How To Pick a Financial Advisor

How To Pick a Financial Advisor

In some of our articles, you’ll find that we always advise you to talk to your financial advisor before making any decisions with your money. But, what if you don’t have a financial advisor, right? How do you choose a competent financial advisor?

How To Pick a Financial Advisor

Who is a financial advisor?

A financial advisor is a trained expert in investment and financial planning. Financial advisors are also called financial brokers — they also help to plan retirement or buy a home. 

Financial advisors are not expected to have any specific education but should be licensed to offer advice relating to finances. The certification they’re required to have is CFP (Certified Financial Planner), which is renewed yearly.

What to look out for with a financial advisor? 

Licensed

This is the first thing to find out — if the financial advisor is licensed or not. Another thing to look into is your state laws with advisors and find out what a financial advisor needs to possess to be licensed. Have in mind that rules vary from state to state. 

Do your research

Find out the type of clients your financial advisor is currently working with. If you think you are a small client compared to a group of big-time investors he’s working with, he might not make enough time for you. 

Also, get acquainted with financial terms and strategies so that when you talk with your advisor, you’ll have some knowledge about what they discuss with you. 

Availability

Ensure that your advisor will always be available whenever you need them. Check how many clients they currently work with. Find out if it’s easy to make an appointment with them. 

How far in advance do you need to set up an appointment with them? If the advisor seems too busy for you, look for other options.

Talk to more than one financial advisor

You may get lucky to find that the first advisor you talk to will be the one. But don’t stop there. It is advisable to speak to at least four advisors. You may get a better deal. 

When you talk to them, find out about their experience, fees and qualifications. Above all, ensure that they’re able to meet your financial goals.

Follow the above tips to find the right financial advisor for your situation. When it comes to choosing an advisor to work with, remember to trust your gut. If you don’t feel confident in his ability, you don’t have to go with him. 

Maintaining an Active Lifestyle on a Retirement Budget

Maintaining an Active Lifestyle on a Retirement Budget

Retired seniors tend to run the risk of living an inactive lifestyle as they get older due to several factors such as chronic illnesses or inability to afford a gym membership. 

If the latter is the case, there are many other ways to maintain an active lifestyle in retirement without having to spend on monthly gym subscriptions.

Maintaining an Active Lifestyle on a Retirement Budget

Exercising Without a Gym Subscription

Even though many people love going to the gym, often because of the nice and sophisticated equipment, the prices are either too high or just plain inconvenient. 

The good news is that there are many other ways to maintain an active lifestyle without having to pay so much. Some of those activities to get involved in include:

Join an exercise class (Dancing, Cycling, etc)

An exercise class is a great way to get in a good workout without spending so much. It is also a great way to socialize because you can go with friends and even meet new people.

Get a pet

Pets are a great way to get on your feet for a few hours per day. Taking them for a walk will benefit both you and the pet. 

Yoga

Yoga is great for seniors because you can go at your pace. Apart from improving your balance and strength, it also improves your flexibility, joint health, and respiration. Because it is more of a meditation workout, it can also reduce high blood pressure and anxiety.

Workout at home

You don’t have to visit a gym to get a good workout. There are workout DVDs you can buy, or you could log into YouTube and look up workouts for seniors.

Walking

This free exercise allows you to get your heart rate up to an ‘okay’ level without risking an exertion. One great thing about walking is that you can go any distance or direction and you can even walk with friends.

Spend time with your grandchildren

This is another great way to stay active throughout retirement. Spend time with the grandchildren by taking them to the park or zoo. It is a great way to exercise while spending time with loved ones.

Maintaining an active lifestyle throughout retirement offers you numerous health benefits including balance improvement, strength, and energy. 

Upgrades and Improvements to Make on Your Home with a Reverse Mortgage

Upgrades and Improvements to Make on Your Home with a Reverse Mortgage

A reverse mortgage offers you a certain amount of financial freedom which means you can do anything you like including home remodeling or improvement projects. 

Below are some home repair, remodeling, and improvement ideas you can do to your home after getting a reverse mortgage loan.

