Is a Colorado proprietary reverse mortgage loan right for you?
If you’re a Colorado homeowner nearing retirement, a reverse mortgage loan may seem like an attractive way to access your home equity. But is it the right choice for you? Before you decide, it’s important to understand the pros and cons. Colorado proprietary reverse mortgages can provide additional income and are non-recourse loans, which means you or your heirs will never owe more than the home’s value. However, fees can be higher than traditional mortgages, and a reverse mortgage may impact your ability to leave your home to heirs. Consider your unique circumstances and reach out to us to see if this option makes sense for you.
Benefits of a Colorado proprietary reverse mortgage loan
- Never make another monthly mortgage payment
- Increase your cash flow
- Stay in your home
- Helps secure retirement
- Pay for healthcare expenses
- Enhance lifestyle, travel, and home upgrades
Colorado proprietary reverse mortgage loan eligibility requirements
- At least 55 or older
- Loans up to 4 million!
- Equity in your home
- The home must be your primary residence
- Ability to pay taxes, insurance, and HOA
Contact us for more eligibility requirements and to see if this makes sense for your scenario!
What are the Pros and Cons of a Colorado proprietary reverse mortgage?
Depending on your needs and financial goals, a Colorado proprietary reverse mortgage may benefit you in the following ways:
- Pulling cash out is TAX-FREE! Learn more on IRS.gov
- You remain the homeowner, and your name stays on the title.
- You can access your equity without selling the home or making a monthly mortgage payment.
- There are no credit score requirements, though your credit history will be reviewed during a financial assessment.
- You’re protected from declining home values since it’s a non-recourse loan.
- There are no restrictions on how proceeds are spent. In other words, you can use the funds on whatever you want or need.
- Even after the borrower dies, non-borrowing spouses who aren’t listed on the mortgage may still live in the home.
- If the loan comes due because you pass away and your heirs wish to keep the home, they can purchase the home for 95% of its appraised value or the balance of the loan – whichever is lower. They can also refinance that cost into a traditional mortgage.
A Colorado proprietary reverse mortgage allows you as the homeowner to supplement your income for your retirement or other expenses. It’s also essential for you to know the eligibility and qualification requirements before settling on this option, as not everybody can use this loan. Before applying for this type of mortgage, we recommend speaking with a professional.
Although there are a number of benefits that come with a Colorado proprietary reverse mortgage, the loan can also have some points that you will want to consider.
- Since you’ll be borrowing against the equity in your home, you’ll decrease your equity and increase your amount of debt.
- If you choose not to make payments, the loan balance will increase over time as interest accumulates.
- Depending on the type of loan you choose and how you handle your money, you may outlive your proceeds.
- While heirs will have a few options for keeping your home after you pass away, you may not be able to pass the home on to your heirs without a cost to them.
- The loan may come due for several reasons. For example, the loan must be for your primary residence. If you do not live in the home for more than 6 months out of the year, the loan could come due. On the same note, a reverse mortgage will come due if you move out of the home or pass away. It could also come due if you fail to uphold your loan responsibilities, including maintaining the house and paying your property taxes and homeowners insurance.
- As stated above, you must continue to pay property taxes and homeowners insurance. If you do not stay current on these expenses, your loan may come due.
- There may be high closing costs and fees associated with the loan.
Colorado Proprietary Reverse Mortgages
Frequently Asked Questions
When you have a Colorado proprietary reverse mortgage, do you have to make a monthly mortgage payment to the bank?
No, but for tax or cash flow purposes including Medicaid planning you may wish to do so.
When does the Colorado proprietary reverse mortgage have to be paid back?
Your Colorado proprietary reverse mortgage will become due when one of these things happens:
- You sell your home.
- You permanently move out of your home.
- The last person on the title passes away. Your heirs will have two options. They can choose to sell the property, pay off the reverse mortgage balance and keep any remaining equity, or they can choose to keep the property by refinancing the balance of your reverse mortgage with a new mortgage in their name. Remember if the loan balance ever exceeds the home value, it does NOT trigger an early payoff or cause you to have to move out of your home.
When you have a Colorado proprietary reverse mortgage, who owns your house (whose name is on the title/deed)?
You remain the owner of your property. There is no change to the deed or title of your home when completing a reverse mortgage.
What basic responsibilities will you continue to have after you get a Colorado proprietary reverse mortgage?
The homeowner remains responsible for the payment of annual property taxes and homeowner’s insurance as well as basic upkeep of the property.
If you get a Colorado proprietary reverse mortgage, how does that change the amount of money that you will leave to your children (or other heirs)?
Most likely, it will decrease the amount of money the heirs will receive from the value of the home. However, your overall net worth will likely get better, because you will not be spending as much from your other accounts.
What if I go into a nursing home?
As long as you are simply rehabilitating and getting better, your home and reverse mortgage are still yours until two doctors agree it is impossible for you to ever return to your home.
If you took all of the money from the Colorado proprietary reverse mortgage in a lump sum and spent every bit of it, would you be able to go on living in your home?
Yes, your reverse mortgage will not become due until you pass away, sell your home, or are no longer living in the home. If you use all of the available proceeds, you would not have any more money available and interest would accrue until one of the three events referenced above occurred.
What happens if at any time the amount you owe under a Colorado proprietary reverse mortgage is greater than what your home is worth?
Nothing as long as you still live in your home and pay taxes, homeowners insurance, and maintenance.
What if I live in Florida for half the year?
That’s fine, you just need to live in your primary residence for six months and a day.
There are several “payment options” or ways to get money from a Colorado proprietary reverse mortgage. Which payment option do you think will best meet your needs?
It depends on your situation. Our trained loan officers have helped hundreds of seniors pick the best option for their personal situation. You can do a lump sum payment, ongoing monthly payment, or you may also choose a line of credit allowing you to access your money as you need it. Your line of credit will be guaranteed to grow every year that you don’t use it.
What happens if you change your mind later and want to change your payment plan?
As long as you still have money available to borrow from your reverse mortgage, you can change your disbursement option for a small, one-time fee. Remember when the value of the loan is higher than the home value it does not trigger an early payoff or due date.
What may happen if you do not keep up these responsibilities as a borrower?
If you do not continue to do these three basic things, the lender is required by HUD to foreclose.
When you purchase a home with a HECM, will the HECM be held on your existing home or your newly purchased home?
The HECM will be held on the newly purchased home as your primary residence.
How will the lender determine how much money you will need at closing?
The down payment you will need to bring to closing will be determined based on your age, interest rates at the time and the sales price (or appraised value, whichever is less) of the home you are buying.
Will your heirs receive more or less after you pass away than they would without a Colorado proprietary reverse mortgage?
It depends on what you do with your overall finances. Some families will receive more by being more efficient with the use of their portfolio of assets; however again, because this is not financial advice, it is very important that you consult with your financial advisor to make the best use of a Colorado proprietary reverse mortgage for your specific situation.
What sources of funds (money) are allowed when you purchase a home with a HECM?
The money must come from your own liquid assets (bank accounts, CD’s, retirement accounts, etc.) or from the documented sale of other assets you may have (your present home for example).
Why is my down payment higher with a Colorado proprietary reverse mortgage?
Your down payment is higher initially because you will never be required to make a monthly payment (except for taxes, insurance, and maintenance). With a traditional mortgage you would potentially lose more in cash flow over the years because of the consistent required payments. Remember the HECM for Purchase also can allow you to purchase a more expensive home than what you would otherwise be willing to commit to in payments for the next 20-30 years.