Colorado Seniors: The Ultimate Guide to Home Buying with a Reverse Mortgage

ColoradoEstateServices on November 7, 2024

Buying a new home later in life comes with unique financial considerations, especially for individuals aged 62 or older who may not want the burden of a traditional mortgage payment. A Home Equity Conversion Mortgage (HECM) for Purchase—commonly known as a reverse mortgage—offers a strategic way for qualified buyers to finance a home purchase without monthly mortgage payments. At Colorado Estate Services, we’re now partnering with Certified Reverse Mortgage Professional Mark Smith from My True Mortgage to support clients considering this option. Here’s a detailed look at how it works, the potential benefits, and key considerations.

What Is a HECM for Purchase?

The HECM for Purchase is a type of reverse mortgage specifically designed to allow seniors to purchase a new primary residence. It enables eligible homeowners to fund part of the home purchase while keeping their cash flow available for other needs. Unlike a reverse mortgage refinance, which uses home equity as a source of income or funding, a HECM for Purchase applies home equity toward the purchase of a new property. This can be an ideal option for individuals looking to downsize, upsize, relocate, or simply move into a home that better suits their needs without committing to monthly mortgage payments.

How It Works

Here’s how a HECM for Purchase typically works:

  1. Eligibility Requirements: At least one borrower must be at least 62 years old for a married couple in Colorado, must pass financial assessment, must occupy the property as their primary residence at least 6 months out of the year, and have sufficient down payment funds. The property must also meet FHA appraisal standards.
  2. The Down Payment: Buyers need a significant down payment, and this will be determined by the age of the youngest borrower, the interest rate and the sales price. This can come from personal savings, proceeds from selling an existing home, or other assets. This upfront payment covers the remaining portion of the home’s purchase price not financed by the HECM loan.
  3. No Monthly Mortgage Payments: Once the loan is established, there are no required monthly mortgage payments, though homeowners must continue to pay property taxes, homeowners insurance, HOA and maintain the property. The loan balance (principal, interest, and fees) only becomes due when the homeowner sells the property, doesn’t occupy the property at least 6 months out of the year, or passes away.
  4. Loan Balance and Equity: The loan balance grows over time because no monthly payments are made, and interest accrues on the balance. However, the borrower’s heirs or estate can sell the home to pay off the loan or choose to refinance the loan into their name or repay it directly to retain ownership.


Benefits of a Reverse Mortgage for Purchase

  • No Monthly Mortgage Payment: With no required monthly payments, seniors can enjoy financial flexibility, which can be particularly valuable for those on a fixed income.
  • Downsize, Upsize or Relocate with Ease: The HECM for Purchase allows homeowners to buy a new, often more suitable property without draining savings or worrying about traditional loan terms.
  • Flexible Living Options: Seniors looking to relocate to warmer climates, closer to family, or to a community with supportive services may find this mortgage option beneficial, providing flexibility and financial relief in retirement.


Important Considerations and Limitations

  • Costs and Fees: HECMs have upfront fees, including FHA mortgage insurance, origination fees, and closing costs, which can be higher than traditional mortgages. It’s essential to factor in these costs when considering this type of loan.
  • Property Taxes, Insurance, and Maintenance: Even though there’s no monthly mortgage payment, homeowners must remain current on taxes, insurance, HOA, and upkeep, as failing to do so could lead to loan default.
  • Loan Balance and Home Equity Impact: Since the balance grows over time, heirs may inherit less equity in the property. If the home’s value has increased, there may still be equity remaining, but that will vary.


How Colorado Estate Services and Mark Smith at My True Mortgage Can Help

Mark Smith at My True Mortgage is a Certified Reverse Mortgage Professional (CRMP) and brings specialized knowledge in reverse mortgages and can guide you through assessing if this option is the right fit. By partnering with Mark, Colorado Estate Services can support clients with a comprehensive service, from understanding loan implications to ensuring a smooth home transition if selling a current home is part of the process. Together, we provide end-to-end assistance, whether that’s consulting on the financial aspects with Mark or handling the sale preparation and marketing through Colorado Estate Services.

For more information on reverse mortgages, visit Mark’s resource page at My True Mortgage  at http://www.mytruemortgage.com/msmith/ and complete the lets have a conversation tab, or reach out to Colorado Estate Services to discuss how this option could support your next real estate move. We’re here to provide guidance on every aspect of the process.

If you have any questions regarding the probate process, we’re here to help. Visit our Contact Us page for our emails and phone numbers.

