Reverse Mortgages. A consumer s guide to using the equity in your home to your best advantage

Transcription

1 ervices Reverse Mortgages A consumer s guide to using the equity in your home to your best advantage

2 Table of Contents F What is a reverse mortgage?...3 F Why would you need a reverse mortgage? F Frequently Asked Questions F Do Your Research F What s In The Marketplace? F The LGFCU Difference F Some Points to Remember F Your Information What is a reverse mortgage? A reverse mortgage is a loan against your residence, which provides cash to assist you with your living expenses. This may be in the form of a lump sum, a line of credit, or fixed monthly disbursements. A reverse mortgage is termed a rising debt loan because each month, interest is added to the loan amount and the balance you owe increases until the loan is paid in full. To qualify for a reverse mortgage, you must: F Be at least 62 years old F Utilize the home as your primary residence F Have a relatively small amount of debt against the property (in general, you should owe no more than half of the property s value) With a traditional mortgage, your income determines how much you can afford to borrow. Because periodic loan repayments aren t required on a reverse mortgage, it may be easier to qualify. Any outstanding loans against the property must be paid prior to obtaining a reverse mortgage, or paid using the proceeds from the reverse mortgage. The amount you can borrow will vary, based on a variety of factors including the age of the youngest borrower, the expected interest rate, and the home s value. You cannot borrow the entire value of the home. You are not required to make monthly repayments, so qualifying for the loan could be easier for you. Borrowers must also receive consumer education from a North Carolinacertified reverse mortgage counselor regarding alternatives to the loan and the loan s financial risk. As the homeowner, you will continue to be responsible for property taxes, homeowner s insurance and home maintenance. As long as any of the borrowers remain in the home and fulfill these responsibilities, you cannot be forced to vacate the home, even if the loan balance becomes higher than the home s value. When the last living borrower dies, sells the home or permanently moves to a new residence, the loan must be repaid in full, including all accrued interest and other charges. 2 3

3 A reverse mortgage could give you the means to live independently for a longer period of time. Why would you need a reverse mortgage? Traditionally, a homeowner in need of cash can choose to sell the house or borrow against its value with a home equity loan. Many older homeowners may have built up the necessary equity, but they don t have an income source to make monthly repayments. This means they will not qualify for a typical home equity loan. In some circumstances, a reverse mortgage may be an option. The supplemental income provided by a reverse mortgage may allow homeowners to remain in their homes, with the means to live independently, for a longer period of time. Some examples of cases in which reverse mortgages could benefit the borrowers include: Receiving a lump sum, plus a set disbursement for life: Judy Smith has been widowed for about a year. She and her husband had taken out a home equity loan to make some home improvements, and during his lifetime, they were able to make payments without difficulty. However, the expenses from his final illness depleted all of their remaining savings. Now that he is gone, his pension is gone, too. She is left with a monthly income of only $1,200. The $800 monthly payment on the home equity loan, which was perfectly manageable when they earned a combined $3,000 per month, is now impossible for her, alone. Judy s low income also prevents her from refinancing the loan. A reverse mortgage will allow her to pay off the home equity loan, which will provide her an extra $800 a month to live on. She is also able to get a $500 loan disbursement each month to supplement her income. Best of all, Judy will no longer be having nightmares about getting behind on payments and losing her home. his $1,200 monthly income is leaving him with little money, even for necessities. A reverse mortgage can provide him $750 per month, which will cover the costs of his helper and provide a little extra money so that he can live a bit more comfortably. Supplementing income, then paying off the loan: Ann Brown got a reverse mortgage 10 years ago. She used the proceeds to supplement her monthly income, which allowed her to continue living in her home after her husband s death. Now she has decided she is ready to move into a senior apartment complex where several of her friends live. Over the years, Ann has received a total of $50,000 in loan disbursements. With closing costs, servicing feeds and interest, her loan balance is now $120,000. She puts her home on the market and receives $160,000 in net sales proceeds, after paying the realtor and other costs. After paying off her reverse mortgage, Ann is left with $40,000 to help pay her rent and other living expenses in her new home. Receiving a set payment for life: David Jones, age 80, has always lived alone. His home is completely paid off. Vision problems have left him unable to drive, making it difficult to get groceries, go to the doctor, or run errands. Because he has no local family members to help, David needs to hire someone to drive him to appointments and help with some of the heavier housekeeping, like shopping and preparing meals. He is very frugal and has gotten along well on his limited income until now, but paying a helper $500 a month out of 4 5

