Catalina State Park – A Jewel in the Desert

So many things have shut down since the Covid-19 virus has affected our everyday schedules but those of us living in Arizona have been lucky that our Arizona State Parks have not been shut down and still offer the ability to get outdoors and enjoy nature and shake of that “cabin fever” that many of us are experiencing during our mandatory .  Catalina State Park has been a magnet for people in the Tucson area who want to get out, get some fresh air, and add some exercise to their daily routine.  Although everyone is still asked to follow recommended routines like regular hand washing, social distancing, and the use of masks and gloves to contain the spread of virus, Catalina State Park offers a safe area to enjoy the beautiful “green desert.”

Because of its’ easy access to metro areas the park fills quickly during morning hours.  The best time to visit Catalina State Park is during off-peak hours (after 2 p.m.)  Parking is only allowed in designated parking areas and main trailhead parking is limited.  When the parking lot is full, visitors will be turned away.

If you are able to spend time here enjoy the 5,500 acres of Saguaros, native vegetation, abundant wildlife, and the incredible trail systems that can take you to the top of Mount Lemon.  Upcoming events are certain to happen as everything gets back to normal so consider attending the Star Party on October 10th and enjoy the wonders of the night sky.

Catalina State Park Website:

https://azstateparks.com/catalina

Hiking Trails in Catalina State Park:

https://azstateparks.com/catalina/things-to-do/trails

 

How Does a Reverse Mortgage Work – Definition & Requirements

A reverse mortgage, also known as the home equity conversion mortgage (HECM) in the United States, is a financial product for homeowners 62 or older who have accumulated home equity and want to use it to supplement retirement income. Unlike a conventional forward mortgage, there are no monthly mortgage payments to make. Borrowers are still responsible for paying taxes and insurance on the property and must continue to use the property as a primary residence for the life of the loan.

These loan products can be a challenge to explain or understand, even for people who have plenty of financial experience. We’ve put together this introductory article in hopes of better explaining the basics in simple terms. Here’s what we’ll cover:

Reverse Mortgages for Dummies

In general, it’s easiest to explain these loans by beginning with a comparison to a better known financial product, the home equity loan. At its core, the reverse mortgage is a home equity loan that’s designed to help seniors tap into the equity in their homes. This loan is only available to homeowners who are 62 or older and have built up substantial home equity.

The other unique features of a reverse mortgage are best explained by a comparison to traditional forward mortgages. In a forward mortgage, the borrower makes monthly payments to the lender, gradually reducing the loan balance and building equity. With a reverse mortgage, the borrower receives payments from the lender and does not need to make payments back to the lender as long as he or she lives in the home and continues to fulfill basic responsibilities, such as payment of taxes and insurance. The loan balance grows over time as the borrower receives payments and interest accrues on the loan; home equity declines over time. Essentially, the mortgage works in the reverse direction of a forward mortgage, which is where the term “reverse” comes from.

All loans must eventually be repaid, and this one is no different. The loan is due once the borrower sells the home or passes away. Of course, the borrower may also choose to pay off the loan at any time. In most instances, a reverse mortgage is paid off when the mortgaged home is sold. It is important to note that reverse mortgages are designed so that the amount owed cannot exceed the value of the home. If, for example, a reverse mortgage balance is $150,000, and the house is sold for $125,000, the borrower does not owe the difference. If the house can be sold for more than the value of the reverse mortgage, that equity belongs to the borrower or the borrower’s estate.

Today, almost all reverse mortgages that are originated are Home Equity Conversion Mortgages (HECM). The HECM is a program of the Federal Housing Administration (FHA), and these loans are guaranteed by the federal government. This means that you do not need to worry about your reverse mortgage lender failing to make payments to you. We’ll cover what this really means later, but it’s important to note that the rest of the information here applies to HECM reverse mortgages unless explicitly noted.

Who is Eligible for a Reverse Mortgage?

One of the strengths of the HECM loan program is that there are not overly restrictive requirements, making these loans easier to qualify for than other financial products such as a mortgage refinance, home equity loan, or home equity line of credit (HELOC).

