What Are the Costs of Aging in Place?

According to an AARP study, 90 percent of people age 65 and over would prefer to stay in their own homes as they get older — and not go to a nursing home or assisted living facility.

But if you or your parents are buying, building or renovating a home to accommodate the needs of a loved one, what kind of costs can you expect to incur?

Source: What Are the Costs of Aging in Place?

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | August 17, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

The PURCHASE Reverse Mortgage (H4P)

What Is A Purchase Reverse Mortgage?

By way of background, a previous blog on reverse mortgages discusses the general facts regarding reverse mortgages. Let’s talk specifically about the purchase reverse mortgage, which is otherwise known as the Home Equity Conversion Mortgage (HECM) for purchase [H4P]. This product was created by the Housing and Economic Recovery Act of 2008 (HERA). The product is insured by the Federal Housing Administration (FHA) and guaranteed by the US Department of Housing and Urban Development (HUD). In short, the purchase reverse is a way to purchase a home with only a down payment. In addition to the down payment, the buyer is responsible for paying the homeowners insurance, property taxes and (if applicable) Home Owner Association (HOA) fees. There are no principal or interest payments required. However, one may make principal and interest payments by choice not necessity. Finally, if the loan balance on the reverse mortgage eventually exceeds the home’s value, the lender is insured against that loss.

Who Is It Good For?

BORROWER: Age 62 and older based on the youngest titleholder. A non-borrowing spouse under the age of 62 may be added to the loan providing the spouse is over the age of 18. There is no credit required, nor a credit score requirement and only minimal income requirements. This is a minimum documentation loan.

PROPERTY: Single family homes as well as 2-4-unit residential properties and all FHA approved condos are eligible. Title may be held as fee simple, a living trust, and leasehold or life estate. The property must meet FHA appraisal requirements. If the property does not meet FHA criteria (health and safety issues), a set aside account will be established for up to six months while the health and safety requirements of the FHA appraisal criteria are met. The property may be either an existing home or a new build home, so long as the property meets FHA standards.

Examples by Age and Purchase Price of a Home Equity Conversion Mortgage

Purchase Price Age Down Payment HECM Funds
$300,000 62 $174,688 $138,300
74 $153,088 $159,900
80 $138,388 $174,600
86 $118,888 $194,100
$679,650 62 $427,230 $274,180
74 $381,427 $319,983
80 $349,620 $351,790
86 $307,634 $393,776

January 1, 2018 – Pricing is subject to change at any time.

To illustrate – let’s look at the example of a $300,000.00 purchase at age 74: To purchase the residence, the HECM borrower would need $153,088 to close on the purchase of a $300,000.00 property. The balance of the proceeds is provided with the HECM as a benefit of the HECM program and include closing costs. In all examples of HECM purchase mortgages, no mortgage payments are required. All that must be paid out-of-pocket on an annual basis are real estate taxes, homeowners insurance and HOA fees (if applicable). There are no required payments of principal, interest, or other mortgage costs (including upfront costs) until termination of the HECM.

Who Likes Reverse Mortgages The Best? The Borrowers Who Have One!

95% Partially to fully meets my financial needs

93% Positive effect on my life

89% Would refer a friend

94% Report peace of mind

89% Report a more comfortable lifestyle

87% Report a better quality of life

Source: AARP December 2007. Survey of 1500 HECM Borrowers

Why The H4P Can Be Good

A reverse mortgage for purchase allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it, which would be the case in an all-cash transaction. It also lets them avoid dipping into their monthly fixed income, which would occur if they took out a traditional mortgage. It provides more purchasing power  and doesn’t drain all of the assets. It allows a buyer the luxury to get a better lot, to add all the upgrades they want and to still have no mortgage payment.

The home is titled in the owner’s home; as with all mortgages, the lender retains a security interest in the title. There are no monthly mortgage payments. Instead, the loan is repaid when the home is sold or the borrower no longer resides in the home. The repayment to the lender includes the amount borrowed, plus accumulated interest. Any remaining equity belongs to the borrower, heirs or estate. The heirs may purchase the property for the balance due or 95% of the value, whichever is less.

