Reverse Mortgages 101: What You Need to Know

Information about reverse mortgages from Wade Insurance AgencyReverse mortgages are advertised a lot these days.

You might find them featured in TV commercials, touted in radio ads and mentioned online.

Usually, these ads depict happy older couples vacationing on cruises or traveling the world with their reverse mortgage funds.

However, this is not the intended use of this type of loan. They are designed to be used as a lifeline by retired people who have a built up a lot of equity in their homes and need to supplement their incomes.

Reverse mortgages may be risky, but there are cases where the benefits do outweigh the risks. For some home owners, a reverse mortgage may provide a means for early retirement, a way to afford necessary home improvements or just as a way to liquidate some of the money they have invested in their homes. For others, however, these deals can turn out to be a financial nightmare and can leave their families in the lurch.

Learn more about how reverse mortgages work as well as their pros and cons, so that you can decide if this sort of financial arrangement is good for you.

How Reverse Mortgages Work

Reverse mortgages were created as a way to assist seniors facing economic hardship. They are designed for those who have built up a significant amount of equity on their homes but need a way to liquidate that equity in the form of supplemental income.

A reverse mortgage is a loan on which recipients do not need to make monthly payments. Rather, the borrowers receive funds from the lender each month and the loan balance increases accordingly. The loan does not need to be repaid until the borrower (or borrowers) move, sell their house, or pass away.

If you apply for a reverse mortgage, the amount that you will be able to borrow is dependent on your age and how much equity you have built up on your home. The current borrowing limit on federally-backed reverse mortgages is $625,500 or the appraised value of your home, whichever is less. Proprietary lenders can offer funds that exceed that amount.

Different Types of Reverse Mortgages

If you are giving serious consideration to applying for a reverse mortgage, you should be aware that there are three different types available to consumers. These are:

  • Single-purpose:  Single-purpose reverse mortgages are designed to be used for one specific purpose, such as paying back taxes or making necessary home improvements. They are typically available only to low-to-moderate-income individuals. This type of loan usually comes with the lowest interest rates and associated fees.
  • Federally-insured home equity conversion mortgages: Also referred to as HECMs, these are the most common type of reverse mortgage. In fact, the National Reverse Mortgage Lenders association reports that HECMs account for approximately 90 percent of all reverse mortgages. They are backed by the U.S. Department of Housing and Urban
  • Development. You are not required to meet any particular income requirements and you can use the funds for any purpose. However, you must be at least 62 years old, reside in the home you are reverse mortgaging and meet with an independent government-approved housing counselor before you can apply.
  • Proprietary: Proprietary reverse mortgages are private loans that are backed solely by the companies that provide them. These loans are sometimes referred to as “jumbo reverse mortgages” because they are designed to meet the needs of those with homes valued at around $750,000 or more. While proprietary reverse mortgages are not subject to the same regulations as federally-backed loans, most lenders offer similar protections to consumers.

Reverse Mortgages and Home Expenses

Although your bank will be paying you a mortgage, you are still the home owner. As such, you are still responsible for paying property taxes and  keeping your home properly covered by homeowners insurance.

Those who apply for a reverse mortgage should be aware that if they should fail to pay their property taxes, let their homeowners insurance lapse, or fail to properly maintain their home, they can find themselves in default and the lender can foreclose.

If your financial circumstances may put you in a position where you will not be able to afford to keep up with these expenses, selling your home and downgrading your living arrangements might be better than taking out a reverse mortgage.

Make Sure Your Home Is Covered No Matter What You Decide

Whether or not you decide to go with a reverse mortgage, remember the importance of keeping your home insurance up-to-date with all the necessary coverage you need. Extra insurance may be necessary, such as if you live in a flood zone or a seismically active area.

If your house is damaged and you do not have the proper insurance to repair it, you may find yourself living in a financial nightmare.

Be sure to speak with one of our local Trusted Choice® insurance agents to learn more about your many home coverage options.

Pros and Cons of Reverse Mortgages >

Over 55? You Can’t Live Without This

Photo of elderly couple sitting outsideAging is inevitable, and in today’s modern society, people are living longer than ever.

Right now, there are close to 600 million senior citizens in the world, a number that will continue to grow. Access to healthcare is one reason we are living longer and as you get older, the need for quality senior health insurance grows.

There are several options that people over 55 can use but finding the right coverage can be tricky.

Our Aging Population

  • In 2010, there were 40 million people 65 and older living in the United States
  • By 2030, the 65+ population will grow to more than 72 million people
  • Only 11% of elderly people participate in exercise to strengthen muscles
  • 38% of senior citizens are obese

More Info about Health Insurance for Seniors >>

Elderly Health Care Options

As a senior citizen, you can have access to several different methods for getting senior medical insurance. With the rising cost of healthcare, having just one plan may not provide the coverage you need. As you age, you can become increasingly prone to disease and injury, so it’s important to be properly protected.

Many adult children assist aging parents in the search for senior health insurance, so understanding the options is essential for everyone involved.

The following are some of the most common forms of health insurance for senior citizens:

  • Medicare
  • Medicaid
  • Private health insurance
  • Medicare supplemental insurance

Each of these is described in more detail below.

