California Reverse Mortgage News



Gray divorces are on the rise and reverse mortgages are starting to play a role in how an estate is settled.  In regards to gray divorces, a Bowling Green University study found that the divorce rate among adults aged 50 and older doubled between 1990 and 2010. You can read the study here: https://www.bgsu.edu/content/dam/BGSU/college-of-arts-and-sciences/NCFMR/documents/Lin/The-Gray-Divorce.pdf

But the good news is that overall, divorces are down.

I sat down with Katie Clunen,  a family law attorney with Dion Law Group in Westlake Village, California, and she advised me that there are several factors that need to be weighed before a couple considers a senior citizen divorce.

Clunen tells her clients to first meet with a therapist to see if they can work on their marriage. Second, she suggests the parties meet with a financial planner, preferably one that has experience in divorce situations, or a wealth management advisor that can run numbers for the parties to show what their income and assets would look like in a divorce if one party stayed in the home and bought the other one out or if the house was sold. I would also suggest the parties look into a reverse mortgage as an additional option, which will be discussed below.

Division of assets is usually top of mind, but Clunen pointed out that in a gray divorce there are unique issues.  For example, when it comes to determining spousal support, some of the factors considered are the marketable skills of the supported party and the age and health of the parties.  Public policy provides that a supported person shall be self-supporting within a reasonable period of time.  However, if one of the parties is not able to work because of being out of the workforce for many years or their age, a dispute can arise regarding the amount and duration of the spousal support. 

The division of retirement benefits is also a hot point. Health insurance and Medicare issues in particular.  Once a divorce is final, the person who pays for the medical insurance does not have to continue paying for the ex- spouse’s health insurance.  In fact, health insurance companies will terminate the coverage to the ex- spouse. If a soon- to -be ex-spouse is ill or has a pre-existing condition, this could play a major role on whether or not a divorce is financially feasible for both parties.  Also, financial stability or instability issues, which again goes back to a person that may need to go back into the workforce for the purpose of obtaining or paying for their health insurance if they lose their coverage in a divorce.

Social Security benefits need to be considered since the monthly benefit is calculated by age and when the beneficiaries select to start receiving benefits.  What if there’s a gray divorce and the primary wage earner is working?  Does the ex-spouse get Social Security benefits right away if the other is still working?  These questions need to be answered by a professional.

Then there’s housing.  Does the family have two properties?  If so, it’s possible each spouse gets a property to live in. Hopefully there’s enough monetary assets to run each household.  But what if there aren’t two properties?  Here’s a scenario: A married, retired 75- year- old couple live in a property that is free and clear and worth $550,000.  They are exploring the possibility of a senior citizen divorce but if they sell the home each may possibly get $270,000 (not including taxes and exemptions).  They don’t qualify for a home loan due to their income, and $270,000 isn’t enough to buy a home outright and they don’t want to rent. 

The reverse mortgage in this case is a gray divorce solution.  There is a reverse mortgage for purchase loan option that is seldom talked about.  The senior citizen puts a large down payment say 45% on the new property they would like to purchase and there’s no payments on the balance due on the loan.    Qualifying for the loan is different than a regular conventional or 203b FHA loan. It has the senior in mind.

That means that one spouse stays in the home and buys out the other.  The spouse buying out the other applies for a reverse mortgage to get funds from their home equity, and the soon- to- be ex-spouse takes the funds they receive and uses another reverse mortgage for purchase loan for a large down payment and buys their next home and without monthly payments. 

To clarify the above situation, since both people used a reverse mortgage for their transaction, neither of them have monthly payments on the balance of their mortgages for the rest of their lives.

Clunen’s firm, the Dion Law Group, has a unique refreshing litigation approach for divorce.  It’s called limited scope representation. This form of representation coaches the client on doing some of the simpler things themselves, with the more difficult tasks handled by the attorney. The client is billed only for the tasks where the attorney was needed. This keeps costs down.  However, if the client wants full representation and doesn’t want to handle any part of the transaction, then the Dion Law Office can do that as well. 

It is important to note that not all law offices offer limited scope representation and only licensed attorneys, not paralegals, can give legal advice when it comes to filling out court related documents or negotiating settlements.

Katie Clunen with the Dion Law Group is located in Westlake Village, California. She can be reached at 805-497-7474 and her webpage is http://dionlawgroup.com/katiec.html.