4 You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. Frequently Asked Questions It helps to know the right questions to ask when deciding on a loan. For a reverse mortgage, this is especially critical. Before you talk to the first lender, take time to consider these questions and answers: How much money can I borrow? The amount of money available from a reverse mortgage loan typically ranges from 30 to 80 percent of the home s appraised value, depending on a variety of factors, including: your age (or the age of the youngest spouse, in the case of couples), interest rates, and in the case of the government program, the maximum loan limit in your area. The limits are defined in Section 203b of the National Housing Act and may vary by location. The limits are also subject to change at least annually. In general, the older you are and the more valuable your home (and the less you owe on it), the more money you can borrow with a reverse mortgage. How can I use the proceeds? The proceeds from a reverse mortgage can be used for anything you need, from supplementing retirement income to covering daily living expenses. You can repair or modify your home (i.e. widening doorways or installing an accessible ramp or bath), pay for health care, pay off existing debts or cover property taxes. How does the interest work? With a reverse mortgage, you are charged interest only on the proceeds you receive. Although fixed rate products are available in the marketplace, most reverse mortgages charge a variable interest rate that is tied to an index, such as the London Interbank Offered Rate (LIBOR), plus a margin that typically adds an additional one to three percentage points to the rate you re charged. Interest is not paid out of your available loan proceeds. Instead, it compounds over the life of the loan and is not due until the loan is repaid. With a Local Government Federal Credit Union reverse mortgage loan, the interest is not compounded or in the simplest terms, you do not pay interest on the interest. Are there any special requirements? As long as you own a home, are at least 62 years old and have enough equity in your home, you can apply for a reverse mortgage. There are no special income, credit or medical requirements. Your home must also meet eligibility requirements, which can vary, depending on the loan for which you are applying. What if I have an existing mortgage? Even if you still owe money on an existing mortgage, you may still qualify. The reverse mortgage funds will first be used to pay off any existing lien or debt on your home. You can also choose to use money from savings or assistance from a family member or friend to help you pay off the mortgage. If the amount of your existing mortgage debt is too large to pay off using the proceeds from a reverse mortgage loan, you will not qualify. What is the Service Fee Set-Aside? Under the FHA Home Equity Conversion Mortgage (HECM) and HECM Saver loan programs, which are the most common reverse mortgages, you may be charged a monthly servicing fee. This fee, which ranges from $30.00-$35.00, covers the cost of managing your account once the loan closes. The Service Fee Set-Aside is a portion of your loan funds reserved to cover future service fees. There are no monthly service fees assessed on an LGFCU reverse mortgage. How will I receive the money? There are several disbursement options available on a reverse mortgage: F Equal monthly loan disbursements to the borrower for an unlimited time, as long as the borrower is in the home. This is known as a tenure option. F Equal monthly disbursements for a fixed period of time chosen by the borrower. This is known as a term option. F A line of credit option, allowing the borrower to draw cash when needed and in amounts chosen by the borrower. This can also be used to pay off an existing mortgage. F A combination of equal monthly disbursements with a line of credit. All of these options, and the freedom to switch from one disbursement option to another, are available from the federally-insured HECM and HECM Saver loans. Some lenders also offer private reverse mortgages, which may or may not include all of the payment options outlined above. 6 7

