplement your retirement income, one option to consider is a Home Equity Conversion Mortgage (HECM) loan, also known as a reverse mortgage.  A HECM reverse mortgage allows homeowners age 62 and older to convert a portion of their home equity into cash that can be used for any purpose such as paying off debt, paying for home renovations or funding extra expenses.  For more information or to talk with a reverse mortgage advisor, call 866.751.6105 today.

New Reverse Mortgage Non-Borrowing Spouse Rule

new reverse mortgage loan for non borrowing spouseCongress established the Home Equity Conversion Mortgage (HECM) program to be administered by the Department of Housing and Urban Development (HUD) in 1987. Since then, HUD has continued to update the program to better fit the needs of borrowers and to ensure the viability of the HECM program. The most significant recent change to the program was enacted on April 25, 2014 when HUD announced that HECM loan documents must contain a provision deferring the “due and payable” status of the loan until the death of the last surviving, non-borrowing spouse. Prior to this provision, non-borrowing spouses had to either sell or refinance the home to pay off the HECM loan. This left non-borrowing spouses who were not able to refinance with only one option, selling the home.1

New loans originated on or after August 4, 2014 will allow non-borrowing spouses, including common law spouses if recognized by state law, to continue living in the home after their spouse passes away. They will not be required to refinance or sell the property. However, there are some requirements that must be met to satisfy the provision. Some of these requirements include the following:  the spouse will have to have been the spouse of the HECM borrower at the time of the loan closing, and will have to have remained their spouse for the duration of the borrowing spouse’s lifetime.  In addition, the spouse must have been disclosed at origination and have occupied, and continue to occupy, the home for the life of the HECM loan to be eligible for the provision.1

Additionally, here are some actions that must be taken for the non-borrowing spouse to take advantage of this provision. According to a recent article from the Minuteman News Center, “There will be very specific, clearly defined actions that must be taken upon the death of the last surviving HECM mortgagor to ensure that the mortgage will remain in good standing. However, when the Non-Borrowing spouse accomplishes these actions, they will be able to remain in their home and continue to receive the benefits of the HECM reverse mortgage.”1 It’s important to note that the new provision will not affect current HECM loan borrowers.

For more information about Home Equity Conversion Mortgage loans, call a reverse mortgage advisor at 866.751.6105.

Five Things to Know About Reverse Mortgages

5 things to know about reverse mortgagesReverse mortgage loans can be a helpful financial option for senior homeowners struggling to make ends meet, but they are not appropriate for everyone. We have highlighted five things potential borrowers should know when considering a reverse mortgage loan.

1. Who are reverse mortgage loans right for? Reverse mortgage loan borrowers must be at least 62 years old, have significant equity in their home, and not be delinquent on any federal debt. They also must own a single family home, a two to four unit home with the owner living in one unit, or a HUD-approved condominium or manufactured home.

2. Who are reverse mortgages wrong for? Linda Sands, branch manager for Luxury Mortgage in Stamford, Connecticut says, “If the money you’d get from a reverse mortgage still wouldn’t be enough to ensure you can pay your bills every month, it’s not right for you. If you take out a reverse mortgage and use it to pay off your existing mortgage so you don’t have that payment, that’s great. But if you still can’t pay your monthly utilities or car payment, it just doesn’t make sense.”1 In addition, borrowers are also required to continue paying property taxes and insurance, as well as maintain the home. There is also concern if the borrower only intends to live in the home for a few years as they may not realize the full benefit of a reverse mortgage loan. A reverse mortgage is designed for homeowners that plan to live in their home long term.

3. Do I have to participate in the counseling session? Yes. The counseling session is required for all reverse mortgage borrowers. The session lasts between an hour and an hour and a half and is provided by a third-party reverse mortgage counselor who is not connected with the lender or broker. During this session, you are encouraged to ask questions about your specific financial situation and the requirements of the reverse mortgage loan. Because reverse mortgage loans can be confusing, borrowers may bring along family or friends to ask questions about the process as well.