 

Posted in:Gray Divorce and tagged: Gray Divorce
Posted by Kevin Walton on June 2nd, 2017 2:41 PM


There is a reverse mortgage tax deduction that is available to heirs that no one seems to know much about.
The unpaid interest that's accumulated over time that's owed on the balance of the loan is able to be claimed by whomever is showing on title to the home at the time it is sold. 
If the parents are deceased, than the deduction is available to the heir (s) of the estate which could be windfall.

Some heirs may look at a reverse mortgage as a way to lose their inheritance since mom and dad are gobbling up their equity, but this reverse mortgage tax deduction may change that thought process a bit.

The way it works is the reverse mortgage lender will ask for documentation as to whom is inheriting the property once a life event happens which prompts the property to be sold. Once the documentation is submitted and accepted by the lender a 1098 mortgage interest paid statement is generated to one person. 

The mortgage interest figure is than used as a tax deduction against any taxes owed which resulted from the liquidation of the parents estate.  Whatever is left, after deducting lender fees, and lender mortgage insurance, is than available to be taken as an income tax deduction for the individual(s) which could result in a nice sum, possibly in the tens or even hundreds of thousands of dollars.
The individual(s) may have to amend their tax return, if they've already filed, to claim the benefits of the reverse mortgage interest tax deduction.

Estate planning is a crucial element here. Establishing a family trust with instructions would be a benefit if there are multiple beneficiaries on how the interest deduction is divided. It may be a good idea to create a family trust prior to the origination of the reverse mortgage so that things get done at the same time.
Upon the sale of the property and the property is held in a family trust, even though the 1098 may be made payable to one person, the trust can have instructions to divide up the interest paid in equal amounts so that not just one person gets it.
It will be noted in the liquidated estate's final tax return as well.

It's also worth mentioning that if the senior citizen was making payments on the reverse mortgage to paydown the balance of the loan, the amount of the interest deduction is less but as with any reverse mortgage, monthly payments are not required.  Each month a payment isn't made, the monthly interest owed is tacked onto the balance of the loan. 

It is also possible that the accumulated mortgage balance may exceed the property value. If that's the case the family should do everything in their power to sell the home instead of letting the lender foreclose or giving it back to the lender. 
If they allow this to happen, they would forfeit the interest deduction.
The dollar amount of the deduction available may play a role whether on what path you will choose.

The reverse mortgage interest tax deduction will be a talking point as the baby boomer generation passes on, and typically it's not discovered until the estate gets liquidated.
A reverse mortgage isn't for everyone, but for those in which it makes sense, it's important that heirs and beneficiaries to get educated on the ins and outs.

I'm an expert on the reverse mortgage.  If you have any questions or concerns feel free to call or email me.

Best,
Kevin Walton
Best Capital Funding
www.californiareversemortgage.biz
californiareversemortgagebiz@gmail.com
800-506-0632 ext. 0 


Posted by Kevin Walton on June 7th, 2016 1:19 PM

A HECM Reverse Mortgage can help fund a senior couple's gray divorce.
Many senior couples do not think they can carry thru with a divorce due to not having enough income to afford to live on their own, or if they have a home, they may not be able to qualify for a home loan to buy out the other spouse's share of equity.

A HECM Reverse Mortgage can help solve some of those problems.
On a property with an abundance of equity, a lump sum of cash can be distributed to the one spouse vacating the property (after the existing mortgage balance is paid off) and the spouse remaining in the property doesn't have to make any monthly payments on the new Reverse Mortgage loan.

This way the vacating spouse has capital and funds to work with and the remaining spouse staying in the property has cash flow as well.

It's unfortunate that we even have to think in these terms, but senior couples are not exempt from divorce and they do need options.

To read more on the gray divorce click here to read an article.

For more information on qualifying for a reverse mortgage or how they work, please visit www.californiareversemortgage.biz

Best,
Kevin Walton
Reverse Mortgage Specialist
800-506-0632 ext. 0

Posted by Kevin Walton on November 3rd, 2015 4:32 PM
I read an eye opening article recently that said we are going to double the amount of people 65 years of age and triple the amount of people living to 85 in the next 30 years. WOW!I
It's estimated that up to  70% of these people will eventually be in need of some sort of long term care and services and property modifications.

But more important than that is the issue with having to provide seniors with a way to age in place, in their existing home where they are at peace and can retain independence which can add years to their lifespan.