5 AGE Frequently Asked Questions cont. The table below approximates the disbursement amount available on a monthly basis with a reverse mortgage from LGFCU. The figures in this table assume a 5.00 percent fixed interest rate.* Table A: Approximate Monthly Disbursement to Borrower, Based Upon Age and Home Value HOME VALUE $100,000 $200,000 $300, $195 $395 $ $280 $570 $ $405 $825 $1,240 * The 5.00% interest rate is used for illustrative purposes only. Individual rates may vary. Approximate monthly figures based upon age, life expectancy of the youngest borrower, and home value. This also assumes there is no other debt against the property. Will I lose my government assistance if I get a reverse mortgage? Reverse mortgage proceeds are not viewed as income and a reverse mortgage line of credit is not viewed as an asset. Therefore, a reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or receive Supplemental Security Income (SSI), any reverse mortgage proceeds you obtain must be managed carefully. Unspent funds count as an asset and could impact Medicaid eligibility. For example, if you receive $3,500 in a lump sum for home repairs and spend it all in the same calendar month, everything is fine. However, any of the lump sum funds remaining in your deposit account the following month will count as an asset. If the total funds (including other deposits and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you could become ineligible for Medicaid. As a precaution, seek the advice of a Medicaid expert. How do I pay back my loan? No periodic repayments are due on a reverse mortgage loan. The loan is repaid when you cease to occupy your home as a principal residence. This can be when you pass away, sell the home or permanently move out. When you sell your home, if the sales proceeds exceed the amount owed on a reverse mortgage, the remaining equity still belongs to you or the estate. A borrower may also pay off a reverse mortgage at any time without a prepayment penalty. Under what circumstances is a reverse mortgage not the best option? With its associated upfront costs, a reverse mortgage is probably not the best solution if you intend to leave your home within two or three years. If your home needs repairs, research home equity loans, no-interest loans or grants offered by your county, government, or a local non-profit. If paying property taxes has become a problem, contact your local government tax office to see if you qualify for North Carolina s Property Tax Relief Program for the elderly and disabled and/or local tax deferment. Finally, if you plan to leave your home as an asset to your children, you should consider other options because in many cases, it is necessary to sell the home to pay back a reverse mortgage. When is the right time to proceed? The amount of money available to you from a reverse mortgage loan is determined in large part by your age. You will receive more money at age 68 than at age 62, and more at age 75 than at age 68. Therefore, if your finances allow, it may be wise to defer origination of a reverse mortgage for a few years. If you re not facing a financial emergency, it may be prudent to preserve your home equity for as long as is practical. Should I involve family members in the decision process? While it is your home and ultimately your decision to make, it may be worthwhile to consider using family members as a resource. Involving a loved one in the process can be valuable as you decide on the loan product that is best for your particular situation. A reverse mortgage does not affect regular Social Security or Medicare benefits. 8 9

6 Frequently Asked Questions cont. How do I select a reverse mortgage counselor? To be eligible for a reverse mortgage in North Carolina, you must first discuss the loan with a counselor employed by a non-profit or public agency approved by the US Department of Housing and Urban Development (HUD) and the NC Housing Finance Agency (NCHFA). In North Carolina, the counselors are trained and certified by NCHFA. To find a HUD-approved counseling agency near you, call , or visit Do I still have to budget my monthly disbursements? Yes! Because you remain the owner of your home, you will continue to bear the responsibility of paying for items such as homeowners insurance and property tax bills, along with routine maintenance and repairs. It s more important than ever to budget for these large expenses, and any other expenses that may come up. If you obtain an LGFCU reverse mortgage, the Credit Union will assist you in setting up specific accounts for these purposes. Some key contacts in North Carolina who can provide you with answers to other questions you may have about a reverse mortgages or its alternatives include: Organization Phone number Website NC Housing Finance Agency NC Commissioner of Banks NC AARP Local Government Federal Credit Union Eldercare Locator

