Best local Colorado Reverse Mortgage Pushing my Buttons!
You’re the Best Local Colorado Reverse Mortgage and what Pushes my Buttons!
Mace, I get salespeople calling me all the time and they push my buttons. I know you and other companies sell and twist arms to get people into RMs, but what I want to know without you sidestepping me is:
- What are the negative aspects of the program?
- What are the tax consequences?
- Can I deduct the RM interest on my tax returns?
Respectfully, Derek
Don’t kill the messenger!
Mr. M…, I got a chuckle from your email and appreciate your position. I am familiar with some of the sales practices mentioned only because many seniors have shared similar experiences with me. Because I’ve likely been in the Reverse Industry for longer than you’ve been a senior, I suspect I’ve heard more stories and grumbles about this than you’ve experienced. At least for your sake, I hope so!
Colorado Reverse Mortgage only practices locally. We’re the best local Reverse Mortgage company in Colorado! Other companies’ licenses allow them to practice nationally or in a multitude of states. For the sake of efficiencies, their salespeople usually operate in a “bull-pen” environment and focus on closing every deal quickly and shareholder profitability.
The best advice Colorado Reverse Mortgage can give is…
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If you ever feel like you’re pushed into a Reverse Mortgage by anyone (and this includes me!) do NOT work with that individual or company. It seems obvious, but if they are more interested in their business interests rather than your best interests, you should keep walking!
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Do NOT enter your contact information on-line. If you do so, you are essentially asking a salesperson to contact you.
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Remember the Yellow Pages? For many years, I advertised in the Yellow Pages. In total, 5 companies advertised Reverse Mortgages and I was one of them. The other 4 were not even mortgage companies, but rather data mining companies. It is even worse today with the internet! Many companies offering to give you information aren’t even mortgage companies, but rather they are companies fishing for leads to sell and data-mining. Their business is to sell your personal information to other individuals or companies and often multiple times. This, of course, triggers an onslaught of phone calls, spam emails, and regular postal junk mail. Now, because some fool paid good money for your contact information, you can bet that they are going to contact you several times and are anxious to get you to talk to them instead of the other guy who also got your contact info.
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If you are not interested, then tell them to not call or contact you again. I know they can be a bit pushy. If you’re not comfortable pushing back, tell them a white lie and that you completed your RM a week ago and that you’re not interested in talking to them further. Also, keeping a list of names and dates of who you told to bug off will come in handy. If they persist in contacting you the Attorney General will be more than happy to get a hold of your documentation!
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If you can work with a CRMP in your state, that should give you some comfort as to the individual’s professionalism and commitment to the Reverse Mortgage product. CRMPs follow a Code of Ethics and Professional Responsibilities. To safely find a list of CRMPs in your State, go to ReverseMortgage.org. There you can learn more about this designation some of us hold.
The most common concerns are…
Accumulating Interest:
A concern may be that your heirs (often, “the kids”) will inherit less equity when you die. Yes, this is typically true. But please remember, this is your home and it is there for your comfort; not your kids.
There are no monthly mortgage payments required and the balance of the loan can grow larger over time. Added every month, is the amount of interest owed and the balance (aka the “pay-off”) is larger. Considered to a disadvantage by some, the Reverse Mortgage product can be a huge advantage for those who want to stay in their homes and improve their financial health.
Remember… Not required is a mortgage payment and this is what attracts most people to the RM product. But I’ve several clients that do choose to make an occasional payment. Whether the intention is to build equity for the heir or the more frequent reason of wanting to build up their LOC with the guaranteed growth for their future personal use, the reasons for making a payment vary from one to another.
But if your #1 priority is to leave an unencumbered home to your heir, then do not apply for a Reverse Mortgage. However, I hope that if you ask your kids, they would be more concerned with your quality of life today more so than their inheritance tomorrow.
Reverse Mortgages in Colorado are complicated:
They aren’t complicated… They’re just different from what you’re used to. With most clients, thinking in Reverse doesn’t come naturally and I spend a bit of time “retraining the brain”. Your LO should be patient and help educate you.
