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U.S. and global economic volatility due to the COVID-19 pandemic have many retirees (and those close to retirement) worrying how to survive these turbulent times.
Will you have enough assets to maintain your lifestyle and meet retirement spending goals in the face of a possibly long-term bear market?
Traditionally, older adults fund retirement with a mixture of Social Security, pensions, 401(k)s and other retirement and saving accounts.
However, many could be sitting on (or rather, in) hundreds of thousands or even millions of dollars they haven’t considered using: home equity. This source of wealth is often ignored in retirement income planning.
One of the most sensible ways of leveraging home equity in retirement age is through Home Equity Conversion Mortgages (HECM), also known as reverse mortgages. With increased safeguards to protect consumers and lower costs than in the past, reverse mortgages are becoming mainstream financial instruments.
Simply put, reverse mortgages enable homeowners age 60+ to borrow up to roughly 50% of their home’s value, depending on their age and that of any spouse also on the loan. Borrowers are guaranteed the right to continue living in their home for the rest of their lives (or until they permanently move out).
Furthermore, while any funds borrowed against home equity continue to accrue interest, all reverse mortgage are non-recourse loans. That means borrowers can never owe more on the loan than what the house is worth when the loan is repaid. If the house has declined in value, the FHA or the lender bears the risk (in part with the help of mandatory mortgage insurance. See below).
On the other hand, if the home should increase in value by the time the owners move out, all remaining equity after paying off the loan belongs to the borrower or their heirs.
In addition, homeowners may pay back the loan without penalty or sell the home at any time (at which point the reverse mortgage lender will be fully repaid).
Higher net worth individuals and families often choose to use reverse mortgages as part of their overall retirement income strategy. It’s not uncommon for these borrowers to make regular payments on their reverse mortgage.
Some choose to make interest-only payments, so their balance doesn’t increase at the rate it ordinarily would.
Others treat a reverse mortgage similar to a traditional loan and make regular monthly payments. With rates on par with traditional mortgages, they are able to borrow money at a low rate of interest and pay it back on their terms, as opposed to the structure of a fixed 15-, 20- or 30-year term.
And some may choose to defer payback until the last remaining borrower leaves the home.
Pay off an existing mortgage: A reverse mortgage can pay off and replace a traditional mortgage loan, reducing the burden of a mandatory monthly payment and resulting in immediate savings — especially helpful in today’s uncertain times.
Standby line of credit: Unlike traditional credit lines, reverse mortgage credit lines are federally insured and cannot be frozen or called due. The unused portion has a guaranteed growth rate of .5% over the current interest rate on the loan, allowing more funds to be borrowed over time. Even if the home decreases in value, the line of credit remains and continues to grow.
This offers an excellent insurance policy against market fluctuation, and a tax-free source of money that can be used as a buffer in a down market.
The strategy in turbulent times would be to draw funds from the credit line instead of drawing on other assets (such as selling stocks when they’re down). Thus, a reverse mortgage credit line can limit the need to make portfolio withdrawals, protecting and preserving retirement accounts.
Multiple payout options: Reverse mortgage proceeds may be accessed in a lump sum, in the form of an annuity (a lifetime payout known as “tenure”), through equal payments over a fixed period of time (known as “term”), or through a combination of these options.
While reverse mortgages can be based on fixed interest rates, the line of credit, tenure and term payouts are available only on adjustable interest rate options.
Interest rates on reverse mortgages are on par with traditional mortgage interest rates. Rates are negotiable and vary from lender to lender.
The “index rate” is the standard rate that varies depending on market interest rates. It is not controlled by the lender. The rate charged on your loan can increase or decrease depending on whether the index increases or decreases.
The margin rate is the interest percentage that is added to the index by the lender. This rate is not adjustable, meaning that after loan origination, the margin stays the same throughout the loan term, regardless of what the index may change to. It is also negotiable.
HUD counseling: To obtain reverse mortgages, borrowers must undergo mandatory counseling with a third-party HECM counselor approved by the U.S. Department of Housing and Urban Development. Typically charged at $125, this counseling addresses the lending process, benefits, drawbacks and eligibility requirements.