The key is making their home safe and at the same time have functionality for their needs.
Lower cabinets and bathroom fixtures and smart security technologies in the home can reduce the instance of in home injuries.

These changes cost money as well as any in home part time or full time care that is needed and that the Reverse Mortgage can free locked up equity which can help pay for the property modifications and care.

To read more on this article click here.

Best,
Kevin Walton
Best Capital Funding
Cell: 800-506-0632 ext. 0
Posted in:Reverse Mortgage and tagged: Reverse Mortgages
Posted by Kevin Walton on October 26th, 2015 10:25 AM

     Here are the top 5 reasons Financial Advisors are starting to favor the HECM
     Reverse Mortgage
and here's a hint, it's not because of the reasons you hear
     about on t.v.

1. The HECM Line of Credit growth factor.  The unused line of credit grows over time 
    on the growth rate attached to it, so as interest rates rise, the amount of available credit
    rises as well. So it serves as a hedge against a rising interest rate market.  A Financial
    Advisor can build other strategies for their client on top of that.

2.  Even in a declining home value cycle, the amount of usable available credit on the   
     HECM Line of Credit increases.  The growth rate is not tied to home values.  In theory, 
     your amount of available credit to use can be greater than the home value itself and if
     the home needs to be sold and property is up side down, there is FHA mortgage
     insurance that will cover the gap.  Plus the lender can't close the line of credit if home
     values fall, whereas on a bank HELOC they can close the line.

3.  Having a HECM Reverse Mortgage standby Line of Credit, gives the senior citizen an
     option to delay taking Social Security benefits.  The senior can let the SSI ripen on the
     tree and take monthly tax free advances on the HECM Line of Credit and delay taking
     SSI benefits until a later time when their monthly benefit will be greater.

4.  The HECM Reverse Mortgage Line of Credit will also give the senior an option for
     monthly income advances to avoid dipping into other liquid assets in a down market
     and provide a cash reserve to weather market turmoil.

5.  You can buy a home with the HECM Reverse Mortgage purchase option.  A large down
     payment is needed on the new owner occupied home, and than no payments
     are due on the balance of the loan. This means that the senior citizen can keep more
     money in their pocket from the sale of their existing home, since they don't have to pay
     all cash, and after making the large down payment, not have any monthly mortgage.

     The HECM Reverse Mortgage is no longer a loan of last resort, it's for savvy seniors 
     who want more options on how to handle their money and the options above aren't 
     mentioned in the television commercials that we see.
     Plus with the newly passed legislation, the product is much safer and friendly to 
     seniors than in the past.
     Feel free to visit our website for articles and videos on for more information.    
   
     Best,
     Kevin Walton
     Best Capital Funding
     www.californiareversemortgage.biz
    

Posted by Kevin Walton on October 19th, 2015 10:11 AM
A standby Reverse Mortgage Line of Credit is becoming a must have for young retirees. However it's not to be confused with a bank HELOC.
Here's a few differences:
The Reverse Mortgage Line of Credit has a growth rate attached to it which allows the unused line of credit to grow over time, (no refinance needed)resulting in more future tax free funds to use.
A $100,000 line of credit, left unused, can double or triple in size over time, meaning more tax free funds to use when needed, a bank HELOC doesn't have this feature.

The key is to originate the Reverse Mortgage line of credit as early in age as possible.
Financial Planners like this Reverse Line of Credit feature because it serves as a hedge against rising interest rates, because as rates rise, so does the growth rate on the line of credit which translates into more future funds for the borrower to use.

If the property falls in value, that does not affect the growth rate, it keeps growing, and the Reverse Mortgage lender can not close out the line of credit for that reason, whereas on a bank HELOC, they can close the line of credit for falling property values.

The growth rate has the compound interest feature as well which allows for rapid growth over time, a HELOC doesn't allow for this, in fact it doesn't allow for any growth at all, you have to qualify for another HELOC loan to get more money. 

After allowing time for growth, which means not touching the line of credit for a period of time, once the borrower starts taking advances on the line the Reverse Mortgage line of credit doesn't require any monthly payments to pay it back, a bank HELOC requires a monthly payment.
The borrower however can make a monthly payment on the Reverse Mortgage if they like, it's up to them.  It's worth mentioning that for each month the borrower doesn't make a payment, the interest owed gets tacked on to the balance of the loan.