Upgrades and Improvements to Make on Your Home with a Reverse Mortgage

Roof Repairs

The longer you wait to repair or replace and old roof, the more it gets damaged and cause harm to other parts of your home like the walls, ceilings, etc. Replacing or upgrading your roof is one of the most important projects you can embark on with a reverse mortgage loan.

Kitchen Improvements

A kitchen upgrade is one of the most important projects you can do to your home. Replacing your old kitchen appliances with energy star appliances will save you money on electric bills. Other improvements you can make including painting, installing new cupboards and counters. 

Bathroom

The bathroom is one of the most utilized areas in the home. With a little budget, you can improve your bathroom with new painting, lighting, and cabinets. During this time, you can also have your plumbing checked to ensure everything is in proper condition.

Update flooring

If you’ve always wanted to upgrade your flooring, your reverse mortgage proceeds can make it happen. You could choose to install new carpets or hardwood floors.

Paint

New painting can change the look and feel of your home. Without spending so much, you can give your home a new look by painting the walls. There are many painting techniques you can try out. And if you don’t like a particular one, you can just repaint.

Update landscaping

If you’re not into doing yard work, you can modernize the front of your home by planting some shrubs and flowers to help transform your front yard into a beautiful, peaceful, low-maintenance yard.

Your reverse mortgage proceeds can be used to upgrade your home and make important remodeling projects. 

The Reverse Mortgage Answers’ staffs are licensed professionals that help clients in the United States. We can assist you with the necessary advice and guidance you need to get a reverse mortgage and what you can do with the loan. 

Eligible vs. Ineligible Spouse Rules for Reverse Mortgage

Eligible vs. Ineligible Spouse Rules for Reverse Mortgage

Many people have asked the difference between an eligible and ineligible spouse as regards to the reverse mortgage.

Let’s set the record straight. We don’t say eligible or ineligible spouse, but eligible and ineligible ‘non-borrowing’ spouse. 

Eligible vs. Ineligible Spouse Rules for Reverse Mortgage
Senior couple on winter vacation riding on sled smiling at camera

A non-borrowing spouse is a person who doesn’t meet the HUD requirements to be a HECM borrower, and as a result, he/she won’t be included in the loan as a beneficiary.

The eligible or non-eligible status tells whether or not a spouse will be granted a deferral when the loan is due and payable if the borrower passes away.

Why we have a non-borrowing spouse is because he/she isn’t up to 62 years old, and every borrower, according to the HUD program, must be at least 62 years. However, if the non-borrowing spouse meets the other conditions, they would be eligible non-borrowing spouse for the closed loan.

Before HUD changed the rules in 2014, spouses of borrowers who were not included in the loan when the loan originated had no rights to remain in the home after the borrower passed. HUD changed that rule in 2014 but became active in early 2015.

Eligible means “protected for deferral.” 

Spouses who are not included in the loan at the time the loan originated are either eligible to receive a deferral when the borrowing partner passes or ineligible, based on other factors.

If they’re still funds on the line, an eligible non-borrowing spouse will not have access to the loan after the borrower passes. But, he/she can stay in the home for as long as they want if they can meet the eligibility requirement.

Also, the eligible non-borrowing spouse should be able to secure title to the property within 90 days of the passing of the borrower. It is advisable to add the non-borrowing spouse to the title of the home when the loan closes to avoid problems in the future.

If the non-borrowing spouse were added while both spouses are alive, there wouldn’t be any probate period, and you won’t have to worry about fulfilling the HUD 90 day rule.

Also, the non-borrowing spouse must pay the taxes and insurance on time and maintain the home according to the HUD standard.

Ineligible translates to “No Deferral Granted.” 

Ineligible non-borrowing spouses are those who don’t live in the property, maybe because they are separated or were not married to the borrower at the time the loan was closed

It means that they would not be eligible for the deferral, and the loan would be due and payable when the borrower passes away.

Everything You Need to know About Reverse Mortgage Insurance in 2019

Everything You Need to know About Reverse Mortgage Insurance in 2019

A federally-insured reverse mortgage comes with the assurance that the borrower will receive loan payments as agreed by the terms of your loan and will never owe more than your home’s worth.

Everything You Need to know About Reverse Mortgage Insurance in 2019

The FHA guarantees these benefits through its HECM program. To enjoy those benefits, the borrower must pay for it through the reverse mortgage insurance premiums.