TIPS: There are no concessions allowed by sellers, builders or agents; this includes any personal property. As well, the buyer must pay for the title insurance. There can be no repair set-asides; all repairs, where major property deficiencies, such as

  • No running water
  • Leaking roof
  • No primary heating source
  • Inadequate electrical system (including lighting)
  • Inoperable doors and windows (inhibited ingress and egress)
  • State or local code violations

which threaten the health and safety of the homeowner and/or jeopardize the soundness and security of the property, must be completed by the seller prior to closing. (H4P FAQs per HUD).

NOTICE: (1) Rates are subject to change without notice. For specific and current information contact me or your H4P Specialist. (2) The illustrations in the above chart titled: *Examples by Buyers Age and Purchase Price, are representative examples only. The figures are not intended to be anything other than representative illustrations in order to convey the concept of the purchase reverse mortgage.

DISCLOSURE: The information provided herein is not intended to be an indication of loan approval or a commitment to lend. Additional program guidelines may apply. Information is subject to change without notice.

DISCLAIMER: This post does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.

Financially Speaking™ James Spray, RMLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365| First Published 01/11/10 | Updated January 1, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

National Elder Abuse Resources and Colorado Financial Elder Abuse Mandatory Reporting Law

Elderly folks tend to be more trusting and less informed of the latest scams, making them the perfect target. To learn more about elder abuse, on the national level, two great resources are the National Committee for the Prevention of Elder Abuse and the National Center on Elder Abuse.

In Colorado, there is the Colorado Coalition for Elder Rights and Abuse Prevention.

As well, Colorado has a mandatory reporting law (including financial abuse) for certain categories of professionals and other workers.

Sadly, it is all too common where a family member is committing financial abuse of a parent, grandparent or other senior family member.

While it is encouraged that reporters of elder financial abuse contact local law enforcement, we’ve learned many local law enforcement agencies are unaware of the Colorado financial elder abuse law and are not trained on how to deal with it.

To report elder abuse in Colorado, the first option is to contact the Adult Protective Services (APS) intake office within the county department of human services were the at-risk adult lives. Click anywhere in this sentence for a current list of phone numbers to report elder abuse.

If reporting to the county APS office is not a viable option, contact the District Attorney’s office for the county in which the at-risk adult lives.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |August 26, 2017

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Obsessives Have Cracked the Perfect FICO Credit Score of 850 – Bloomberg

Kudos to Suzanne Woolley for authoring an article which accurately portrays how one can improve their credit.

Source: Obsessives Have Cracked the Perfect FICO Credit Score of 850 – Bloomberg

Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Cancelling infrequently used credit cards may seem like a good strategy, but your credit score may be adversely affected. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, explains: “When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result because one of the main impacts on your credit score is the length of credit history.” A shorter credit history translates to higher risk in the eyes of lenders.

Sean McQuay, Credit and Banking Expert at NerdWallet, agrees but includes another reason to keep older cards, noting that closing a card account results in “decreasing your overall credit line, which basically signals that a bank trusts you less.”

In addition to decreasing your overall credit line, closing an infrequently used account raises your credit utilization your total credit in use compared to your cumulative credit line. High credit utilization suggests a greater chance of falling behind on payments and/or defaulting on debts.

To avoid these pitfalls, make periodic small purchases on all your open credit cards to keep them active and pay the balances in full at the end of each billing period. By keeping credit spending low, you can still address debts while getting the full benefits of your credit account.

It’s okay to concentrate most of your credit spending in one account to maximize rewards. Just use alternate accounts often enough to keep them from being closed for lack of activity.

Source: Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Reverse Mortgages For Every Income Bracket

In the terrific, brief article posted below, wealth manager Tom Davison provides clear understanding of the usefulness for reverse mortgages in every income bracket.

I encourage everyone with any interest whatsoever in wealth management to invest a few minutes and read Davison’s great blog post, reblogged below.

Reverse Mortgages: Many Users, Many Uses

Image attribution: Tools for Retirement Planning

Notice: The information provided is not intended to be an indication of loan approval or a commitment to lend. Additional program guidelines may apply. Information is subject to change without notice.

Disclaimer: This article does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | June 21, 2017

The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only.

A Reverse Mortgage to Buy a Home? Here’s How – WSJ

With a home-equity conversion mortgage, seniors can finance the purchase of a new home without monthly payments

Source: A Reverse Mortgage to Buy a Home? Here’s How – WSJ