You are eligible for a reverse mortgage if:

• You are 62 or older.
• You own your home and use it as your primary residence.
• The house is single family, multi-family (up to 4), or an approved condominium or manufactured home.
• You own your own home free and clear or only have a small amount left to pay on the existing mortgage.
• Your home is in good condition prior to taking out the loan.

You must meet with a HUD approved counselor before obtaining a reverse mortgage to determine if the product is suitable for your needs. The counseling sessions will help you understand how the loan works and different alternatives that are available to you.

All prospective borrowers must also undergo a financial assessment to qualify. This assessment makes sure that the borrower can pay for:

• Property taxes
• Homeowner’s insurance
• Basic home maintenance
• Home Owner’s Association (HOA) fees if applicable

How It Works

When you own a home with a traditional mortgage, you gain equity over time as you pay down the loan. Home equity is the difference between what your home is worth, its appraised value, and any debt that you have from mortgages against the home. Let’s say, for example, that you own a home worth $300,000 in today’s real estate market, and you only owe $50,000 on the mortgage balance, having paid down the rest. You have valuable home equity worth $250,000, which is calculated by taking the $300,000 value and subtracting the $50,000 still owed. If you are like most Americans, the chances are high that this $250,000 worth of equity represents a substantial portion of your net worth, and as you reach retirement age you may want or need to tap into this wealth to supplement your fixed income.

There are a few options for tapping into your home equity that you may be familiar with – selling the home, taking out a home equity loan, or obtaining a home equity line of credit. However, these options may not be suitable for you – selling your home doesn’t make sense if you do not wish to move, and home equity loan and HELOC options may be difficult to obtain.

There is an alternative solution, however, and that is the reverse mortgage. If you are eligible and the product is suitable for your needs, a lender can offer you fixed monthly payments or a line of credit based on the value of your equity. Though there are other factors involved, you can think of the lender giving you a loan to you based upon how much equity you have in the property.

How Much Can I Borrow?

The amount of your reverse mortgage is based on how old you are, how much your home is worth, and the interest rate that you are offered on the loan.

Generally speaking, your borrowing power increases:

• When you are older. An 80-year-old will be able to borrow more than a 62-year-old if all other factors are equal.
• If your home is more valuable and/or you have a higher amount of home equity.
• As interest rates fall. You will be able to borrow more at a 4% rate than a 6% rate.

 

Options for Withdrawing Your Money

One of the best features of the HECM program is that borrowers are given a great deal of flexibility in how they receive the proceeds of the reverse mortgage.

There are four basic options:

• Withdraw a lump sum of cash when the loan closes.
• Receive a monthly annuity for as long as the borrower lives in the house. This is called a “tenure” annuity.
• Receive a monthly annuity for a set period of time chosen by the borrower. This is a “term” annuity.
• Take out a line of credit that can be used at the borrower’s discretion. This credit line actually grows with the passage of time.

Of course, a senior obtaining a reverse mortgage can also choose to combine multiple options into a plan that best suits his or her needs. For example, a senior could choose to take out a certain amount of cash at closing while also receiving an annuity.

There is also significant flexibility with changing from one option to another over time. For example, if a borrower receiving an annuity wished to switch to a line of credit instead, he or she could do so by paying a small fee.

 

How is the Government Involved?

This is a big point of confusion, especially since advertisements have sometimes promoted the reverse mortgage as a “government benefit” of some kind. First, it’s important to note that the FHA, a government agency, is not loaning you any money. You are working with a private company, and the FHA is providing a guarantee on your loan. This guarantee protects you in two significant ways.

First, the FHA guarantees that the senior will receive all the payments that he or she is entitled to as a result of the reverse mortgage. This removes the risk of the lender going bankrupt or simply refusing to make good on its obligations. Second, the FHA protects the borrower and his/her estate from ever owing more on the loan than the home is worth. In circumstances where the debt outstanding on the reverse mortgage exceeds the value of the home, the FHA covers the difference.