It includes a one-time insurance payment made upfront i.e., a flat 2% premium based on the maximum limit of $726,525 or your home’s appraised value. The others will be an insurance premium paid annually.

In August 2019, the U.S. Housing and Urban Development department came up with changes to its reverse mortgage program.

The changes include a new cost structure for reverse mortgage insurance required of borrowers with federally-insured HECM. Just like other forms of insurance, it comes with excellent protection and benefits.

The mortgage insurance also protects the lender in case a borrower fails to fulfill his or her obligations. With a reverse mortgage, there are even more excellent benefits for the borrower.

What does reverse mortgage insurance provide?

  1. Loan proceeds are guaranteed

Reverse mortgage borrowers can choose to collect their proceeds as a lump sum or ongoing installments. The reverse mortgage insurance guarantees that your proceeds will be disbursed as it was initially agreed in the terms of the loan. Even if the lender goes out of business, your proceeds are still guaranteed.

  1. Non-recourse protection

Your loan balance on a reverse mortgage might grow for many years, and it might even be higher than the value of the home itself. But, with the non-recourse protection, as a borrower, you can never owe more than your home is worth at the maturity of your reverse mortgage loan.

Even though this insurance comes with a cost, the benefits are worth it. By protecting you and the lender, this insurance is a crucial part of every reverse mortgage, and it’s important to understand how it applies to you as a borrower.

What Happens to My Reverse Mortgage if a Natural Disaster Hits My Home?

What Happens to My Reverse Mortgage if a Natural Disaster Hits My Home?

Just like a traditional loan, insurance also covers a reverse mortgage loan. For reverse mortgage loans, all hazard claims are paid jointly by the owner and the lender until the house is fixed. 

When the lender has completed inspections to ensure the home has been rebuilt, at that point, they will sign off on the checks.

What Happens to My Reverse Mortgage if a Natural Disaster Hits My Home?

However, in a situation where the property is destroyed, such that it needs to be replaced in multiple draws, the lender will work with a draw schedule with the repair company so that money is released on a draw schedule as needed.

But, if the repair company or the borrower does not complete the repairs, the lender can use the insurance proceeds to rebuild/repair the structure. This is under the terms of the Deed of Trust.

In the documents provided by the lender, the loan call provisions are stated clearly. As a borrower, you must maintain the home (that is, you must live in the house), which means that if the home is destroyed in any way, and not rebuilt, you have not met the requirements of the loan.

In such a situation, the lender would keep the insurance proceeds and can decide to accelerate the loan — which means they can call it due and payable.

Will My HECM proceeds be Interrupted?

In most cases, it may take longer than one year to rebuild and occupy the home. Payments will continue because the property is still the primary residence even while under re-construction. However, you have to keep the construction going and state the reason for displacement in the annual primary residence notice.

Payments may stop when the loan is in a called due status for default reasons as provided in the mortgage. If you don’t pay off the loan, or rebuild, then the loan would be due and payable eventually — since the house would not be your primary residence anymore.

If you aren’t sure about having adequate insurance, it would be wise for you to look into guaranteed replacement coverage, so you are covered no matter the cost to rebuild.

Paying For Home Care With Your House

Paying For Home Care With Your House

The dream of most retiring seniors is to stay at home and age in place. Beautiful as the dream might be, there are specific health problems and costs that could stall even the best of plans. One of every three people aged 65 and above will require long-term medical assistance, statistically speaking.

Paying For Home Care With Your House

Home care was introduced to encourage treatment at home instead of taking seniors to a nursing home or an assisted living home. However, the cost of assisted living varies based on the rates for the type of care and the amount of time required. 

The cost, for the most part, is not covered by Medicare or Medicaid. They are paid for, from personal funds or long-term care insurance or both, if one saw into the future and invested in an insurance policy earlier in life.

When these things come up, the question becomes, “can I afford this”? 

“Do I have the resources to take care of home health care costs and continue to provide income and liquidity needed to maintain my lifestyle without emptying emergency reserves”?

If you don’t, the smart solution would be to utilize accumulated home equity to solve these problems.

