ARAMCO Report - The Mother of ALL Mortgage Blogs!

Reverse mortgage changes appear to be working

Posted by Mehran Aram on Thu, Jul 4, 2019 @ 07:07 AM

As home equity levels continue to rise, the popularity of reverse mortgages is growing and because of changes implemented four years ago, the process is smoother than ever. In 2014, the Federal Housing Administration began requiring that all prospective borrowers submit to a complete financial assessment to determine if a reverse mortgage would benefit them. A new study shows that this new requirement has resulted the number of defaults dropping substantially.

The financial assessment includes reviewing a borrower’s credit history, any risks in their ability to maintain the terms of the loan and an examination of their income to make sure tax payments and insurance payments are affordable.

A reverse mortgage is a powerful financial tool that allows borrowers 62 years or older to use their home’s equity to eliminate monthly mortgage payments while also receiving supplemental income in the form of a lump sum, monthly payout or a line of credit.

Today, conventional conforming no-point 30-year fixed mortgage rates are averaging 3.875 percent and 15-year rates are near 3.375 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, Mortgage rates

San Diego is a retirement hot spot

Posted by Mehran Aram on Sun, Apr 14, 2019 @ 08:04 AM

If you’re looking for moderate weather year-round, pristine beaches and the flexibility of a suburban life with a little urban thrill nearby, San Diego is an ideal place to retire in. This is why millions of retirees are making San Diego their new home. In fact, according to a new report, the city ranks number 14 nationwide of best places to retire.

One of the drawbacks may be San Diego’s cost for housing but experts are quick to point out that for seniors, this may not necessarily be a deal breaker. Powerful financial tools like a HECM for Purchase (H4P) eliminate the cost barrier to buying a home. H4P is a home loan insured by the Federal Housing Administration that allows those 62 or older to combine their down payment with loan proceeds from a reverse mortgage.

Launched in 2008 by the FHA, H4P is easier to qualify than a conventional loan and can be used for the purchase of a single-family home, townhome and FHA-approved condominiums. Most appealing is that they loan requires no monthly mortgage payment and can help free up much needed cash in retirement.

Today, conforming no-point 30-year fixed mortgage rates are averaging 4.125 percent, 15-year rates are near 3.625 percent and the 5-year ARM is averaging 4.00 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, HECM, San Diego, Retirement, Reverse Mortgage for Purchase, HECM for Purchase, San Diego Housing Market

Debt levels burdening retirees

Posted by Mehran Aram on Thu, Apr 4, 2019 @ 16:04 PM

Unlike the generations that retired before them, the tens of thousands of Baby Boomers who are reaching retirement every day, are doing so with more debt. In fact, seniors aged 75 and older are four times more likely to carry debt into their retirement than someone the same age who retired in 1989. The value of that debt has also climbed a whopping 270 percent since that time.

Entering retirement with high levels of debt can place a heavy burden on seniors who find that social security and personal savings are not enough.

A certified reverse mortgage professional can assist those planning for retirement by evaluating the benefits of home equity programs like a reverse mortgage. Reverse mortgages allow those 62 or older to eliminate monthly mortgage payments while providing a source of income through a monthly check, a line of credit or a lump sum payout.

Meanwhile, conventional conforming no-point 30-year fixed mortgage rates are averaging 4.125 percent, 15-year rates are near 3.625 percent and the 5-year ARM is averaging 4.00 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, HECM, Certified Reverse Mortgage Professional, Retirement, debt, Seniors, Mortgage rates, Baby Boomers, Social Security, Personal Savings, CRMP

Seniors holding on to their homes longer

Posted by Mehran Aram on Sun, Feb 10, 2019 @ 05:02 AM

More of America’s senior citizens are choosing to put off downsizing in retirement and instead are making the decision to stay in their family home. According to a new report from Freddie Mac, this may be a significant cause of the housing shortage that exists.

An analysis from Freddie Mac suggests that seniors choosing to age in place is responsible for at least 1.6 million homes not being listed for sale in 2018. For many seniors living on a fixed income, holding on to the family home is often made possible through powerful financial tools like reverse mortgages.