Key Benefits

The amount of your reverse mortgage is based on how old you are, how much your home is worth, and what interest rate the lenders offers to you. Generally speaking, the older you are and the more your home is worth the more you’ll receive.

With a reverse mortgage there is no loan to repay as long as you are alive, living in the home, and keeping the terms of your loan. You can have the money disbursed to you in the form of a check or a line of credit. Lump sum payments are also popular; in 2011, 73% of borrowers chose a lump sum payment.

The loan generally does not have to be paid back until either the last surviving homeowner dies or moves out of the home. After that happens, the estate typically sells that home and uses the proceeds to repay the reverse mortgage loan. If there is extra money left over the heirs get to keep it. If the house is sold and there is not enough money to repay the payments that the lender has made, then it’s tough luck for the lender. They have to accept the financial loss and cannot go after the heirs for the balance.

Reverse Mortgage Fees?

There are three major fees that borrowers must pay. Most are similar to those paid on a forward mortgage.

These are the upfront fees that you will need to pay:

• Origination fee paid to the lender. This is government regulated and ranges from a minimum of $2,500 to a maximum of $6,000, depending on how much your property is worth. The exact formula is 2% of the first $200,000 in property value and 1% of the amount above $200,000.
• Third party fee. This is multiple smaller fees paid to individual third parties, but we’ve lumped them together for simplicity. Appraisal, title, inspection and so on.
• Upfront mortgage insurance premium (MIP). This fee is paid to the FHA, and in all cases it is 2% of the property value. This premium pays for the protections that the FHA gives to borrowers.

Over the life of the reverse mortgage, borrowers must also continue to pay a 0.5% annual MIP on the loan balance. Interest will also accrue on the balance. Generally, the costs of a reverse mortgage are financed into the loan so that the borrower does not have to pay out of pocket. Instead, the money is being taken from the home’s equity.

Let’s return to our example from before, where we owned a $300,000 home and add up the fees.

• First is the origination fee, calculated as $200,000 * 2% + $100,000 * 1% = $5,000.
• Second are third party closing costs, which we’ll estimate at $1,500.
• Third is the upfront MIP, calculated as $200,000 * 2.0% = $4,000

This gives an upfront cost of $10,500, which is generally financed, meaning it is added to the loan balance. This means that before you borrow any money, you have spent $10,500 of your home equity to obtain the loan.

Of course, not all lenders charge the maximum origination fee possible. It’s possible to find one who will charge you a reduced amount, and in some cases it’s possible to get a rebate, which is essentially a negative origination fee.

Does a Reverse Mortgage Borrower Have Any Obligations

The home must continue to be used as the primary residence. Seniors must also maintain the home, do needed repairs, and stay current on property taxes and homeowner’s insurance premiums. Otherwise they risk default. Bankruptcy can also be a violation of the reserve mortgage agreement. Once the homeowner is in default they are subject to foreclosure – and the unexpected loss of one’s home can be especially tragic for an elderly person. Thankfully the financial assessment added in 2014 makes this far less likely.

Is a Reverse Mortgage Right for You?

In 2012, the Consumer Finance Protection Bureau put together a report to examine the reverse mortgage industry. This report concluded that the following groups of seniors were most likely to benefit from obtaining a reverse mortgage:

• Those looking to supplement a fixed income in retirement.
• Those who need a home equity line of credit (HELOC) but cannot qualify.
• Seniors who will remain in the home for a long time horizon.
• Those who are looking to use a reverse mortgage as a financial tool as part of a retirement planning strategy.

This list is a good start, and we have a few additional uses for reverse mortgages that consumers may find useful. Here are additional ways that a senior could use the proceeds of a reverse mortgage:

• Pay off a forward mortgage and eliminate the monthly payment that goes with it.
• Use a credit line as a means of paying unexpected expenses, protect against loss of income from the death of a spouse, and/or to make sure that retirement income remains stable even if your other sources of funds fluctuate.
• Purchase a home using the HECM for Purchase

A Few Questions to Ask Yourself

1. Is there anyone who lives in the home that will be mortgaged besides the borrower or borrowers?

YES: When the borrower dies or moves out of the home, the reverse mortgage becomes due. This could affect those living with you, such as a younger spouse, children, or other family members. Discuss the situation with them beforehand and then proceed if it makes sense for you.

