George Costanzo

| NMLS 221921
Phone | Fax:
732.784.6446
Mobile:
855.649.5626
125 Half Mile Road, Suite 200, Office #7, Red Bank, NJ 07701

Mortgage lending is more than selling loans. It’s about helping people achieve their homeownership goals. Whether that’s helping them reach a better financial position or connecting them to the home of their dreams, it’s about guiding them to the finish line.

My industry experience has taught me to take the time to understand my customers: What’s their story? How can I help them in their pursuit of a home? When I see my customers as real people with real goals, needs, and dreams, I get to match them with the best loan product and create a truly seamless lending experience.

Everyone has a story to tell. What they need is a Loan Originator who will listen, customize a loan to meet their needs, and guide them every step of the way.

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"Our greatest weakness lies in giving up. The most certain way to succeed is always to keep trying."

— Thomas A. Edison

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What are the reverse mortgage pros and cons and why should you care?

If you pay attention to the news, you’ve probably seen “reverse mortgage” pop up in the headlines at least once or twice. They’re a pretty hot topic right now in the mortgage industry, and for good reason. While we don’t sell reverse mortgages, we have thoughts on reverse mortgage pros and cons, as well as what’s happening with them right now in the marketplace, that you might want to consider.

REVERSE MORTGAGES: WHAT ARE THEY?

Reverse mortgages are a type of mortgage available to homeowners that are 62 years of age or older—as such, they are sometimes used by retirees. One reason retirees may take out a reverse mortgage is to fund living expenses when retirement income runs scarce. For some, a reverse mortgage may help to avoid the need to sell the family home and downsize or move into a retirement home. With a reverse mortgage, borrowers are not required to make monthly principal and interest payments to their bank or lender, as they would be required to do with a typical purchase or refinance mortgage. Instead, their bank or lender pays them, in one or multiple lump sums, or via a line of credit. Reverse mortgages allow retirees to tap into their home equity in order to pay for miscellaneous expenses and do not require repayment until after the borrower’s death (assuming certain conditions continue to be satisfied, such as continued ownership and occupancy of the home and payment of taxes and insurance). If a retiree is looking for extra cash without depleting their other non-home assets—and the flexibility to not make monthly principal or interest payments that is not available with other types of mortgages—a reverse mortgage may be a viable solution. Regardless of a retiree’s financial situation or what happens in the industry, a reverse mortgage lender cannot change the terms of a reverse mortgage or demand the loan’s repayment unless the borrower dies, the borrower no longer occupies the home as a principal residence, the borrower fails to pay taxes or insurance, or some other default event.

WHAT’S ALL THE FUSS ABOUT?

So, with some of the potential “pros” covered, why are reverse mortgages sometimes criticized? Some argue that reverse mortgages have a tendency to encourage older homeowners to spend recklessly, which can deplete their assets. Plus, historically, reverse mortgage scam efforts were widely reported. One way to help determine whether you’re being scammed is through reverse mortgage counseling, which the Federal Housing Administration (FHA) requires borrowers to complete in order to get an FHA-insured reverse mortgage. (Currently, nearly all reverse mortgage originations are for FHA-insured Home Equity Conversion Mortgages.) Recently, reverse mortgages have garnered attention because of changes to the Home Equity Conversion Mortgage (HECM) program that the current administration implemented to protect the government from future losses. These changes may result in higher costs and smaller loans for some homeowners. Another item for consideration is the fact that, when reverse mortgage borrowers die, their children may not be able to inherit the home. If the heirs can’t pay off the loan, the deceased’s lender may acquire the home. Let’s keep the conversation going. We want to hear from you! Share your thoughts about reverse mortgages with us on social media!

Some retirees may be able to save money with these reverse mortgage alternatives.

We recently wrote a blog post about reverse mortgages and why they’re a popular choice for some homeowners who are 62 years of age or older. But if you’re unsure about this type of mortgage, or if it’s just not the right choice for you, we’ve got some reverse mortgage alternatives for you to consider as you explore your options. Of course, in the brief space below, we aren’t able to fully explore all potential pros and cons of the various reverse mortgage alternatives. Be sure to fully vet any of these options (including with legal and financial advisors, as needed) before making a decision.

REFINANCE YOUR EXISTING MORTGAGE TO MAKE LOWER MONTHLY PAYMENTS

Refinancing your existing mortgage may work well if you’re looking to lower your monthly mortgage payment. Although you’d still be making a monthly mortgage payment, you could reduce your payment if you lower your interest rate. If you’d like to shorten your remaining loan term, this also may be possible by refinancing your existing mortgage. Although, in the past, it may have been difficult for seniors to qualify for a refinance because of their limited income, 401(k)s, IRAs, and other assets can often now be counted to help you qualify.