Improved health and longevity are giving retirees more reason to utilize their homes equity as a form of supplemental income. Reverse mortgages allow those 62 or older to not only eliminate existing mortgage payments but also to receive extra income in the form of a lump sum, monthly payout or a line of credit.

Meanwhile, conventional conforming no-point 30-year fixed mortgage rates are averaging 4.375 percent, 15-year rates are near 3.75 percent and the 5-year ARM is averaging 4.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, senior citizen, Retirement, Seniors, Freddie Mac, downsizing, Age in Place, housing shortage

Reverse mortgages can help the next generation buy a home

Posted by The Aramco Group on Sat, Oct 20, 2018 @ 05:10 AM

Knowing that soaring home prices are making it increasingly difficult for younger homebuyers to enter the housing market, families are getting creative. Seasoned homeowners can use a reverse mortgage to tap into the equity they’ve built up in their home and use it to share the wealth with their children or grandchildren who need assistance with a down payment on a property of their own.

A reverse mortgage is a powerful financial tool that allows homeowners 62 years or older to eliminate their monthly mortgage payment while receiving cash in the form of a lump sum, line of credit or a monthly distribution.

Unlike a regular cash out refinance, borrowers do not need to make monthly payments on the proceeds they give to their children. Reverse mortgages do not need to be repaid like a monthly home loan allowing the funds to be given as a gift not a loan.

Meanwhile, conventional conforming no-point 30-year fixed mortgage rates are averaging 4.75 percent, 15-year rates are near 4.25 percent and the 5-year ARM is averaging 4.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, homeowners, Housing Market, Mortgage rates, Mortgage Payments

FHA makes changes to further protect HECM borrowers

Posted by The Aramco Group on Thu, Oct 4, 2018 @ 06:10 AM

As a part of the Federal Housing Administration’s continued efforts to reduce risks for those who utilized reverse mortgages as well as lenders, the federal agency announced this week that it will take a closer look at appraisals and the valuations of properties when assessing reverse mortgage endorsements.

The FHA will perform a risk assessment for all appraisals beginning this month and, in some cases, may require a second appraisal be obtained. The purpose of the new protocol is to avoid over-inflation of property values..

Reverse mortgages, commonly referred to as HECMs, are designed for those 62 years or older. In addition to eliminating the burden of monthly mortgage payments, seniors can fund use a reverse mortgage to fund their longevity. Proceeds can be received in the form of a lump sum, monthly payout or a line of credit which can continue to grow over time.

Meanwhile, conventional conforming no-point 30-year fixed mortgage rates are averaging 4.625 percent, 15-year rates are near 4.15 percent and the 5-year ARM is averaging 4.15 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Topics: Reverse Mortgage, HECM, FHA, Appraisal, Property Values

Does a Reverse Mortgage Impact Social Security, Medicare, and Other Benefits?

Posted by The Aramco Group on Wed, May 23, 2018 @ 09:05 AM

Senior couple discussing finances with advisorAre you enjoying your retirement to the fullest?

If you’re 62 or older, a reverse mortgage loan could help you tap into your home's equity to cover your golden years — but as with any financial solution, it’s important to understand how it would work with your lifestyle.

Unlike other mortgages, a reverse mortgage does not require monthly payments. A reverse mortgage allows you to access the equity from your home as either a line of credit or a lump sum. Of course, that begs the question: does this additional income mean you have to give up other helpful financial programs?

From social security to Medicare and Medicaid, read on to find out which benefits are impacted by a reverse mortgage and why, so you can manage your retirement finances more effectively.

Benefits That Aren’t Affected by a Reverse Mortgage

Financial schemes that are not based on income don't change when you take out a reverse mortgage. This includes government-based programs like Medicare coverage and social security benefits, as well as most pensions.

Social security benefits take into account the money you and your spouse paid into the system while in employment — not your assets and income in retirement. Your social security benefits will be unaffected by a reverse mortgage, although you may find that getting a reverse mortgage increases your social security benefits. That’s because a reverse mortgage may provide you with enough money to avoid claiming social security benefits until the latest date possible, which is when they’re at their highest value.