NO: There is no need to worry about your family or loved ones needing to move out when the reverse mortgage becomes due.

2. Do you plan to keep living in your home for an extended period of time?

YES: Reverse mortgages are expensive over a short time horizon and get progressively less expensive as more time passes. Thus, a reverse mortgage is more likely to be right for you if you will remain in your home for a long time.

NO: If you’re not planning to stay in your home, there are other short term options that are likely cheaper. A reverse mortgage is less likely to be right for you, especially after the FHA discontinued the HECM Saver program.

3. Is it important for you to leave your home to your family without debt attached to it?

YES: A reverse mortgage is probably not right for you. If you are comfortable leaving some debt on your home, there are reverse mortgage options that will limit the amount of equity that you withdraw, leaving your heirs with a more valuable inheritance.

NO: A reverse mortgage is more likely to be right for you.

Additionally, the senior must continue to use the home as his or her primary residence. Once the home is not used as a primary residence for 12 months, the reverse mortgage becomes due.

Arizona gained 107,628 residents in 2017, one of largest population gains among the nation, according to Census Bureau estimates. The rapid growth should contribute to a promising job market and a strong recovery in housing

In 2017, California was one of the top five leading states in the U.S. for people moving out of the state. Arizona is the top state for inbound moves, with 60 percent of people moving to Arizona last year. Following Arizona is Idaho, North and South Carolina, and Tennessee among the top inbound states for 2017. More than 30,000 people have left California for Arizona in each of the past three years. The big concern causing this move

California residents pay nearly twice as much state income taxes. The individual income tax rate is 4.54 percent in Arizona. It’s 9.3 percent in California.

Equity refugees have more money to buy and invest in less-expensive housing in states like Arizona. Oscar Wei, senior economist at the California Association of Realtors, said the cost of living and doing business in California clearly are main factors in California-Arizona migration patterns.  When you compare home prices of California to Arizona, Wei said, “California is about 60 percent higher than Arizona in general in terms of the state median price.”

 

Arizona’s total population growth rate of 3.15 percent between 2015 and 2017 was second only to Florida’s 3.53 percent among states with a population greater than 5 million people, according to raw census data.

While this has led to a slowdown in California’s population growth, other problems are pushing people to actively leave the state. Kotkin identifies two key groups quitting California: baby boomers approaching retirement and middle-income families aged 35-44. Aging boomers can sell their one asset — their house — and either afford a larger, nicer home in Arizona or a modest one and pocket the difference.

A company that manufactures workbenches and lab furniture in Orange County recently relocated to Goodyear to save money, while creating 30 new jobs in Arizona with the savings incurred by move. The director of sales for this company stated the move will increase most assuredly increase the stability and longevity of his business and increase the living standard of his employees. According to NerdWallet, a cost-of-living-calculator application, the cost of living in Orange County is 56 percent higher than living in Phoenix.

What is a 55+ Active Lifestyle Community?

A retirement community is a particular neighborhood that has been built for adults who are at least 55 years of age. The agent limit, however, is not always set in stone and can be as young as 50 and as old as 60 for a starting point. Most seniors living in retirement communities are in fact retired from their nine to five jobs. Retirement communities can be single family homes, condos or even apartment living. Sometimes these neighborhoods can be gated for additional security.

Retirement communities are an attractive option for older home buyers, and for a good reason. These communities offer a broad range of choices (the more expensive the community, the more it generally has to offer), all of which are designed to make retirement more attractive, healthier and more enjoyable than it would be if you were to buy and live in the average neighborhood. Quite often 55 and older housing offers amenities that other places might not have much like living in a hotel.

If you are considering buying a home or a condo in a retirement community, there are some things you should know before you get started. Buying what may be your last home is considerably different than buying your first, and you will need to account for some factors that are unique to later life and the communities that cater to older buyers.