The solution – Reverse Mortgage

Talk about killing two birds with one stone. The HECM reverse mortgage is a home equity loan that enables senior homeowners 62 years and above, who want to remain in their homes, the capability to utilize part of their home equity to achieve greater financial security.

The Home Equity Conversion Mortgage (HECM) reverse mortgage may: 

  • Provide the money required to cover home health care costs among other needs
  • Enable you to stay at home for the rest of your life without any commitment to make mortgage payments.

As a borrower, your obligations are:

  • Keeping real estate taxes and homeowner insurance current
  • Provide basic maintenance
  • Living in the property as your primary residence.

Utilizing housing wealth most effectively should be a vital consideration. When used correctly, it can have a positive effect on improving and extending retirement security.

Talk to our qualified and certified experts at Reverse Mortgage Answers to know more about how you can use home equity to pay for your health care.

HECM Reverse mortgage or HELOC – Which is the Best Cash Flow options for fixed-income seniors?

HECM Reverse mortgage or HELOC – Which is the Best Cash Flow options for fixed-income seniors?

Today, in America, many seniors are living off a fixed income that barely covers their essential needs. Almost 20 percent of married retirees rely on social security for the bulk of their income. The same goes for nearly 50 percent of unmarried retirees.

Reverse Mortgage

Also, around ten to twelve thousand baby boomers are retiring every day, and the trend will continue into 2030. If this trend continues at this rate, retirement experts predict we are on the brink of a national emergency.

Several surveys have shown that a majority of seniors have chosen to remain in their homes and age in place. 

But, how will they accomplish this when most seniors exist on limited incomes and savings?

The answer could be in the utilization of accumulated home equity. Short of selling the home, their options are limited. Most seniors opt for one of the following:

  • They choose to borrow money through a traditional mortgage or a home equity line of credit (HELOC).
  • They decide to tap into their home equity through a reverse mortgage. The dominant reverse mortgage (95%+) nationally is the HUD/FHA insured Home Equity Conversion Mortgage (HECM) reverse mortgage.

The terms and provisions of the HECM reverse mortgage are uniquely designed to accommodate the needs and circumstances of retirees.

HECMs offer better advantages for seniors when compared to HELOCs. However, industry records show that HELOCs are chosen 9 out of 10 times over HECMs. The reasons are:

Lack of Knowledge

Most seniors who own a home are only familiar with and understand traditional mortgages. For these seniors, HELOCs had long been an easy way for them to tap home equity and typically require minimum payments of interest only. 

HECM reverse mortgages, on the other hand, are not well understood and are generally viewed in a negative or questionable light.

Misconceptions and Myths

Misunderstandings about reverse mortgages are prevalent and, unfortunately, serve to discourage examination at the outset.

Uninformed Advisors

Most seniors have established long and trusted relationships with their bank or other advisors. Typically, they’d look to these experts first for advice and recommendations. Banks, who promote their in-house HELOC program, don’t offer HECMs, because they are not well informed on reverse mortgage terms and benefits.

Comparing your HECM and HELOC options

Are monthly payments required?

For HECM, no monthly payment is required. HELOCs, on the other hand, monthly payments are required – usually interests only.

 Do I have to pay upfront costs?

For HECM, the closing cost will include a premium for FHA insurance based on the amount of the initial disbursement.

For HELOC, since FHA does not insure it, no upfront cost is needed. However, the upfront cost may vary by lender.

Is credit line growth guaranteed?

For HECM, the undrawn credit line balance grows at the same rate charged on the balance owed.

For HELOC, the credit line balance doesn’t grow, and access to funds stops at the end of the initial withdrawal term.

Is there a mandatory payoff date?

For HECM, no repayment is required as long as the borrower continues to live in the home, and the loan remains in good standing.

For HELOC, there is a mandatory payoff date. It is usually around 30 years or less.

Can the lender limit or freeze access to funds?

HECM lenders cannot freeze or limit access to funds. HELOC lenders can restrict access to funds to the initial draw-down period – usually the first 7 to 10 years.

Making an Important Decision between HECM Reverse mortgage and HELOC

Making the right choice between a HELOC and a HECM reverse mortgage requires an understanding of the senior’s individual needs and circumstances, as well as fulfilling their near and long-term objectives.

