Reverse Mortgage

At The Jake Taylor Team at Pilot Mortgage, LLC, we are proud to offer reverse mortgage loans from the nation’s most well know and reputable reverse mortgage lenders.  Pilot Mortgage has partnered with these mortgage lenders to offer a comprehensive list of options to the Seniors we assist with Reverse Mortgage Loans or Home Equity Conversion Mortgages, commonly referred to as HECM’s.  We cordially invite you to attend one of our seminars, or schedule a one on one presentation in our office or in the comfort of your home with Jake Taylor today. Your peace of mind and financial stability is our main focus.

When was the first Reverse Mortgage Loan Made?

In 1961 the reverse mortgage was inducted to the home mortgage line up.  The very first reverse mortgage was made to the widow of a high school football coach who wanted nothing more than to stay in her home after losing her husband.  Without income, this seemed improbable. The widow’s name was Nellie Young, the place was Portland Maine. Nellie’s husband was the bread winner, and without income she could no longer afford to age in place.  Nelson Haynes of Deering Savings and Loan devised a mortgage that would allow Nellie to access her home equity, which was the majority of her life’s savings, to finance her lifestyle and provide financial stability that expired with the loss of her husband.  The reverse mortgage was born.

What Is A Reverse Mortgage Loan?

A reverse mortgage loan is a loan that allows the mortgagor (home owner) to allow the balance of the loan to increase over time, rather than decrease by making monthly payments.  The balance of the loan increases because the mortgagor is not required to make regularly scheduled payments. The end goal is to allow the mortgagor to use the existing equity in their home to make the payments, rather than requiring a mortgage payment to be made from a checking or savings account.  Reverse mortgages are very helpful with senior citizens who are interested in using their home equity to enjoy greater financial stability as the age in place.

HECM Purchase Loan

HECM stands for Home Equity Conversion Mortgage.  A HECM can be used to purchase a home.  One misconception is that a HECM, or reverse mortgage, can only be used once you already own the home.  That’s simply not the case. Use a HECM to purchase a home up to the limits approved by the FHA.

HECM Refinance Loan

If you already own your home, use a Home Equity Conversion Mortgage, or HECM, to refinance. Your existing mortgage or gain access to your existing home equity to build financial stability.  A HECM is a popular way to decrease your monthly debts and possibly gain access to your home savings while staying in your home.

Reverse Purchase Loan

Use a reverse mortgage to purchase a home.  With a reverse purchase loan you can use the equity from the sale of your current home to purchase a new home.  Once you purchase a home with a reverse mortgage, you will never be required to make a payment on your home for as long as you live in your new home.

JUMBO Reverse Mortgage Loan

The FHA sets upward limitations on the amount of money you can borrow on a reverse mortgage .  With a JUMBO reverse mortgage, the limits of what you can borrow are much, much higher. Our JUMBO Reverse mortgage programs allow reverse mortgage loan limits of up to $4million dollars.

Who qualifies for a reverse mortgage?  

Not everyone qualifies for a reverse mortgage.  In fact, all reverse mortgage candidates must be a certain age.  Were it otherwise, the formula wouldn’t work. The average life expectancy of US Citizens is taken into count when the reverse mortgage loans are calculated.  Therefore, the age of retirement, or 62, is the minimum age of all applicants who would receive a reverse mortgage loan.

5 Qualifying Factors for a Reverse Mortgage

There are five main factors that are considered when qualifying for a reverse mortgage.  None of these variables plays a role in determining  your interest rate. However, these factors are in place to help you maintain a financially healthy lifestyle and to be in a position to sustainably maintain your home.

1

Age of Applicants

Age of applicant does not determine interest rate.   The loan amount is made based on an age and loan to value calculation.  In this case, older is better!

2

Home Value

The  home’s value does not determine interest rate.   The home’s value will be used to determine the allowable maximum loan amount.

3

Amount of Loan

The loan amount does not determine the interest rate.  The loan amount is determined based on a simple using the applicant’s age and the home’s value.

4

Credit

The applicant’s credit score does not determine the interest rate for the loan.  The lender is obliged to check the credit report for a few disqualifying factors prior to loan approval.

5

Income

The applicant’s income is used to calculate a sustainable payment.  This is called checking the applicant’s 

‘ability to repay’ the loa’.

