HECM Lending Limit Increase for 2020 Impacts Reverse Mortgage Proceeds and Costs

HECM Lending Limit Increases for 2020

FHA has increased the HECM lending limit to $765,600 for HECMs with case numbers assigned on or after January 1, 2020. This is the fourth annual increase in a row and reflects the continuing trend of rising home values across the nation. The new lending limit applies to the entire U.S., including Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Note that our HECM calculators have already been updated to reflect the change. This latest lending limit increase means homeowners in high-cost real estate markets will have access to significantly more proceeds. However, the change also means higher closing costs…

Why a Reverse Mortgage is Like a Rooty Tooty Fresh ‘N Fruity (But Shouldn’t Be)

Reverse Mortgage Rooty Tooty

In a recent post, I addressed the common perception that a reverse mortgage is only for broke and desperate people. I’ve talked with many seniors over the years who were embarrassed about looking into a reverse mortgage. Some went to almost comical lengths to explain that they weren’t desperate and broke and didn’t really need it. They were just looking into it because they were “curious”. Amusingly, some even tried to convince me they were calling on behalf of a “friend” when they were really looking into it for themselves. It reminded me of the old IHOP commercials where embarrassed…

The Lurking Danger That Can Swamp Even a Solid Retirement Plan (and How You Can Avoid It)

Caution HECM Reverse Mortgage Sequence Risk

If you’re not familiar with the term sequence risk, you definitely should be. It’s a potentially devastating lurking danger that can completely swamp an otherwise solid retirement plan. Brian Davis wrote a great article over at Bigger Pockets on this topic a while back and I’d like to build on what he wrote. If you haven’t read his article yet, you may want to now. I’ll hang tight until you get back :). As Brian defined it, sequence risk is “the risk that the market (usually the stock market, but technically any market you’re invested in) will crash within the first…

Is a Reverse Mortgage Only for Broke and Desperate People?

Is a reverse mortgage only for broke and desperate people? Many people seem to think so, but I respectfully disagree. A reverse mortgage can sometimes help broke and desperate people, but often it can’t. The reason? You have to qualify for a reverse mortgage. Your income and credit must meet certain standards or you won’t be eligible for a reverse mortgage. I would argue that a reverse mortgage is best used as a safety net by seniors who are at least reasonably financially stable. In my opinion, the most ideal candidates tend to fit two general profiles – which I’ll…

So You’ve Paid Off Your Mortgage. Great! Now Here’s the Problem…

So You've Paid Off Your Mortgage

So you’ve paid off your house and are headed for a mortgage-free retirement. Fantastic! Retiring without a mortgage payment means you can more easily live on a lower retirement income and preserve your retirement savings for longer. Though retiring mortgage-free is a great accomplishment, it comes with a potentially big problem. And I’m not referring to the “problem” of losing your mortgage interest deduction. Let me explain. An Unusable Asset According to US Census data, the typical American’s net worth at age 65 is $194,226. Of that, $150,304 is held in the form of home equity. Now think about your home’s equity for…

Setting the Record Straight on the HECM Reverse Mortgage

Reverse Mortgage Rooty Tooty

I recently ran across a somewhat annoying article written by Utah real estate agent Jen Kirchhoefer in the Ogden Standard-Examiner. Like many articles written by people with little reverse mortgage experience, it was filled with inaccuracies. The inaccuracies themselves didn’t bother me because I’ve come to expect them from media outlets. Reverse mortgages have been highly misunderstood for a long time. Even well-meaning journalists who do their homework commonly get details wrong. What really annoyed me was the combination of misinformation and the sarcastic tone of the article. Was the article intended to actually inform or did Kirchhoefer just have…

Should I Get a Reverse Mortgage Now or Wait?

HECM Reverse Mortgage Line of Credit Jack

A man who I’ll call Jack contacted me about using a reverse mortgage to pay for future medical expenses. Jack made it clear from the get-go that he didn’t want a reverse mortgage now. He just wanted to explore some options and call back in five years to set it up then. Jack basically wanted to use the reverse mortgage as an “insurance policy” to protect against the financial risk of big medical expenses. It was smart of Jack to think ahead, but here’s the thing about insurance: you have to get it before you actually need it. After all, it’s…

What Are the Dangers of Reverse Mortgage Financing?

What are the Dangers of Reverse Mortgage Financing?

What are the dangers of reverse mortgage financing? Is a reverse mortgage risky? If so, what are the risks? Questions like these come up from time to time and I always find them puzzling. I don’t see a reverse mortgage as risky. It can be a poor fit for some people, but calling it “risky” or “dangerous” is a stretch, in my opinion. A traditional mortgage can be far riskier for seniors than a reverse mortgage. I think a lot of people see reverse mortgages as risky simply because they don’t understand them. There is a ton of misinformation floating…

Yes, A Reverse Mortgage Can Be Life Changing

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Imagine it’s Christmas Day and you’re sitting on the sofa in the living room of your son’s house. A beautiful Christmas tree covered with ornaments and bright lights stands in the corner. The turkey baking in the oven fills the air with warm and delicious smells. Your favorite people in the whole world – your children and grandchildren – are sitting around the room and laughing and chatting and enjoying each other’s company. You stare at the beautifully wrapped gifts from your loving family stacked in a large pile at your feet. You know you should feel happy and blessed,…

Does Your Financial Plan Include “Retirement Insurance”?

The HECM as Retirement Insurance

Does your financial plan include “retirement insurance”? I’m guessing you’ve never heard of such a thing, right? The term is sometimes used to refer to Social Security or insurance products that target retirees, but that’s not what I’m referring to here. There is no insurance product called “retirement insurance”, but there is a strategy that can serve as a “retirement insurance” of sorts. When used prudently as part of a broader retirement plan, this strategy can significantly reduce the risk of draining your retirement assets faster than expected. The financial tool I have in mind is one you may have…