Home appraisal: Appraisals run on average $450 to $550 and can vary depending on the size, age and condition of your home. They are ordered through an independent appraisal management company.
Third-party closing costs: Expect to pay typical mortgage fees for loan recording, credit report and title insurance. These fees could vary and are negotiable. Ask for an itemized fee breakdown.
Mortgage Insurance Premium (MIP): There is an initial mortgage insurance premium of 2% of the home’s appraised value. Over the life of the loan, you’ll also pay an annual MIP that equals 0.5% of the outstanding mortgage balance. (This federally-backed insurance helps protect lenders in the event the value of the home drops over the life of the mortgage.)
Loan origination fee: Lenders may change a loan origination fee ranging from zero to $6,000 depending on your home value. This fee is negotiable and can vary among lenders. Most costs may be financed into the loan.
An important note on costs: Reverse mortgage borrowers must also continue to pay their property taxes, insurance and maintain the home to comply with loan guidelines.
As with any financial product or service, education is paramount. Discuss the options with a knowledgeable professional before committing.
An unprecedented number of people are currently out of work due to the COVID-19 pandemic. The good news is that buyers or those seeking to leverage their home equity who are furloughed or otherwise unemployed can still get mortgages.
As in the case with most recessions, the COVID-19 global pandemic has investors and businesses looking to “leverage.” Simply put, this is the concept of using various financial instruments or borrowed capital to multiply the potential return.
The HECM (Home Equity Conversion Mortgage), more commonly known as a reverse mortgage, is designed to help older Americans age in place and enjoy retirement.
With 10+ years of experience, Joe Susserman is a top-level producer with a proven track record of success in the reverse mortgage space.
At The Steven J. Sless Group of PRMI, Joe educates homeowners to determine if a reverse mortgage will meet their financial goals. He then helps clients to navigate through all steps of the loan process.
“I enjoy assisting seniors to help them live a better retirement,” said Susserman, who has three sons and two grandchildren. Joe says, “I aim to provide the highest level of customer service and be responsive to all of my clients’ needs.”
JOSEPH SUSSERMAN: NMLS 986529. Maryland Department of Labor, Licensing & Regulation Commissioner of Financial Regulation #5511.
Steven J. Sless has become regarded as the “go-to housing wealth source” by various media outlets. Bringing nearly 20 years of mortgage industry experience, he founded The Steven J. Sless Group of PRMI, the lender’s national division dealing exclusively with reverse mortgages.
A powerful speaker and communicator, Steven regularly gives seminars and learning workshops for homeowners 60+, their family and trusted advisors. Exploring the nuts and bolts of reverse mortgages, Steven presents the facts, dispels common myths and misperceptions, and answers questions so his audiences can make informed decisions and take control of their retirement.
In 2019, Steven earned the CLTC®: Certified Long-Term Care professional designation, demonstrating that he also has acquired the critical tools necessary to discuss the subject of longevity and its acute consequences on a client’s family – financially, physically and emotionally – years down the road.
“Possessing knowledge of long-term care and what decisions must be made before care is needed will allow me to better serve the needs of my clients,” Steven says. “Having a deeper understanding of my clients’ needs will allow me to have a more advanced conversation with them, their family and trusted advisors.”
In addition to helping clients and educating colleagues and audiences, Steven loves spending time with his wife and two young daughters. He also is an avid fan of the Baltimore Ravens and Orioles, and he enjoys playing golf and cooking.
Steven J. Sless NMLS# 298581 . Licensed by the Delaware State Bank Commissioner to engage in business in Delaware 5644 expires on 12/31/2021. Georgia Residential Mortgage Licensee. Georgia Department of Banking and Finance 6521. Indiana-Department of Financial Institutions Consumer Credit Division, First Lien License 11069 Secretary of State Securities Commission Second Lien License 103936. C.P.D. Reg. No.-19-07981
Brandy Nickoles has over 17 years of experience in the mortgage industry, dedicating the last 8 years solely to reverse mortgages. With great knowledge of the reverse mortgage product, she is committed to making sure our borrowers have a seamless experience.
Instrumental in creating infrastructure from file setup through loan funding, Brandy manages the loan pipeline. This includes everything from analyzing documentation and loan scenarios, to creating and implementing process/procedures, and coordinating with lenders.