Things Banks Consider for Reverse Mortgages

Three of these five qualifying factors for reverse mortgage loans are quite fixed at the time of the loan application:  applicant age, home value and desired amount of loan. The credit and income items are somewhat variable and prove to be most important to determine the longevity of the financial health and ensure the applicant’s ability to afford their day to day living costs.  The applicant must demonstrate that he or she has enough stable income to ensure the applicant’s ability to pay for the home insurance, taxes and other costs associated with the upkeep of the home.

There must also be enough income for the applicant to afford basic lifestyle accommodations, without putting the applicant at risk of not having enough income to sustain a financially stable lifestyle.  These minimum amounts are put into place to ensure the financial needs of the applicant can be sustained long term. Generally speaking, the applicant has a good idea of his or her financial needs and there are rarely any surprises in the application process here.  The main determining factors are age, property value and the desired loan amount.

Home Equity Conversion Mortgage

A HECM is a Home Equity Conversion Mortgage. A HECM loan balance grows with each passing month that there are no payments made on the loan. A HECM loan balance acts in reverse to a forward, or conventional mortgage. The conventional mortgage balance decreases over time with each payment made to the lender. Al reverse, the HECM loan balance grows every month that the applicant chooses to not make a payment.

Applicants can take cash out up to the availability of equity in the home based on the applicants age, property type and available loan amount. Again, no regular payments are ever required to be made, even if the applicant receives access to what’s considered to be a large sum of money upon closing of the new HECM Loan.

 

HECM For Purchase Explained

A HECM For Purchase is very similar to a HECM. The difference being is that a HECM Purchase Loan is used to buy a property and not refinance a property that is already owned. This option is very popular for seniors looking to purchase a retirement home. The same benefits of a regular HECM loan apply. There are no monthly payments on the home for as long as the applicants live in the home.

What is an HECM

Can payments be made on a HECM?  Yes! Of Course! Payments can be made in random increments, random variables and according to the ability and desire of the home-owner, but no payment is ever required as long as the applicant maintains residency in the home.  Of course, the taxes, insurance and other costs remain in effect, however no payment on the principle balance of a HECM is required. This feature is what makes the HECM loan stand out to seniors aged 62 and over most attractive.  The ability to access the resource of the value of the home without selling the home, without the requirement of making a regular monthly payment for as long as they occupy the home as their primary residence.
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HECM For Purchase Example

Let’s say that Larry and Tina live in Minneapolis but are planning on moving from Minnesota to Arizona to retire. After selling their home in Minnesota they realize that based on their age and loan amount they have enough of a down payment to qualify for a HECM Purchase Loan. The Home Equity Conversion Mortgage for purchase rules state that as long as Larry and Tina meet the loan amount based on their age and loan amount requested, Larry and Tina can use a HECM For Purchase loan to buy their retirement home and immediately receive the full benefits of the HECM Loan: they never have to make a payment on the loan for as long as they occupy the home as their primary residence.

Are reverse mortgages a scam?

Reverse mortgages are not scams.  Reverse mortgages today are heavily regulated by the government and there are many check and balances in place to protect the applicants from being ‘hoodwinked” into an agreement that was not well explained by the loan officer and counseling agency and understood by the applicant.  That’s not to say that there are not bad actors in the field. There are bad actors, and unfortunately some people are taken advantage of in some instances. That’s not to say that happens regularly. It may happen to someone, but the chances of it happening are getting smaller and smaller with each round of regulation that’s put into place to protect seniors from these bad practices.   However, just because a reverse mortgage is not a scam, that doesn’t mean that a reverse mortgage is right for you or your loved ones. Please contact our office for more information, attend a seminar or to schedule a face to face appointment to go over the initial steps to learning about reverse mortgages.

Who owns my home if I take a reverse mortgage?

Just as in a forward mortgage, the ownership of your home stays with you. The reverse mortgage lender takes a position on your DEED as the ‘mortgagee’ (the lender in a mortgage). The reverse mortgage loan has conditions that will be explained to you as you complete the loan process. All reverse mortgage applicants agree to meet the terms of the loan and as to stay in compliance with their portion of the agreements made to the lender, or mortgagee. In all circumstances, the applicant remains the owner of the home with the lender having a claim to the DEED.

