WELCOME. To the Wonderful World Of Reverse Mortgages

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Tyrone James
8 years ago
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1 WELCOME To the Wonderful World Of Reverse Mortgages

2 Reverse Mortgage Loans Borrowing Against Your Home

3 Basic Questions: 1. Do you really need a reverse mortgage? -- Why are you interested in these loans? -- What will you do with the money? -- Are the needs you intend to meet worth the cost?

4 Afford a Reverse Mortgage? These loans are very expensive The amount you owe grows larger every month You Must Pay: Real Estate Taxes to Town Homeowners Insurance

5 Use Up Your Equity Can you afford to start using up your home s equity now? The more equity you use now, the less you will have later when you may need it more.

6 Common Characteristics of Reverse Mortgages You must be at least 62 years old and own a home

7 You ALWAYS retain title (Ownership) The lender never, at any point, owns the home, even after you (or the last surviving spouse) permanently vacate the property.

8 You Must Pay Property Taxes and Insurance Home repairs keep the home well maintained If you cannot pay taxes and insurance, a special set-aside from the reverse mortgage can be created (escrow-like)

9 Repayment Occurs When You or last surviving spouse permanently vacates the home. You or heirs (estate) then must pay back the loan: either private money or selling the home. After loan is repaid, all leftover funds go to you or to the estate.

10 How Much Can I Get? Depends on -- Your Age (or age of youngest borrower) Value of Home Interest rate Upfront Costs

11 Loan Fees Can be financed or paid out of available loan proceeds. This means you pay little out-of-pocket In most cases, you pay only appraisal fee

12 Loan Balance Grows Each time you access funds from line of credit or receive monthly payment. In addition, lender is charging you interest on the outstanding loan balance + monthly service fee.

13 Repayment Not required until you leave the home as primary residence. For the HECM program, you can live up to 12 consecutive months outside the home

14 Non- Recourse Feature Total amount owed can never exceed the appraised value of the home, as long as the home is sold by the borrower or heirs to pay back the loan. If amount owed exceeds home s appraised value, then the lender or the federal government (in the case of HECM) will absorb the loss.

15 Reverse Mortgages & Foreclosure What is the likelihood of a Foreclosure on a Reverse Mortgage? Before a reverse mortgage can be foreclosed, it must be due and payable.

16 Reverse Mortgage is Due and Payable: When: 1. The borrower sells the home 2. The borrower moves 3. The borrower dies Other occasions are when: 4. The borrower refuses or cannot pay property taxes or homeowner s insurance. 5. The property is in disrepair and borrower refuses or cannot make repairs.

17 Previously Lenders would (or at least COULD) advance funds to pay property taxes or insurance if funds were available in the reverse mortgage. NOW: Effective January 2011 HUD rules stopped lenders from advancing funds if not available in Linr of Credit. Also began requiring lenders to start the foreclosure process for borrowers delinquent w/taxes or insurance.

NOW: Effective January 2011 HUD rules stopped lenders from advancing funds if not

18 Types of Reverse Mortgages: Home Equity Conversion Mortgage (HECM) Oldest and most popular. High fees. Maximum Loan $625,500. HECM Saver (introduced October 2010) Save 40% Lower Fees but Lower Loan Maximums

19 Payment Plan Options You can choose to receive the money: Lump Sum Fixed Monthly Payments set term or for as long as you live in the house Line of Credit Combination of these Most Popular (chosen by 60%+ of borrowers) Line of Credit

as you live in the house Line of Credit Combination of

20 Common Misconceptions #1 A Reverse Mortgage is where the bank takes your house at the end. Incorrect! Reverse Mortgages are designed to take only a portion of your equity you may be able to leave an inheritance or have money left over.

Reverse Mortgages are designed to take only a portion of

21 Common Misconception #2 Reverse Mortgages are only for desperate seniors or for the house rich, cash poor. Incorrect! This type of loan is used by homeowners from all walks of life to enhance their retirement years.

22 Common Misconception #3 You must be debt free to Qualify Incorrect! Even seniors with an existing mortgage and other debts may qualify for a Reverse Mortgage.

23 Misconceptions #4 When a Reverse Mortgage Comes Due, the Bank Sells the Home. Incorrect! When the loan must be repaid, you or your heirs can either pay the balance due and keep the home, or sell the home and use the proceeds to pay off the Reverse Mortgage.

24 Are There Less Costly Options? Dip into Personal Savings Other Financial Resources State/Local property tax relief programs Sell the House: move to less expensive one (Weigh the costs v. benefits)

25 Where to Get More Info? Do you fully understand how Reverse Mortgages Work? AARP Foundation: US Department of Housing: National Association of Reverse Mortgage Lenders:

Reverse Mortgage Information Guide

Reverse Mortgage Information Guide Table of Contents FHA Reverse Mortgages 3 Common Misconceptions about Reverse Mortgages 4 How the Program Works 4 Benefits of a HECM loan 4 HECM vs. Traditional Mortgage