In most cases, a reverse mortgage won't affect your pension, either. Your pension will have already been established with your employer or in an investment portfolio, so a reverse mortgage will have no negative impact on these benefits. In fact, a reverse mortgage allows you to hedge against problems with your investment portfolio — like a down market — and helps protect your long-term wealth.

Benefits That May Be Affected by a Reverse Mortgage

The proceeds of your reverse mortgage won't count as taxable income, because the money comes from a loan that eventually needs to be repaid. Having said that, social service programs that determine eligibility based on your income and assets could be affected if you take out a reverse mortgage.

Programs with countable asset limits include:

  • Medicaid
  • Supplemental Security Income (SSI)
  • Food Stamps
  • Temporary Assistance for Needy Families (TANF)
  • Wartime Pensions

Whether you receive your reverse mortgage payment in one lump sum or save up payments in your bank account, you could exceed the income limits for these programs. But that doesn’t mean you can’t regain your eligibility once you’ve taken out a reverse mortgage.

If you take out your reverse mortgage payment in one lump sum and use all the money immediately, you could find yourself back within the income limits. This is not an advisable move unless you need the line of credit to pay off a large amount of debt or another home.

If your reverse mortgage payments have accumulated in your bank account, you could do a "spend down." This involves spending the excess amount of money on non-countable assets, such as home repairs or medical equipment that would not be covered by your health benefits. It’s important to find out what qualifies as a non-countable asset in your state, as spending down on the wrong assets can endanger your eligibility for some programs.

Another way to stay within the income limit for benefits is to arrange an adjustable rate reverse mortgage. By setting monthly payment amounts or accessing a line of credit, you can ensure you aren’t pushed over the income limits each month. Before proceeding with any of these strategies, however, it’s essential to understand the exact requirements for each financial program, and always seek advice from a benefits specialist.

Which Benefits Can You Keep?

While a reverse mortgage doesn’t automatically mean the end of your benefits, you should speak to a Certified Reverse Mortgage Professional (CRMP) before moving forward with a reverse mortgage. A CRMP will be familiar with the latest benefit requirements and can accurately review your unique case.  

Contact ARAMCO and schedule an appointment with one of our certified reverse mortgage professionals to see if you could benefit from a reverse mortgage in your retirement.

Topics: Reverse Mortgage

When Does It Make Sense to Use a Reverse Mortgage in Retirement?

Posted by The Aramco Group on Wed, May 16, 2018 @ 09:05 AM

A couple speaks with their financial advisor

Many homeowners look forward to the day when they can make their final mortgage payment and own their home outright. But, during retirement, it can often help to tap into your home equity, rather than leave it sitting untouched.

A reverse mortgage is a type of loan designed for homeowners over the age of 62. Insured by the federal housing administration, it transfers equity into cash — without the stress of monthly mortgage payments. You can receive your equity either as a line of credit or a lump sum, so you can spend your money in a way that suits your retired lifestyle.

While a reverse mortgage may not be the right option for all senior homeowners, below we’ve outlined circumstances where it can make sense to use this financial vehicle to your advantage.

1. You Need Some Budget Breathing Room

Once you’re retired, you live on a fixed income which has to cover your day-to-day expenses. When unexpected medical bills and significant home improvements suddenly come your way, it can be difficult to find the extra financial cushion you need to cover these costs.

Reverse mortgages can free up your budget by eliminating your monthly mortgage payments (of course, you still must make your property tax and insurance payments). What’s more, because reverse mortgages provide you with a lump sum, you have money to use as and when you need it. This gives you peace of mind that you can deal with any future surprises.

2. You Have an Investment Portfolio

If you have a portfolio of investments that's not yet performing as well as it should, or there are downward fluctuations in the real estate and stock markets, a reverse mortgage can help.

Because this financial solution gives you access to your home equity, you have money to spend during down-market years. This means you won’t be forced to sell your investments before you’re ready, allowing you to build up a stronger retirement portfolio and strategically sell when the market is favorable for you.