Ancillary Probate in Colorado: What You Need to Know

ColoradoEstateServices on November 4, 2024

Ancillary probate can be crucial when a person owns property in a different state from where they lived at their time of passing. Here’s a more in-depth look at what ancillary probate is, why it may be necessary, and how Colorado Estate Services and Althaus Law can help manage this process.


What Is Ancillary Probate?

Probate is the legal process of distributing a deceased person’s assets, ensuring that debts are settled and property is either transferred to beneficiaries or sold. This process is usually initiated in the state where the deceased lived. However, when an individual owns property in another state—in this case, Colorado—a secondary, or *ancillary*, probate may be required to transfer or sell the property.


Examples of When Ancillary Probate Is Needed

  • The decedent’s primary residence was out of state, but they owned a vacation home, rental property, or other real estate in Colorado.
  • The property title is in the decedent’s name only, meaning it does not automatically pass to a joint owner or beneficiary.


The Steps of Ancillary Probate in Colorado

While ancillary probate sounds complex, it’s streamlined and typically does not require a full probate process in Colorado. Here’s how it works:

  1. Primary Probate: Begin by opening probate in the state where the decedent lived. This court process will establish the personal representative’s legal authority to manage the deceased’s assets.
  2. File Necessary Documents in Colorado: The representative files the original probate documents, along with additional paperwork specific to Colorado, in the county court where the property is located.
  3. Receive Authorization: Once the Colorado court has reviewed and approved these documents, it issues authorization (called “out-of-state letters”) that allows the representative to manage or sell the Colorado property. This could mean transferring the property to beneficiaries or preparing it for sale.
  4. Collaborating with Local Experts: Handling property in another state can be challenging. Working with Colorado-based experts, such as Althaus Law, helps ensure compliance with local probate laws. Althaus Law handles the legal steps efficiently, while Colorado Estate Services offers hands-on assistance with property preparation, clean-outs, and marketing for sale if needed.


Avoiding Ancillary Probate Through Proper Estate Planning

Probate—including ancillary probate—can often be avoided through comprehensive estate planning. By proactively addressing ownership and beneficiary designations, individuals can simplify asset transfers for their heirs. For instance:

  • Trusts: A trust can hold property, allowing it to bypass probate and transfer directly to beneficiaries upon death.
  • Joint Ownership: Jointly owned property typically passes automatically to the co-owner upon one owner’s death, avoiding probate.
  • Beneficiary Designations: Designating beneficiaries for specific assets or accounts can also streamline asset transfer.

These strategies can save time, reduce legal fees, and provide peace of mind for families.


How Colorado Estate Services and Althaus Law Partner to Support Families

Colorado Estate Services, in partnership with Althaus Law (Website), offers families a smooth and supportive experience throughout the ancillary probate process. Althaus Law’s expertise in probate law ensures that the necessary documents are filed accurately, while Colorado Estate Services focuses on preparing and selling estate properties as needed. This collaboration allows families to navigate the probate process efficiently, with the benefit of both legal and logistical support.

For more detailed information about ancillary probate or to explore how estate planning can help avoid probate in Colorado, contact Colorado Estate Services (Website) or Althaus Law. Whether you’re managing a loved one’s estate or planning ahead, we’re here to provide clarity and guidance.

If you have any questions regarding the probate process, we’re here to help. Visit our Contact Us page for our emails and phone numbers.

Powerful Protection: Garn-St. Germain Act for Keeping a Mortgage After Death

ColoradoEstateServices on October 16, 2024

Losing a loved one is never easy, and when it comes to managing their estate, the process can become even more overwhelming. One of the most common concerns families face is what happens to a mortgage when a relative passes away. Fortunately, the Garn-St. Germain Depository Institutions Act of 1982 provides critical protections that generally allow families to assume the mortgage on inherited property without facing immediate financial pressure.

Expert Advice: Managing After Loss Planning Without an Estate Plan

ColoradoEstateServices on October 10, 2024

Consider this question: if something were to have happened to you yesterday, what would the people in your life not know that they need to know? Often, the answer to this question is everything.

When it comes to after loss planning, having a comprehensive estate plan in place is undeniably advantageous. However, not everyone manages to get one in place before it’s too late. Without a formal estate plan, the process can be more complex and challenging for loved ones left behind. Beyond the legal realm, it is also vital to consider other areas of preparation.

In knowing how daunting it can be to meticulously document and make accessible the important aspects of your life, we have outlined some of the key areas for consideration to help get you started.