Take a look at some of the best tips for buying into a 55 and over retirement community.

Retirement Communities – Buying A Home or Condo.  Weigh the positives and negatives of each housing type.

One of the first steps before looking at retirement communities is to decide on what kind of housing that’s most desirable. You want to buy a property that you can be happy with, whether it is a single-family home or a condo. Single-family homes offer more privacy, but a usually harder to maintain (although many communities provide maintenance and upkeep services – for a price), while condos are generally easier, but offer less privacy. The bigger space, generally the costlier the utilities, maintenance, etc. Have a look at the pros and cons of a house vs a condominium to get an understanding of which housing choice may be the best fit for your financial and lifestyle choices.

Visit during the off-season.

It is important to visit the 55 plus communities you are considering at different times of the year. Many times, buyers fall in love with an area while visiting on vacation. But just because you liked Florida in the spring does not mean you will like it in the summer. It may be a good idea to rent temporarily in the area you are thinking about buying to see what the off-season is like, just to verify that you can be happy living there.

If you are a retiree and have not committed yet to where you want to purchase a retirement home, have a look at some of the top 55 and older communities throughout the country. If you are not staying local, it might be worth checking out one of these hot spots.

Find out what the management is like.

Competent, reliable management is a necessity if you want to live in a community where things work as they should. While some management teams may be great at what they do – and dedicated to the satisfaction of residents – others may not.

Make sure to meet the management and talk to residents to get a clear picture of what you will be dealing with. There is nothing worse than getting stuck living in an area with a horrible management company or association. Be sure you know the advantages and disadvantages of a homeowners association. You will find an excellent explanation in the reference.

Know what will be required of you.

When you enter into a retirement community, you will sign an agreement that states what you can expect from the community, and what the community will expect from you. If you have never lived in a home or condo with a community organization, like a homeowner’s association (HOA), you may be surprised to discover yourself limited in more ways than you anticipated. Rules for parking, decorating your home, lawn maintenance and more may be in place.

Some 55 and over communities have rules in place restricting who can live in the property. For example, you may find out that both a husband and wife need to be at least fifty-five years old. Some retirement communities do not allow kids to be residing in the property at all. Often people ask if they can purchase into a 55 and over community if one of the spouses is less than 55.

These are questions that should be researched before buying.

You may be wondering how it is lawful for a community to be able to discriminate based on age. There is an exception in the fair housing act called The “Housing For Older Persons Exemption.”

Make sure you are OK with the answers before you buy. Additionally here are some tips for dealing with a homeowners association which you may eventually need.

Learn about what life is like in the neighborhood.

Another important tip for buying into a 55 and over community is finding out the programs offered. Many retirement communities offer activities for residents. One of the main benefits of living in such a community is that there is always something to do, often with other residents. Some communities have a focus, like golf, while others are more varied in what is available. You should review the calendar of activities to see if there are events that you will want to participate in.

If you are not excited about what is offered, you may find another community is better suited to your lifestyle. Some people know without a doubt they want amenities like a gym, swimming pool or tennis courts. Other folks may want to look for things such as daily activities whether it is a knitting or painting class or even something as simple as Bingo or other such games. These are things to think about before buying into an over 55 retirement community.

Clarify the costs of living in the community.

Some adult living communities require you to purchase a membership to live there, which can be expensive. There will usually be costs associated with community management, upkeep for your home and landscape and possibly other expenses. The more services offered, or the more exclusive the community, the more costly it is to live there. You should choose a community that works with your budget.

Consider several different locations.

When you know what you want to spend your time doing in retirement, it is easier to choose a place that offers what you need at a price you can afford. If golf is your obsession, obviously a community near a country club would be ideal. But if you want to spend your time exploring museums and cultural offerings, a city-based community might be better.

Although the real estate can be pricier, the city makes getting around easy and puts you close to so many different things. The closer you can be to the things that you want, the less time wasted commuting and the less stress you will deal with. Maybe being close enough to family and friends is important? If that’s the case, then it probably would not be wise to purchase a retirement home out in the boonies somewhere.