4. What should I bring to the counseling session? Come prepared with documents that show the value of your home, your income, your current debt, and your expenses. The counselor won’t need to see tax returns, but you should bring everything you have that will give the counselor a good idea of your financial situation. Also, be prepared to ask questions. This is a good opportunity to go through your finances to see if a reverse mortgage loan is the best option for you. Remember, the counselor is there to answer questions and make sure you are informed about the loan. The lender will underwrite the loan to determine whether you’re eligible and whether your loan is approved.

5. How long do I plan to live in the house? This may be one of the most important questions you should ask yourself before getting a reverse mortgage loan. Because of the cost associated with obtaining the loan, only living in the home for a couple years after getting a reverse mortgage might not be the best financial option. However, if you plan to live in the home for many years and can afford to continue paying property taxes, insurance, utilities, and home repairs, then a reverse mortgage may be right for you.

A reverse mortgage loan may not be suitable for everyone. However, for many it can offer a supplemental source of income and provide a financial safety net throughout your retirement years. For more information about reverse mortgage loans, call a reverse mortgage loan advisor at 866.751.6105.

2014 EBRI Retirement Survey Indicates Seniors Struggling With Debt

ebri retirement surveyThe Great Recession is over, but many are still feeling the pain as they recover financially. At-risk groups such as the growing senior population are especially vulnerable. Many retirees were forced into early retirement in recent years and feel financially unprepared to face retirement.

Others simply do not have the retirement savings they require to make ends meet for the duration of their retirement. The 2014 Retirement Confidence Survey by Employee Benefit Research Institute1 shows that Americans are feeling slightly more confident about retirement savings than the previous year.

The percentage of workers who are very confident about having enough savings for retirement reached record lows between 2009 and 2013. Positive aspects of the 2014 survey show that the amount of workers who are very confident has increased from 13 percent in the 2013 survey to 18 percent this year. However, nearly one quarter of those surveyed were not at all confident they had saved enough for a comfortable retirement.

It is needless to say a large portion of workers are woefully unprepared for retirement. Over one-third of those surveyed claimed to have less than $1000 in savings or investments. Those with lower incomes of $35,000 or less per year are the most likely to have less than $1,000 in savings. The workers surveyed cite day basic cost-of-living expenses as the top reasons why they have not been able to save more.

Another cause for concern is the growing level of debt Americans have accrued. 58 percent of workers and 44 percent of retirees claim they are struggling with debt. 24 percent of workers and 17 percent of retirees claim their amount of debt is higher today than it was five years ago.

Because debt is a concern for so many Americans and many soon-to-be retired workers are facing the stark reality that they simply do not have enough saved to retire, retirement expectations are slowly changing. More than 80 percent of workers surveyed claim their expected retirement age would increase.

Retirement should be a time to relax, spend time with loved ones, travel or invest time in hobbies. There is still a large group who are either postponing retirement or scrimping to make ends meet. If you or someone you know falls into this group, there may be another option to alleviate some of that financial stress.

A reverse mortgage loan is available for homeowners who are 62 years old and older who have significant equity in their homes. A reverse mortgage loan allows homeowners to tap into the equity in their home as a supplemental form of income.

The funds from a reverse mortgage loan can be used however the homeowner chooses. Many borrowers will make modifications to their home to make the space more accessible. Others are able to take a dream vacation or invest in a hobby. Whatever your retirement goals, a reverse mortgage loan may be able to help. Use our reverse mortgage calculator to see if you may qualify.

Learning to Age Comfortably in Place

reverse mortgage loanAccording to a recent study conducted by AARP, there has been a steady increase in senior citizens who wish to stay in their own homes as they age. This rising trend accounts for 90% of the seniors surveyed and is now referred to as “aging in place.” While residing in assisted living facilities or with relatives provides definite benefits, many find that being able to continue living by their own rules, in the comfort of their own home, outweighs all other options.

However, it is important to remember that as your health and dexterity begin to change, changes to your home may become a necessity to keep the prospect of staying in your own home not only a reality, but a safe alternative to assisted living. According to the same study by AARP, there are certain features that are found to be especially important in your later years in life, and they are:

  • Safety features such as non-slip floors
  • Bathroom aides such as grab bars
  • A personal alert system for emergencies
  • An entrance without steps
  • Lever handled doorknobs
  • Wider doorways
  • Either higher or lower electrical switches

Not surprisingly, there has been a significant increase in homeowners opting to renovate their homes, according to an article by Reverse Mortgage Daily. With the rising costs in living and a rather turbulent housing market, remodeling your home to match your current needs is a very attractive option.