  • Legal Considerations
    • Estate Plan Documents: A trusted attorney from the Opfer Campbell Beck team can assist you with determining what exactly needs to go into your unique estate plan. These documents will outline how you want assets distributed, who will manage your affairs, and more. Without having these in place, the state may decide for you, which may not align with your wishes.
      • Wills and Trusts
        • Powers of Attorney (Healthcare and Durable)
          • Medical Directives
            • Guardianship Designations
  • Financial Considerations
    • Inventory of Financial Accounts: It is essential to create a full inventory of your financial life to ensure your people can locate and manage your finances effectively when you are no longer able to. Consider your assets, income, liabilities, and insurance policies. Ensure these are stored in a secure physical location or using a trusted online operating system such as Trustworthy or Everplans.
    • Beneficiary Designations: Ensure all eligible accounts have designated beneficiaries. This includes retirement accounts, life insurance policies, and payable-on-death (POD) accounts. These designations supersede what is written in your will, so be sure to keep them up to date.
  • Other Essential Categories
    • Essential Contact Lists: Compile a list of key contacts, including family members, close friends, neighbors, legal advisors, financial planners, physicians, home cleaners, and other relevant professionals that may need to be contacted if you were to become incapacitated.
    • Directory of Important Items: Create a directory that outlines where important documents are located. This includes documents like birth certificates, marriage licenses, passports, property deeds, tax records, and more.
    • Care Information for Children and Pets: In addition to having the legal side of guardianship in place, it is important to provide detailed care instructions for both children and pets. Consider including information about daily routines, medical conditions and history, favorite activities, and important contact information for physicians/veterinarians.
    • Real and Personal Property: List all real estate properties you own, including their locations and any mortgage information. For personal property, include descriptions and any available information on valuable items such as jewelry, collectibles, and vehicles.
    • Digital Inventory and Legacy: Document your digital footprint, including email accounts, social media profiles, and any online subscriptions. Set up legacy and emergency contacts where possible (Meta, Apple and Google all have options to do so) and consider including login information using a secure password manager like Bitwarden, Dashlane, or LastPass.
    • Business Ownership Tasks: If you own a business, outline what needs to be done to ensure a smooth transition. Include details about your business partners, employees, key customers, and suppliers.
    • Aging Care Wishes: Document your preferences for aging care, such as living arrangements, medical care, and end-of-life wishes.
    • Remembrance Wishes: Outline your wishes for memorial services or celebrations of life. This can include specifics about the type of service you want, readings, music, and any other personal touches.

Taking Action Today

While this list is a thorough place to begin, each of us leads a life with unique considerations when it comes to legacy and estate planning. By addressing these areas as well as any other pertinent areas of your life, you create a comprehensive after loss plan that provides peace of mind to you, and eases the burden on your people during an already difficult time. Planning without an estate plan requires detailed organization and clear documentation. Start today by compiling this essential information, and consider reaching out to professionals for further guidance and support along the way.

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Author: Kylee Bandy, After Loss Advisors LLC

Kylee Bandy is the founder of After Loss Advisors, a firm specializing in legacy and estate organization as well as after-loss consulting. After the death of her father in 2018, Kylee learned firsthand the “business side of death” – namely the logistical struggles that can come alongside settling a loved one’s estate. Through her professional background in sales leadership and project management, along with her personal experiences with death, Kylee brings a unique blend of organizational skills and empathy to her work.

After Loss Advisors is here to support you every step of the way, ensuring no stone is left unturned in your planning process. Following a complimentary consultation, we formulate a customized plan and guide you to make the process as smooth and stress-free as possible.

At Colorado Estate Services, we are proud to partner with After Loss Advisors to ensure that both estates and Personal Representatives (PRs) receive the highest level of care and expertise. By combining our real estate services with their specialized legacy organization and after-loss consulting, we offer a comprehensive approach to estate management. Together, we help families navigate the complexities of probate and estate sales with personalized support, ensuring smooth transactions and peace of mind during an already challenging time.

To contact Kylee, reach out through Colorado Estate Services, visit her website at After Loss Advisors, or call her directly at 970.439.0592.

Estate Management Made Easy: Legacy & After Loss Consulting

ColoradoEstateServices on October 10, 2024

Whether you’ve personally been through it or know someone who has, you understand how overwhelming it can be to not be prepared for life’s most difficult moments. We’re talking about the unavoidable “D” — Death. When the time comes, the emotional toll can be compounded by the stress of managing legal documents, financial accounts, and personal affairs.

Why Hiring an Expert Probate Attorney is Essential

ColoradoEstateServices on September 9, 2024

While it’s possible to handle probate without an attorney, doing so is often far more complicated than it seems. Just like pulling your own tooth might seem like a way to save time and money, it’s usually better, faster, and safer to leave it to the professionals. When it comes to probate—especially when real estate or significant assets are involved—hiring a probate attorney can protect you from costly mistakes, help you avoid legal issues, and make the entire process easier.