GET A CASH-OUT REFINANCE

A cash-out refinance is when a borrower refinances their mortgage for more than the amount they currently owe and receives the difference in cash. Like a reverse mortgage, this type of refinance allows you to borrow against your home’s equity and spend the proceeds as cash. Although a cash-out refinance is similar to a reverse mortgage, homeowners must have qualifying income to obtain a cash-out refinance.

SELL YOUR HOME AND DOWNSIZE

If your goal is to get cash from your home’s equity, selling your home might be a viable option. In fact, you may even get more money back from selling your home than you would by taking out a reverse mortgage. If the time is right and you’re ready to sell, consider downsizing—a smaller home may come with a smaller monthly mortgage payment, leaving you with more money in your pocket to pay other expenses.

SELL YOUR HOME TO SOMEONE YOU KNOW

Here’s a scenario: You have a friend or family member who is willing to buy your house from you. If this is someone you trust and have a good relationship with, you could set up an agreement to continue living there while they own and pay for the house. This arrangement can be especially attractive to older couples with grown children who are looking to purchase a home for their young families (and would like to have the multi-generational family live together). However, it’s very important that you seek professional advice before pursuing an agreement like this, seeing as it involves transferring your title, a binding legal contract, and doing business with family.

TAKE OUT A HOME EQUITY LINE OF CREDIT (HELOC)

A home equity line of credit (HELOC) is another type of loan where you can borrow against your home equity and use that to pay miscellaneous expenses. It’s unique, though, because the cash may be advanced to the borrower via a line of credit—much like a credit card—rather than in a lump sum. In many cases, closing costs on HELOCs may be lower than other mortgages. Interest rates generally are variable, meaning that they can go up or down. The interest paid on a HELOC may be tax-deductible, and during the “draw” period of your HELOC, you may be able to opt to pay for the interest alone each month (and not include principal in your monthly payment until after the expiration of the draw period).

TAKE OUT A HOME EQUITY LOAN

Like a reverse mortgage or a HELOC, a home equity loan allows you to access some of the home equity you’ve built up. But in this case, you receive the funds in a lump sum. Over a contracted period of time, you would repay a home equity loan in fixed monthly payments and this type of loan may either have a fixed or adjustable interest rate. Homeowners choose home equity loans because they get to keep their home while they’re repaying the loan, the interest they pay may be tax-deductible, and fees may be lower than those of a reverse mortgage.

TURN YOUR HOME INTO AN INVESTMENT PROPERTY

If you’re cash-strapped, flipping your home into an investment property could benefit you greatly. You could rent out a room, a floor, or the whole place from time to time and make a little extra from tourists and vacationers. This option works for many retirees who are still living in the “family home” and have a lot of unused space. Keep living in your home, make a little money on the side, and enjoy the company of visitors! However, this option, like all others, may not be the best for all homeowners and we suggest you discuss it with family or friends, as well as legal and financial advisors, first. (In some cases, using your home as an investment property may not be permitted. For example, your existing mortgage, local government, or homeowners association may prohibit it.)

GET A ROOMMATE

Similar to renting out your home to vacationers and other visitors, getting a roommate can help offset some of the costs of living. This also may be a great alternative for a retiree who’s coping with the loneliness associated with the loss of a spouse. And with rent rates rising across the country, this extra income from your roommate may be enough to cover (or largely offset) your monthly costs. In this situation, though, it’s best to carefully screen your candidates and perhaps get some help from a friend, one of your grown children, and/or legal or financial advisors. (In some cases, renting a portion of your home may be prohibited, for example, by your mortgage, local government, or homeowners association.)

RESEARCH PROPERTY TAX DISCOUNTS

Look into your tax benefits because, depending on your state or county, you may qualify for a little tax relief! If you meet low-income requirements, you may be eligible for a partial tax credit or programs that allow you to postpone or forego property tax payments. While this isn’t a loan or line of credit, it may be a way to keep a little more cash in your pocket.

LOOK INTO YOUR BENEFITS

There are so many other programs and benefits out there that can help retirees reach a better financial place and take full advantage of retirement. Many VA programs exist to help veterans and surviving spouses, Medicaid programs are available to assist those with disabilities or medical needs, and even more money-saving assistance programs can be found at BenefitsCheckUp. You don’t know what’s out there until you do a little research. These are just a few reverse mortgage alternatives that may help retirees. Talk to your professional financial advisor and/or legal counsel before you make such an important decision—they will be able to help you choose the best option for your unique situation.

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