One of the main factors reverse mortgage applicants need to be aware of is that the reverse mortgage applicant must occupy the property as their primary residence for as long as the loan is in place. If the applicant does not occupy the home, the loan will become due and payable. The home must also be kept up to living standards and well maintained. Compliance to these and other items will allow the applicant to remain in the home as long as they wish without the cost of ever making a mortgage payment.  

What are reverse mortgage disadvantages?

The most well known disadvantage of the reverse mortgage are the upfront costs associated with the reverse mortgage.  Because the reverse mortgage adds a benefit to the applicant of not needing to make a payment on the loan, there are fees and insurances that are added to the loan and paid to the FHA upon loan initiation.   These fees vary from loan type to loan type. In some cases your Independent Mortgage Expert may be in a position to help cover some of these upfront fees. Another disadvantage is that the loan balance will increase over time.  This disadvantage is offset with the delightful dynamic of no payments ever are required.

Reverse Mortgage Seminar

Most loan professionals agree that a reverse mortgage seminar may be the best place to learn the truth about reverse mortgages in a safe, comfortable, non-threatening, no-pressure environment. Reverse Mortgage Seminars range in length from one to two hours, and are typically held in libraries, hotel lobbies, or resort conference rooms. As the first step in obtaining a reverse mortgage is a mandatory counseling session with a certified government agency, the loan professionals hosting the seminars stick to the basics and speak to the group, not to the individuals, although individual questions are welcomed.

The Jake Taylor Team at Pilot Mortgage, LLC offers free Reverse Mortgage Seminars in the Phoenix Metro Area. In our reverse mortgage seminars, you can expect to be one of up to thirty people that are learning about the very basic variables of reverse mortgages.  You can expect to learn about how does a reverse mortgage work, who qualifies for a reverse mortgage, government reverse mortgages for seniors and many other basic topics that prove helpful when starting the education process. Call or email us today to learn about a Reverse Mortgage Seminar in your neck of the woods, or should we say desert.

AARP Reverse Mortgage?

American Association of Retired Persons, better known as AARP, does not make reverse mortgage loans.  Rather, reverse mortgage companies advertise with AARP. AARP is an association that provides information and vets services for senior citizens.  Many reputable reverses mortgage companies advertise with AARP, however AARP does not make loans to the public. Ask us about which if the reverse mortgage companies that AARP promotes would work best for your financial goals and objectives.

How Does A Reverse Mortgage Work

This is a very frequently asked question and the truth is that the answer is somewhat complex.  We highly recommend speaking with a licensed loan officer who can explain how reverse mortgages work.  He or she can guide you to a HUD certified reverse mortgage counseling agency to help you begin to learn the basics of reverse mortgages.  Step one of the reverse mortgage process is to be educated with a HUD certified Counseling Agency.

A ‘reverse’ mortgage balance grows over time, unlike a ‘forward’ mortgage which balance shrinks over time.  The reason the reverse mortgage works this way is because no monthly payments are due from the homeowner. Ever.  Because no payments are due, the balance of the loan grows. There are many other variables that make the reverse mortgage work this way, but this is the main reason.  Please call or email us to begin the process of learning whether a reverse mortgage loan can be the right loan to help you achieve the financial stability and peace of mind you desire in retirement.

Who Qualifies For A Reverse Mortgage?

Use our calculators to see if you qualify for our government reverse mortgages for seniors.  No personal information is asked of you and the answer is immediate. Other than determining your age, your property value and the amount of a reverse mortgage loan for which you qualify, there are a few other requirements in place to protect you and to ensure that you are able to sustain your lifestyle with the reverse mortgage over time.

Before qualifying for a reverse mortgage the lender will calculate your cost of living needs along with your income to ensure you meet the minimum income requirements for health and safety requirements and to maintain the integrity of your home.  Although you will not be required to make a mortgage payment, our lender is morally and ethically obligated to ensure your lifestyle will be sustainable as you age in your home.

The Jake Taylor Team Invites You

At The Jake Taylor Team, we invite any and all seniors over 62 years to inquire and learn about reverse mortgage options that can assist with the sustainability of a long an financially stable life in the home you choose.  Call or email us today to begin the learning process.