Medicare

Medicare is a federal health insurance program for people age 65 and older, as well as people with disabilities and severe health conditions. It is divided up into four different parts:

  • Medicare Part A, also known as hospital insurance, will cover hospitalization and home healthcare. This is free if you’ve worked for 10+ years and paid social security taxes. You will need to fill out an application for Medicare in order to be covered.
  • Medicare Part B includes medical insurance. This will cover a range of medical services like doctor’s visits and annual check-ups, mental healthcare and x-rays. As with all plans, there are coverage limits, and this option isn’t free. The annual premium for Part B is $104.90 and you are automatically enrolled when you become eligible for social security.
  • Medicare Part C is known as Medicare Advantage. It allows you to get Medicare coverage through private companies. The advantage of Medicare Part C is that it often provides better coverage, but you must have Part A and B to be considered eligible. Costs vary according to state and providers.
  • Medicare Part D covers prescription drugs. You don’t have to enroll in this part of Medicare, but if you take regular medication, it might be a good idea for you to pursue it. This also comes with a monthly premium based on coverage amount.

Medicaid

This federal program provides medical insurance for low income seniors often used in conjunction with Medicare. It will provide coverage for certain medical services and prescriptions. There is an application process you’ll need to go through, and you need to meet certain income limitations to qualify. If you qualify for Medicaid, it’s a good method to get affordable senior citizen health insurance.

Private Health Insurance

If cost isn’t a factor and you are trying to find health insurance for elderly parents, a private health insurance plan can be paired with Medicare. This is a good way to make sure you are completely covered as Medicare does have limitations. Be sure to check your private plan to understand the exclusions on that policy and avoid gaps in coverage.

There is one big disadvantage that senior citizens may face when searching for private senior health insurance: pre-existing conditions.

Seniors with pre-existing conditions should be able to find coverage with the passage of the Affordable Healthcare Act. If you need a private health insurance plan, there are options available right now, but hopefully the future will bring more affordable options to all seniors.

Medicare Supplemental Insurance

Medicare supplemental health insurance, called “Medigap” is meant to provide coverage for the things that Medicare doesn’t cover.

To qualify for Medigap, you must be enrolled in Medicare Part A and Medicare Part B. Your Medigap coverage will help cover excess costs, such as co-insurance costs for stays in the hospital or a nursing facility, and even the deductibles in your Part A and Part B Medicare plans.

You can find this plan through private insurers and organizations that cater to the elderly. Costs will vary according to coverage.

Buying the Right Health Insurance for Elderly People

With all the various options that are available and the many combinations, finding the right senior health insurance can be confusing. It’s a good idea to familiarize yourself with federal insurance programs and to examine private policies as well.

Under the Affordable Care Act, you’ll be able to search for policies that meet your needs on an online marketplace. Each state will have a marketplace (or, if your state does not have its own marketplace, it will be run by the federal government), so everyone will have access.

Remember that you are encouraged to ask questions of your potential insurer, and to advocate for yourself to make sure you’re getting the coverage that makes the most sense for your needs. Our independent agents are available to answer your questions and to provide the information you need. Contact us today.

More Info about Health Insurance for Seniors >>

How to Find the Best Auto Insurance for Seniors

senior-auto-insurance-rate-infographicOne of the advantages of being a mature driver is that insurance companies recognize your experience, and that experience can bring you better pricing in the form of safe driver and senior discounts. Let’s talk about how you can be rewarded for your longevity and wisdom through lower rates and discounts on your auto insurance policy.

Top Reasons to Find a New Mature Driver Auto Policy:

  • You recently turned 50 or hit another “milestone” birthday
  • You have taken a safe driving course, and your current policy does not offer a discount
  • You have been “claim free” for two years or more but your rates remain high
  • You do not have a local agent who regularly reviews your insurance needs
  • You have had a recent life change such as getting married or losing a spouse

Factors that Affect Senior Auto Insurance Rates

There are a number of important factors that can affect your rates, and even how much insurance you need to buy, according to our partners at Trusted Choice. One factor that will make a difference in your policy and rates is the type of vehicle you drive. For example, if you switch from driving a high-end car such as a Lincoln MKS to a standard family car like a Ford Focus, your rates will likely decrease.

How often you drive is a factor in determining your insurance rates, too. If you are paying the same rate you were when you were commuting daily to work now that you are retired, you are most likely paying too much. A daily work commute brings with it certain risks that are vastly reduced if you are driving less frequently.

Your driving record is a key factor in determining your auto insurance premium. Seniors tend to be safe and cautious drivers, though they may have lost confidence or have diminished vision, which can lead to mistakes. Many mature drivers have not refreshed their driving skills since they initially learned to drive many decades ago. Taking a driving course specifically for mature drivers can enhance your driving skills, which can help you remain safe on the road, and maintain your good driving record. It can also result in a discount, just for taking the course.

Finally, an important and often overlooked factor is whether you are paying for coverage you don’t need. One example is loss-of-use coverage and the damage to non-owned automobiles. The loss of use endorsement is used when you have been involved in an accident and need a car to drive to work while your vehicle is being repaired. The liability for damage to a non-owned vehicle is the coverage you would use if you wanted to rent a vehicle for the weekend.

If you and your spouse are both retired, and are listed on each other’s auto policy, you may not need this additional coverage. That being said, if you travel, you may want to call your agent and add the coverage onto one of the vehicles so you will have coverage abroad.

Learn More about Insurance for Senior Citizens >>