Archive for June 2007

Interest Only Loans

June 27, 2007

Lately, I have been receiving more phone calls from seniors who have an interest only adjustable rate mortgage. For one reason or another, they believed that this was the best solution for them at the time, which it might have been. However, in today’s climate of increased interest rates, they are paying much more on their monthly payment, which puts pressure on their month to month finances. What once was a $600-$700 monthly payment is now a $900+ monthly payment. On a fixed income, this could be disastrous.

Though the reverse mortgage solution may not be the appropriate tool for every person in this situation, it certainly is one that makes sense for many. If the client were to simply payoff their existing mortgage with a reverse mortgage, they would no longer be required to make monthly payments. As they stand now, their monthly payment is simply going straight down the toilet. It is like paying rent . . . . .  no financial long term improvement. However, with a reverse mortgage and by saving a portion of their monthly payment, it may make sense to work with a financial advisor and put to work the money that would have been used for their monthly payment, to actually grow their money, rather than to throw it away in interest only payments.

In these situations it is always my encouragement to clients to work with a financial advisor that understands the financial condition of the client and is able to provide integrity based solutions to help seniors to meet their financial goals.

Reverse Mortgage Daily

June 6, 2007

I have recently been introduced to a daily blog called The Reverse Mortgage Daily. For anyone that is interested in looking at many of the aspects of reverse mortgage, from an industry’s perspective, as well as simply a product perspective, I highly recommend this site. It is a syndicated site which deals with more than just reverse mortgages, but rather many different topics of interest for those in the senior market. It is the place that I go in order to get updates within the industry and changes that are going on at the legislative level. I’ve mentioned a few times in other blogs that the reverse mortgage industry is in the midst of a lot of changes. Most of these changes are good for the borrower as it is providing more flexibility. On the other hand, in my opinion, some of the changes are creating a haven for unscrupulous lenders. Hopefully there will continue to be checks and balances to help protect many of our seniors today.

Lending Limits of HECM’s

June 4, 2007

Over 90% of the reverse mortgages have been the Home Equity Conversion Mortgages. Referred to as HECM’s, these reverse mortgages often provide the greatest cash benefit. HECM’s are based on the Appraised Value or the Lending Limit established by FHA (Federal Housing Authority). Up until June 18th, the lending limit for Clark County and many of the counties in Portland (Clackamas, Columbia, Multnomah, Yamhill, and Washington Counties) have been $284,600. This means that homes that were valued at, for example, $350,000, would only have a portion (81%) of their home recognized by HUD. This would reduce the amount of equity one could use in a reverse mortgage. The fortunate thing about the FHA Lending Limits is that they change regularly.

As of June 18, 2007, the lending limits for Clark County and many of the Portland counties(Clackamas, Columbia, Multnomah, Yamhill, and Washington Counties), is going up from $284,600 to $304,950 (1 family unit). This provides over $20,000 more in equity to access as income, line of credit, or lump sum non-taxable income.

Though it still does not provide full recognition of value for homes over the limit stated above, there are other programs that may provide greater benefits that have higher lending limits or no lending limits. Be sure to contact me with any questions (gag@seniorlifesolutions.net).

Other lending limit changes to take place June 18, 2007 (subject to change) are:

Chelan & Douglas Counties: From $213,750 to $232,250
Jefferson County: $319,200 to $332,500
Kittitas County: $205,500 to $232,250
Mason County: $204250 to $213,750
Tillamook County: $230,850 to $237,500