 

Understand the local surroundings.

While you may have discovered what feels like the best retirement community around, don’t forget about your surroundings. Many buyers forget to research the amenities they are accustomed to having elsewhere. Here is an excellent resource that explains how to pick a neighborhood. Take a look at many of the things you should be thinking about when choosing a neighborhood such as:

• How is the crime and safety rating of the town or city?
• What is the accessibility to major highways and commuting routes?
• Are there major conveniences nearby like grocery shopping, a bank, the post office and restaurants?
• How far away is the nearest hospital?
• Is there a commuter rail nearby that will take you to major cities?
• Are there things nearby which you might not want like high tension lines, railroad tracks, etc.?
• Is there any highway noise that may end up becoming a nuance?
• How is the walkability of the area both inside and out of the retirement community?
• Are there churches or synagogues nearby that suit your religious needs?
• If you have a dog is there a park nearby?

These are all things worth finding out about when you are purchasing into an over 55 retirement community. You only have one shot at getting this right. Selling again in a couple of years is probably not on your radar. Here are even more neighborhood details to be thinking about. Knowing the neighborhood is important!

Understand the homes amenities.

While choosing the 55 and over community, you will be happy with could depend largely on your surroundings, don’t underestimate the importance of the home or condominium you choose to live in! Over 55 housing often has different features and perks than you would find in traditional housing.

For example, are the doorways in the home set up for easy access with a wheelchair? While nobody wants to think about this kind of things, it could become necessary somewhere down the line. Maybe due to health or injury concerns you need a first-floor master bedroom, so you are not going up and down stairs? Are the baths handicap accessible? These are the kinds of things to think about when purchasing 55 and over housing. Handicap accessibility may not be an issue now, but it could be sometime in the future.

 

Research the approval process.

Most retirement communities will want to verify that you are a good fit before you are allowed to join. The more exclusive the community, the more thoroughly it will scrutinize you. Management may ask for your financial records and references. You can talk to your real estate agent and the residents of the community to find out what kind of questions you will be asked.

You can also ask management directly. Find out what they are looking for before you apply, so you can prepare and increase your odds of acceptance.

Make sure to talk to your future neighbors.

The people currently living in the community will be your future friends – or your future enemies. You are moving to the town to start a new chapter of your life, to take advantage of your freedom and to spend time with other people in a similar stage of life. While you can’t expect to like every person living there, you should try to talk to quite a few of them to see if you think you will like being around them.

Understand your financing options.

If you are a senior purchasing a retirement home, it is certainly possible you are paying cash. If that’s not the case, it is important to understand your financial options. Some seniors may even consider getting a reverse mortgage if they are no longer working and looking for an income stream.

Reverse mortgages can be a great loan product under those circumstances. Make sure, however, that you understand reverse mortgage pros and cons. If you are over 62 years of age, it’s a financing option worth looking into. Reverse mortgages are not for everyone. Be sure you speak to someone reputable when looking for this kind of financing.

Check re-sale values.

Most seniors who are opting for 55 and older housing are probably not thinking about selling anytime soon. This, however, is a weak reason not to check on the local re-sale value of this type of housing. There have been periods of time where this kind of housing flooded the market, causing market values to drop. Make sure you speak to a top local real estate professional who can guide you on the projected re-sale value. Is purchasing an over 55 property a good idea in the location you are thinking about? Doing your homework is wise.

 

Assisted living vs. over 55 housing.

One last important point worth mentioning – there is a big difference between assisted living and traditional over fifty-five housing. When people hear the words “retirement community” different things can come to mind. This is a great article that explains the various types of senior housing choices. Assisted and residential care homes are not the same things as an over 55 development.

Trust your intuition.

You are going to have a lot of options for retirement communities, and you may have trouble finding a clear winner. Once you have considered all the relevant factors – cost, location, activities, current residents, management, etc. – you are going to have to decide. Trust your intuition and go with what feels right.

Just be sure to ask all these important questions when you are buying into a 55 and older community. Finding out the answers will help ensure you are happy with your decision.