3. You Want to Pay off Your Debt

Nobody wants to spend their golden years constantly worrying about debt. Unfortunately, if you’re finding it hard to sustain normal living standards on your fixed income, you may struggle to get rid of leftover debt at the same time.

A reverse mortgage can help you consolidate some of the high-interest debts that might leave a burden on your family after you pass away. This saves money on loan payments, and ensures you have access to enough cash to enjoy your retirement instead of focusing on how to make ends meet.

4. You Want to Upgrade Your Home

If you’re hoping to leave your home to your family, you may want to address any problems on your property to ensure that it’s in top condition. A reverse mortgage can help you make any necessary changes without accessing a high-interest loan.

Even if you don't want to leave your home to anyone, upgrading certain aspects of your property could be a great way to give yourself a better quality of life during retirement. From renovating your kitchen and bathroom to installing a chair lift, you can make your home easier to get around and more enjoyable to live in with a reverse mortgage.

Is a Reverse Mortgage Right for You?

If you’re still not sure whether a reverse mortgage is right for you, ask yourself the following questions:

  • Would it be helpful for me to pocket my monthly mortgage payments?
  • Would it benefit me to access the equity in my home without selling it?
  • Do I have medical expenses or debts I need to pay off?
  • Would I feel financially secure with more cash in my budget?
  • Would I feel better if I leave my family with a non-recourse loan, rather than excess debt?

If you answered yes to any of these questions, then it may be helpful to explore your options with a reverse mortgage.

Contact ARAMCO to schedule an appointment with one of our Certified Reverse Mortgage Professionals (CRMP), and find out whether this financial solution could work for you.

Topics: Reverse Mortgage, Retirement

The Role of a Reverse Mortgage in Retirement Planning

Posted by The Aramco Group on Wed, May 9, 2018 @ 09:05 AM

Stacks of coins

Once considered a last-resort income source, the reverse mortgage has become an effective and reliable tool in retirement planning for older homeowners looking for financial peace of mind.

As a form of home equity loan, the reverse mortgage allows you the opportunity to eliminate your monthly mortgage payments. The loan is repaid once the last surviving borrower passes away or moves to a different home. This flexibility combined with recent changes to regulations makes this financial option one of the best ways to tap into alternative sources of income after you retire.

With so many methods of accessing reverse mortgages, let's look at just three ways you can use this borrowing option in your retirement plan.

1. Reverse Mortgages Can Be Emergency Funds

Perhaps the most traditional use for a reverse mortgage is as a line of credit, which you can access as you need it. If there is enough equity in your home after paying off your current mortgage (if any), you’ll have the option to access your equity as a line of credit. This is one of the best ways to get a reverse mortgage because you act as your own bank, accessing your home equity on demand as you need it.

2. Reverse Mortgages Can Protect Investments

Investments are a crucial aspect of your long-term retirement strategy. Unfortunately, in a down market, your cash flow and portfolio might struggle to survive without additional help. Using incoming funds from your reverse mortgage, you can protect your investments until the market starts to thrive again.

A reverse mortgage can significantly reduce the impact of an unpredictable market on your investment portfolio, so you won't have to sell assets for a loss. This gives you plenty of additional time for the market to recover so your portfolio can rebuild.

At the same time, any of the remaining credit in your portfolio will continue to grow, increasing your borrowing power and enhancing your credit rating. This means that if you do need to access an alternative form of lending in the future, you might not struggle as much in getting approval for your applications.

3. Reverse Mortgages Allow You to Access Full Social Security Benefits

A reverse mortgage could provide you with the additional income you need to defer tapping into your social security benefits until your 70th birthday, or as long as possible.

Many financial experts recommend delaying the application for your social security benefits until you've reached the latest possible retirement age. Doing this will allow you to access anywhere up to 132% of your primary insurance amount (PIA), and means you’ll have more money to live on for the remainder of your retirement. Delaying your claim will also ensure that your spouse would receive the highest benefit available if you were to pass away. This can provide additional security for your loved ones.

Of course, delaying access to social security benefits can be difficult. There are bills to pay and living expenses to think about, which many can't afford without the help of a regular income. A reverse mortgage loan can be the answer to this problem, giving you the additional resources you need, fast.