Brandy also trains and oversees team members to ensure tasks are completed timely and efficiently. Having worked with Brandy for nearly a decade, Steven and Andrew can attest that her attention to detail and organization is top notch.
The Steven. J. Sless Group is fully operational and committed to expediting loans for our clients during these unprecedented times.
We have implemented the following measures to ensure the safety of our team members, strategic partners and valued customers:
Call us at 410-814-7575 or schedule an appointment. (link )
Andrew Parker began his career in the mortgage industry in 1999 and transitioned to focusing solely on reverse mortgages in 2008. Through the years, Andrew has built a stellar reputation in scaling mortgage teams and overseeing products and systems training.
He has worked in tandem with Steven for the past 18 years and now oversees day-to-day production operations at the Steven J. Sless Group. In addition to managing loan originators and coordinators, providing product training and helping them to structure loan scenarios, Andrew works with credit desks to get clients approved. He also navigates underwriting approvals.
Andrew is a big reason why The Steven J. Sless Group get clients approved for loans that other lenders don’t, and why the team closes loans much quicker than the industry average. He has consistently forged strong bonds with and earned the trust of clients and strategic partners.
With 10+ years of mortgage industry experience, Robert Sklar educates clients about reverse mortgage loans and the strategy of incorporating housing wealth in retirement planning.
In doing so, he structures loan scenarios based on clients’ specific goals and needs. He also reworks loans to new terms and identifies additional conditions as needed to insure a viable credit decision. And he analyzes credit reports, property appraisals, titles and associated documentation.
Passionate about making a profound impact in the lives of his clients and others, the Hofstra University graduate has become a trusted resource of information and education in and around Baltimore.
ROBERT SKLAR: NMLS 1161107. Maryland Department of Labor, Licensing and Regulation Commissioner of Financial Regulation #5511.
Bringing 30 years mortgage industry experience, Sharon Birdow is adored by her clients and colleagues alike.
The West Chester University graduate, wife and mother of four has served as branch partner and originating loan officer, branch manager and senior mortgage loan officer. She was named Loan Originator of the Year in Volume in 2016, 2017 and 2018.
At The Steven J. Sless Group of PRMI, Sharon helps clients 60+, their families and trusted advisors to obtain reverse mortgage loans. She regularly consults with financial professionals on the benefits an HECM provides and how to utilize this tool in individual retirement planning.
“It’s my privilege to educate and empower older Americans about the versatility of reverse mortgages,” Sharon says. “I love helping our clients achieve financial independence and peace of mind in their golden years.”
SHARON BIRDOW. NMLS#176375 // GA MLO # 47859. California – Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act 4130403. A copy of our Privacy Policy and Notice is accessible by going to Primary Residential Mortgage’s website and clicking on the “Privacy Policy” link located at the bottom of the page. https://www.primeres.com/privacy-policy – District of Columbia-Department of Insurance, Securities and Banking Department MLB3094. Distrito de Columbia-Florida Office of Financial Regulation MLD646. Oficina de Regulación Financiera de Florida MLD646. Georgia Residential Mortgage Licensee. Georgia Department of Banking and Finance 6521. Indiana-Department of Financial Institutions Consumer Credit Division, First Lien License 11069 Secretary of State Securities Commission Second Lien License 103936. C.P.D. Reg. No.-19-07981 Indiana-Departamento de Instituciones Financieras, División de Crédito al Consumidor, Licencia de primer grado 11069, Secretaría de Estado, Comisión de Valores, Licencia de segundo grado 103936. C.P.D. Reg. No.-19-07981
Fifteen-year customer relations and hospitality management veteran, Justin Zornman is the group’s first remote hire.
Based out of Kalamazoo, MI, he is responsible for helping clients to navigate the loan process. He also assists loan originators and aids the processing team to expedite loan closings.
A University of New Orleans graduate, Justin is currently completing his studies to pass the mortgage originators exam, get licensed and, one day, open a Michigan branch for the group.
“I am honored to ease the way for homeowners, 60+ to secure a better retirement,” Justin says. “I look forward to ultimately establishing The Steven J. Sless Group of PRMI as the market leader in Michigan.”
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