Additionally, HECM rules require that you visit a 3rd party RM Counselor face to face or over the phone if it is more convenient for you. Usually, they defer to the Loan Officer as to the proper structuring of the loan. Their primary role is to make sure you understand the basics of the program, that it is an appropriate solution and that no one is taking advantage of the senior. Even the best local Colorado Reverse Mortgage clients are required to go through the counseling process. Click here for a list of counselors.
Not enough money is received:
You may be frustrated that a Reverse Mortgage doesn’t give you as much as your home is worth. Because the balance can grow over time, leftover is the equity in the property to absorb this growing balance. To calculate the loan amount (aka the Principal Limit), we use the appraised value of your home, your age, and interest rates. The Principal Limit amount is determined by a government formula.
Not Everyone Qualifies:
Just because you are 62 years old and own a home does not mean that you’ll qualify. This product is not available to everyone! You must have a large enough equity position or additional resources to close on a Reverse Mortgage. Additionally, we do consider a person’s credit payment history and income level when determining whether to extend the loan to a homeowner.
The bank keeps the house:
Passed around the campfire like a ghost story is this common concern. Yes, it is fun to pick on banks, lenders and even us Mortgage Loan Officers. Lucky for me there are still more lawyer jokes than LO jokes.
In all seriousness… Yes, it can occur and the bank can acquire the home. But the same can be said for conventional mortgages as well. You see, with a forward mortgage or a reverse mortgage, if the homeowner commits fraud or doesn’t follow the rules (live-in home, pay property taxes, HO Insurance and maintain the home are a few) or if the bank doesn’t get paid the principal and interest that is owed upon loan maturity, the lender has the right to foreclose upon the home. Fortunately, this is the exception and NOT the rule! To be sure… passed on to the heirs are most properties even with a Reverse Mortgage.
What are the tax consequences?
A simple answer to a simple question; I like these!!! Since the proceeds from a Reverse Mortgage are a loan, they are not taxable.
Can I deduct the interest on my taxes?
This is a more complicated answer. With the understanding that what I’m about to state is accurate, I’ll ask you to confirm with your CPA.
With a Conventional mortgage, you’re charged interest and you pay it each month with your payment. The amount of interest accumulates over the year and it IS deductible.
Like a Conventional mortgage, charged monthly is interest with a Reverse Mortgage. However, whether you make a payment is optional. Most people in a Reverse Mortgage are not making payments, so there is no interest payment to deduct. Charged each month is interest, but you’ve not yet paid it. Later, when your estate sells the home, it pays off the amount you borrowed and the interest that accumulated. So, if your estate is responsible to pay taxes, there may be a large deduction that they could claim. However, if you are one of the few who choose to make payments on your RM, then be aware that before any of your payments are applied to accumulated interest, there is a pecking order as to where your payments are applied. Applied first to any financed Mortgage Insurance, then the other Closing Costs and finally, to interest.
I believe what I’ve shared is correct, but I’m a smart enough guy to again remind you to verify my comments with a CPA or tax attorney as tax codes change over time as do their interpretations.
In conclusion…
Mr. M,
Ultimately, only you can determine if the advantages outweigh the disadvantages. The main purpose of these is to educate and be a resource to the senior community. We all want you to make a decision that is right for you and with which you’re comfortable.
If you want more information or would like specific numbers, you’ve got my contact information. Any details you share with me are always confidential and I promise that I don’t sell your contact information to others or unnecessarily bug or push your buttons.
Being the best local Colorado Reverse Mortgage company…
we feel that we are more than just a Reverse Mortgage company and feel it is important to look at and address a bigger picture. Of course, we discuss Reverse Mortgages but are happy to share our knowledge and input on a variety of “senior-centric” topics. Mace visits about the importance of Trusts, Social Security, Home Safety, Power of Attorney documents, Senior Abuse (financial, physical and mental), and many other areas. Remember we’re not just a reverse mortgage company, we’re your neighbors.
Use this Reverse Mortgage calculator. This is a safe site and the calculator will give you a rough estimate. However, an experienced Certified Reverse Mortgage Professional will not only be more accurate but will also know ways to maximize the benefit to a consumer and will do a better job than a generic calculator.