Using a reverse mortgage as a way of delaying social security payments is a strategy that's seen some controversy in the past. The Consumer Financial Protection Bureau’s report on social security suggested that the loan could be more expensive than homeowners expect. However, further reports have commented on the inaccuracy of that announcement, noting that the document doesn't show an accurate insight into what the reverse mortgage is capable of. Of course you should always discuss with your tax/investment advisor.

Planning Your Retirement with a Reverse Mortgage

Retirement planning is different for every individual. The best way to make sure that you're prepared for the future is to start strategizing early — with the help of a Certified Reverse Mortgage Professional (CRMP) or a financial planner.

The more support you have from the specialists, the more confident you'll be in your decision to use methods like the reverse mortgage loan to support your income. Contact ARAMCO and schedule an appointment with one of our Certified Reverse Mortgage Professionals to see how this financial solution could change the way you plan your retirement.

Topics: Reverse Mortgage, Retirement

What Are the Upfront Costs for a HECM Reverse Mortgage?

Posted by The Aramco Group on Wed, Apr 4, 2018 @ 09:04 AM

If you’re considering a reverse mortgage to fund your retirement, you probably have more than a few questions. For starters, is a Home Equity Conversion Mortgage (HECM) a responsible financial decision?

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When managed properly, a HECM reverse mortgage is a reliable way for retired homeowners to supplement their income, fund home improvements, or cover unexpected costs. As with any loan, there are upfront costs to consider before you decide whether to apply for a HECM reverse mortgage.

Here’s a breakdown of the upfront costs and ways you can manage them, so you can get the most out of this potentially life-changing financial solution.

1. Appraisal

Before you even start your HECM reverse mortgage process, you’ll need to have your house appraised to see how much it’s worth.

Your lender will choose a third-party appraiser to inspect the property and determine its value. If repairs are required, a follow-up visit will be necessary. The first appraisal cost varies across the country, but the national average is $450, with any follow-up visits ranging between $100 and $150. ARAMCO can cover the cost of the appraisal in certain instances.

2. Origination Fee

The origination fee is charged by the lender, and covers their operating costs associated with originating the reverse mortgage for you.

This fee is calculated based on the value of your home, as determined during the appraisal. Under the HECM program, there is an origination fee cap of $6,000, which is the average fee throughout the country. That means you won’t be charged more than that, no matter how much your house has been valued at.

3. Closing Costs

Just like a traditional mortgage, reverse mortgages require certain fees that are rolled together into your closing costs. These include everything from a credit card report fee and title insurance, to pest inspection costs. These costs are vary depending on which individual reports and services apply to your loan.

4. Mortgage Insurance Premium

As of October 2017, all reverse mortgage borrowers are charged a mortgage insurance premium (MIP) at 2% of your home’s appraised value or 2% of the maximum lending limit; whichever is less. It’s an upfront, one-time cost that’s nonrefundable and paid directly to FHA’s insurance fund.

You will also pay an annual MIP, generally at a rate of 0.5% of your outstanding loan balance. The MIP is used to help fund the federally insured reverse mortgage program and in turn, pass along the benefits you receive to help fund your retirement. Without it, there is no reverse mortgage program.

5. Counseling

Anyone who wants a reverse mortgage is required to undergo counseling. You will pay a fee, usually $125, to the counseling agency directly — although if you have a low income, you may be eligible for a lower or waived fee.

Don’t be put off if the upfront costs sound overwhelming; all of these costs, with exception of appraisal and counseling, are rolled into the loan. If you’re working with ARAMCO, your only out of pocket expense is for counseling. Our team of certified reverse mortgage professionals (CRMPs) specialize in ensuring you get the biggest bang for your buck. By managing your reverse mortgage responsibly, as part of your retirement strategy, you can bolster your finances and improve your quality of life. The possibilities are endless!

Contact ARAMCO today to speak to our team of certified reverse mortgage professionals (CRMPs), and learn more about your reverse mortgage options.

Topics: Reverse Mortgage, HECM