And if you are a homeowner at least 62 years of age, a Home Equity Conversion Mortgage loan may provide the extra funds you need to pay for any renovations needed to your home. A Home Equity Conversion Mortgage may assist not only in paying for renovations to your home, but it may help pay off any existing mortgage, increasing your monthly cash flow allowing you to live a more financially comfortable life. Call 866.751.6105 to learn more.

A Brief History of the Reverse Mortgage

reverse mortgage historyFor many senior homeowners, accessing a portion of the equity that they have built in their homes can be a vital financial resource. Over the years, Home Equity Conversion Mortgages (HECMs), also known as reverse mortgage loans, have helped many seniors seeking another avenue to supplement their retirement income.

The changes to the HECM program show that it has evolved to better protect and fit the needs of borrowers. In this article, we will briefly discuss the history of the HECM reverse mortgage loan in America and some of the changes that have occurred since the inception of the program.

HECM reverse mortgage loans have been helping supplement retiree’s income for 25 years. In 1988, President Reagan signed the act into law authorizing the Federal Housing Administration (FHA) to insure reverse mortgages through the HECM Demonstration1. In October 1989, the first HECM loan closed in Kansas City, Missouri. Since then, the HECM program has changed to meet the growing needs of senior homeowners. The HECM program saw significant increases in loan volume after the turn of the century.2

In 2008, just after the economic crisis had started, lenders were allowed to offer fixed-rate mortgages on lump sum loans. This allowed borrowers to take the maximum loan amount at closing. These borrowers tended to be younger and often had weaker finances than their predecessors.

The major reason these borrowers gave for obtaining a HECM loan was to “pay off an existing mortgage, rather than to increase income for every day expenses, enhance quality of life or plan ahead for emergencies.” In 2012, nearly 10% of HECM borrowers were in default for failure to pay property taxes and homeowners’ insurance, and three of the largest HECM reverse mortgage lenders; Bank of America, Met Life and Wells Fargo exited the reverse mortgage industry.

To create a more financially stable reverse mortgage loan program, the Department of Housing and Urban Development (HUD) recently created several significant reforms. The first measure of action included replacing the HECM Standard and HECM Saver options with a Single HECM product. Among other changes, the new program implemented initial disbursement limits.

Borrowers may access the greater of 60% of the principal limit amount or all mandatory obligations, as defined by the HECM requirements, plus an additional 10% during the first 12 months after loan closing. The combined total of mandatory obligations plus 10% cannot exceed the principal limit amount established at loan closing.

Some of the key eligibility requirements for a HECM loan include the following:

  • Borrowers must be at least 62 years old
  • Borrower’s either need to own their home outright or have significant equity built up
  • Borrower’s must live in the home as their primary residence
  • Borrower’s must participate in a HUD-approved counseling session
  • The home must be a single family home, a two to four unit home with the owner occupying one unit, a HUD-approved condominium or a manufactured home that meets FHA requirements

In addition, borrowers are required to continue paying property taxes and insurance and maintain the home according to FHA guidelines. For more information about HECM loans call 866-751-6105.

7 Things to Know About Reverse Mortgages

what is a reverse mortgageA reverse mortgage loan is a home equity loan that allows eligible seniors to access some of the equity they’ve built in their home. This can be an attractive financial option for seniors who find themselves house-rich but cash-poor and need a supplemental income.

The following are seven things that potential borrowers should know before taking out a reverse mortgage loan.

What is a reverse mortgage and how does it work? A reverse mortgage allows seniors to convert a portion of the equity in their home into tax-free1 cash without having to make monthly mortgage payments.2

This money can be used however the borrower chooses. Many borrowers pay for:

  • medical expenses
  • in-home care
  • home modifications
  • or even for vacations

Is a reverse mortgage loan available to anyone? No. there are eligibility requirements that must be met in order to obtain a reverse mortgage loan. Borrowers must be at least 62 years old, have sufficient equity in their home, and they must live in the home full time.