Frequently, people make conclusions without enough information or with advice from people who aren’t qualified.

The fact is, both programs have their place and—like most things in life—have pros and cons, costs, and responsibilities.

The new realization that home equity wealth can and should be a part of retirement planning is challenging the traditional way of thinking.

And for many seniors who own a home, the HECM program is a smart solution. However, reverse mortgages should always be evaluated alongside other options—including the sale of one’s home to downsize or relocate.Talk to our licensed experts at Reverse Mortgage Answer to learn more about these options.

4 Reverse Mortgage Safeguards You Should Know

4 Reverse Mortgage Safeguards You Should Know

Taking out a Home Equity Conversion Mortgage (HECM) is a big decision to make. And, many people have asked how safe is this government-insured loan program? Although reverse mortgages aren’t right for everyone, the HECM program has many built-in protections to keep borrowers safe.

4 Reverse Mortgage Safeguards You Should Know

The following are safeguards that cover the reverse mortgage you should know – to keep your mind at peace.

The Loan is Federal Guaranteed

The fact that the reverse mortgage is federally guaranteed is one of the most prominent protection that covers this loan option. The reverse mortgage is insured by the Federal Housing Administration (FHA).

Depending on the loan program you choose, when you take out a reverse mortgage, as a borrower, you will need to pay an upfront mortgage premium. Also, you will need to finance an annual mortgage insurance premium of 50% of the mortgage balance.

The Reverse Mortgage Offers a Non-recourse Feature

Here is another borrower protection to put your mind at ease. The non-recourse feature means that even if your reverse mortgage ends up exceeding the value of your home, you won’t have to repay more than what your home is worth at the time decide to sell your home.

It also extends to your heirs as well. In the case of an unfortunate event, and you pass away, your heirs won’t have to pay more than the home’s value should they decide to sell.

Counseling

Everyone who qualifies for the HECM loan will be required to go through a Department of Housing and Urban Development-approved counseling agency. The counseling is aimed at making sure that you understand how the loan works and how it applies to your unique situation.

Counseling is also a time you can ask any question that you might have. After the counselors have assessed your knowledge of this loan, they will issue a certificate that enables you to continue with the loan application.

The Ban on Cross-selling

Under the Housing and Economic Recovery Act of 2008, reverse mortgage originators are banned from cross-selling some financial products. What this means is that they cannot originate a reverse mortgage and then ask you to buy an insurance investment or any other financial product with them.

These rules are there to protect you (the borrower) from unethical lenders who may want to compel you to purchase a financial product you don’t want or need.

Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?

Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?
Did You Know You Can Use a Reverse Mortgage in a Divorce Settlement?

I bet you never heard this one. Well, a reverse mortgage is a versatile financial tool that you can use for almost anything. 

While discussing with the lawyers about which spouse will keep which asset, a reverse mortgage can be used to relieve some of the financial burdens on both spouses while allowing them to live separately.

Living Separately With a Reverse Mortgage

Many couples who divorce often find that they are unable to support the costs of a home that was initially supported by both partners now that they are independently responsible.

A reverse mortgage can help out in a situation like this. A reverse mortgage offers an option to choose how you want to withdraw the equity in the home. You can decide to take the loan as a lump sum or a series of partial payments.

If your spouse prefers to stay in the home, but cannot meet the monthly payment requirements, a reverse mortgage can be used to pay off the mortgage, with the remaining proceeds going to the moving spouse.

Reverse Mortgage for Purchase

In a case where the couple doesn’t want to stay in the home, a reverse mortgage purchase loan gives you leverage to purchase a new home while taking out a reverse mortgage in a single transaction.

Doing this will enable one spouse to move to a new home through the reverse mortgage while the other spouse can receive some of the remaining cash proceeds. It works well where the borrower is downsizing.

What If I Already Have a Reverse Mortgage?

In a situation like this, where a couple already has a reverse mortgage, and they decide to get a divorce later, they will be required to submit the divorce decree to the loan company.

At this stage, one of the spouses will be permitted to be removed from the title of the home, allowing the loan in the remaining spouse’s name.

To learn more about how you can use a reverse mortgage in a divorce settlement, talk to our certified professional at Reverse Mortgage Answers.