The standby Reverse Mortgage line of credit is another bucket of tax free income for seniors and the growth rate feature is seldom discussed, but is a powerful tool that can create wealth, protect assets, and help a senior to not outlive their assets.
Educating senior citizens, and the financial services sector will take time but is a worthwhile endeavor.

For questions on the Reverse Mortgage line of credit, feel free to give me a call or drop me an email, or visit my site.

Best, Kevin Walton
Best Capital Funding
Certified Mortgage Advisor and Reverse Mortgage Specialist
www.californiareversemortgage.biz
californiareversemortgagebiz@gmail.com
800-506-0632 ext. 0
Posted by Kevin Walton on October 16th, 2015 10:11 AM

JP Morgan is creating an investment fund where it selects companies with an eye on technological innovation when it comes to helping senior citizens stay in their homes and improving their lifestyles.
AARP is partnering with JP Morgan in this venture, and the fund is to be called, The Innovation Fund.
Guidance from AARP will help target companies in which the Innovation Fund will have $40 million in funds to invest.
To learn more about this unique fund click here.

Posted in:Reverse Mortgage and tagged: Reverse Mortgage
Posted by Kevin Walton on October 5th, 2015 10:23 AM
AARP has recently commented on using the Reverse Mortgage as using an option to age in place.
The article emphasizes on rather than downsizing into a smaller home or into a senior community Reverse Mortgages should be considered.
The article falls short of a full endorsement of the Reverse Mortgage, but it does acknowledge that the loan should now be considered as an option for seniors.
It's a step in the right direction at increasing the general public knowledge on Reverse Mortgages and acknowledge some of the positive changes and new legislation that has recently passed to make the loan a safer and more viable option for seniors.
To read the full article click here.
Best,
Kevin Walton
Posted in:AARP and tagged: AARP
Posted by Kevin Walton on October 1st, 2015 7:54 PM

The HECM Reverse Mortgage Line of Credit is fast becoming a key retirement tool for baby boomers.
Word is getting out that Reverse Mortgage Line of Credit growth rate allows the amount of unused available credit to grow over time, which means more accessible tax free money when the senior needs it.
The idea is to take out the Reverse Mortgage Line of Credit as a reserve, where you don't use it right away.  It's a set it and forget it mentality.  As it sits there idle, the line of credit of unused funds grows over time.  It can grow to double or triple its size and when you withdraw the funds it's tax free.
A bank home equity line of credit does not have this capability.
The bank can also close your line of credit in a down real estate market without your consent.  Not so, with the HECM Reverse Mortgage Line of Credit, it can't be closed for home value reasons.
Can the Reverse Mortgage Line of Credit grow to the point where it exceeds the value of the home?  Yes it can. So what happens if the property needs to be sold and the property value is under water?  The M.I.P., mortgage insurance premium that comes with the loan pays off the difference.  It's like gap insurance and heirs can rest easy that aren't responsible for the balance.
You owe it to yourself to check out the HECM Reverse Mortgage Line of Credit and it's growth rate feature and see why it's fast becoming a financial planning tool for our Baby Boomer generation.
Click here to watch a video on the HECM Reverse Mortgage Line of Credit growth rate.
Best,
Kevin Walton
Best Capital Funding
Certified Mortgage Advisor




Posted by Kevin Walton on September 28th, 2015 11:12 AM

When long term interest rates increase, reverse mortgages take a direct hit.
How? The prevailing interest rate is among the criteria that's used to determine your principal limit factor, or how much of a loan you qualify for.

This increase affects all reverse mortgage loan types.
The amount of equity in your home, the age of the youngest borrower, demonstrating your ability and willingness to pay monthly property expenses (tax, insurance h.o.a.) are the other major factors that go into qualifying for a reverse mortgage.
A half percent increase may not affect qualifying all that much, but anything up over a cumulative one percent increase, go take a bite out of the funds you would receive.

However, if you have an already existing HECM reverse mortgage line of credit, an increasing rate may be a good thing because of the growth rate.
As rates go up, and you have a standby HECM reverse mortgage line of credit, so does the growth rate on your line of credit which means more funds for you to access since the available line of credit grows at a monthly rate over the life of the loan.
If you have questions on the HECM reverse mortgage line of credit growth rate, feel free to call Kevin Walton. 800-506-0632 ext. 0 or visit our website, www.californiareversemortgage.biz

Best,
KW

Posted by Kevin Walton on September 21st, 2015 10:22 AM