The home must be a single family residence, a two to four unit home where the borrower occupies one unit, or a Federal Housing Administration (FHA) approved condominium or manufactured home. For more information about reverse mortgage eligibility requirements, contact a reverse mortgage loan advisor at 866-751-6105.

How do I apply for a reverse mortgage loan? The first step is to contact a reverse mortgage advisor to discuss your eligibility and financial situation. Next you will need to meet with a HUD-approved reverse mortgage loan counselor.

During this meeting, you can ask any questions you may have about your reverse mortgage loan before deciding to continue with the loan process. As with any major financial decision, it is a good idea to discuss your financial needs and goals with a trusted financial advisor.

Will the bank own my home if I take out a reverse mortgage loan? No. The borrower owns their home and maintains title as long as they live in the home full time, continue to pay required property taxes and insurance and maintain the home according to FHA guidelines.

When the last borrower passes away or sells or moves out of the home, the loan becomes due. At that point, the heirs to the property can either repay the loan and keep the home or the home can be sold to pay off the loan.

Will I have to pay for property taxes and homeowners insurance? Yes. All property taxes, insurance, and home owners’ association fees must still be paid throughout the life of the reverse mortgage loan.

When will I have to repay the reverse mortgage loan? The loan must be repaid when the last borrower no longer lives in the home full time. The loan will also become due if the borrower fails to pay their required property taxes or insurance or does not maintain the home in accordance with FHA requirements.

Are reverse mortgage loans expensive?  There are upfront fees that must be paid including mortgage insurance premium (MIP), a loan origination fee and closing costs, as well as ongoing fees such as interest, MIP and service fees.

These fees can often be financed as part of the loan.  Generally the only out of pocket expenses the borrower will have is the HUD counseling fee and the cost of the appraisal.

Reverse mortgage loans can be helpful for seniors who have sufficient equity in their homes, but need greater cash flow for every day expenses. Working with a reverse mortgage advisor and a reverse mortgage counselor can help potential borrowers decide if this is the right decision for them.

For more information, you can speak with a reverse mortgage advisor at 866-751-6105.

Using a HECM To Purchase Your Next Home

HECM-for-purchaseIn 2008, Congress authorized the HECM (Home Equity Conversion Mortgage) for Purchase loan program which allows qualified seniors, ages 62 or older, to purchase a new principal residence using the equity from the sale of a previous residence or other qualified source.

The Federal Housing Administration (FHA) insured HECM for Purchase loan was designed for seniors to buy a new home and get a reverse mortgage all in one transaction.

This allows seniors to purchase a home that may better fit their needs or allows them to be closer to family members. Just as families outgrow homes as they have more children or their children get older, many seniors would like to down-size to a smaller or more convenient home after retirement.

Others choose to install modifications in their home such as ramps, widened doorways, handrails, etc., move to a single story or handicap accessible residence to make the home more comfortable for their needs or move to an independent retirement community.

Financial advisors and Realtors are able to use this program to help increase their senior client’s purchasing power, allowing them to purchase homes that might not be available to them otherwise.

Requirements:

  • All title holders must be aged 62 years or over
  • The difference between the purchase price of the new home and the HECM loan proceeds must be paid in cash from qualifying sources such as the sale of a prior residence or homebuyer’s other assets or savings
  • Your new home must be your principal residence and must be occupied within 60 days of closing
  • Your home must meet FHA minimum property standards
  • Evidence of a completed counseling session with a HUD-approved Reverse Mortgage counselor is also required. A list of counselors in your area can be found here or by calling (800) 569-4287
  • Your home must be a single-family residence or a FHA approved condominium

A HECM for purchase allows seniors to make one initial investment (down payment) towards the purchase, and therefore, eliminates monthly mortgage payments1.

While many retirees are obtaining traditional reverse mortgage loans to stay in their home, a growing population is choosing to right-size into a home that better suits their needs. If you have questions about which reverse mortgage loan option would be best for you, click here or call 866.751.6105.