7 Do Your Research Research is crucial to ensure you are getting a fair deal. Start by investigating other alternatives to a reverse mortgage. Monthly repayments on a home equity loan or home equity line of credit may be a less costly option. Many state and local governments also offer tax relief/ deferred loans and grants. Don t overlook the option of selling your home and downsizing to a less expensive home, or to a no-maintenance rental property with adequate accessibility. After evaluating the alternatives, if you decide that a reverse mortgage is your best option, be sure to review North Carolina s law on reverse mortgages. Mark Pearce, former Deputy Commissioner of Banks for the State of North Carolina, comments: If you are considering a reverse mortgage, you should shop around. Talk to a counselor to make sure the product you are considering is the best fit. Reverse mortgages are complex products and choosing the wrong one can cost you thousands of dollars and even possibly your home. North Carolina Law The North Carolina Reverse Mortgage Act was created to protect consumers. This law requires mortgage lenders and loan officers to be approved by the NC Commissioner of Banks before they can participate in making reverse mortgage loans. Currently the following entities are approved to conduct business in North Carolina as a reverse mortgage lender: The North Carolina Housing Finance Agency, any lender authorized to engage in business as a bank, savings institution or credit union under the laws of this state or of the United States, or any person, firm or corporation authorized to make reverse mortgage loans by the Commissioner of Banks. A complete list of currently approved reverse mortgage lenders is listed on the Commissioner of Banks website: (see reverse mortgage). The Reverse Mortgage Act holds lenders responsible and accountable for the loans they make, and requires potential borrowers to be counseled on the product prior to approval. The Reverse Mortgage Act also requires that counselors operate independent of the lender. Given the complexity of reverse mortgage products and the potential vulnerability of the borrowers, the NCHFA requires that counseling occur face-to-face rather than by telephone. Counselors may only accept counseling requests from homeowners or their legal representatives not lenders. Remember, North Carolina enacted the Reverse Mortgage Act to help protect you from deception or misleading information from mortgage lenders. If you ever feel you are being misled, you are encouraged to report your concerns to the NC Commissioner of Banks by phone: or , by mail: Commissioner of Banks, 4309 Mail Service Center, Raleigh, NC , or via the website: With the number of scams targeting senior adults, it is not surprising to hear of borrowers being victimized with reverse mortgage scams. In fact, a recent Mortgage Banking article highlighted a few examples of fraud: In Indiana, an elderly couple met a loan originator who also owned his own mortgage company. The originator persuaded the couple to apply for a reverse mortgage so that they could generate funds to invest in his mortgage company. The loan originator promised that their investment would be placed in an interest-bearing account that would be available on request. After the transactions were made, the couple requested but did not receive their funds. After the originator failed to meet the mortgage obligations, foreclosure proceedings were initiated against the couple s home. The originator was convicted of fraud and securities violations charges and is awaiting sentencing, reports MortgageFraudBlog.com. Your first step should be to investigate other options available besides a reverse mortgage

8 Do Your Research cont. In many fraud cases, the perpetrator is known to the victims, as in the following example: In a California case, a couple in their late 60s met the alleged fraudster at their church. After some discussion, the couple agreed to obtain a reverse mortgage from him. During the closing, which was described as casual, the couple and the alleged fraudster discussed church and social matters as they signed the documents, which were not explained to them. A month after closing, the couple learned they no longer owned their home. When the loan originator refused to return the title to their names, the couple called the police. Police conducting a search at the defendant s office said it appeared that several businesses and individuals collaborated to perpetuate the scheme. Police reports noted there were more victims and more arrests expected, according to the Tracy Press, Tracy, California. In another scheme, a loan officer, again capitalizing on the borrower s lack of understanding of the loan process, told the borrower that standard HECM procedures required the borrower to sign over the proceeds check to the loan officer for future disbursements. The loan officer made a few payments, but kept the balance of the money for himself. Remember, a good resource to protect yourself against scams is the NC Attorney General s Office, Consumer Protection Division. This group can be reached at NO.SCAM ( ). Chris Schafale, Director of Information Services with Resources for Seniors, comments: One of the requirements for potential reverse mortgage borrowers is that they receive counseling before applying for the loan. You may wonder why you have to go to counseling to borrow money. It makes more sense if you think of it as consumer education the point is to make sure you have all the information you need to make an informed choice about whether to go ahead with the loan. It s important to understand the costs as well as the benefits of a reverse mortgage, and to know what your rights and responsibilities are as a borrower. Part of the counselor s job is also to help you look into other possible alternatives to the reverse mortgage, so you have as many choices as possible. The counselor must work for a HUD-approved nonprofit or governmental housing counseling agency not connected with the mortgage lender, so that he or she has no financial stake in whether you decide to get the loan or not. As a result, you can trust that your counselor is giving you honest information and has your best interests in mind. A counselor is not there to decide whether you should get the loan or not, nor will he or she judge you in any way instead, your counselor is on your side, as your ally and advocate. In North Carolina, this counseling must happen face-to-face, not over the telephone, which is allowed in other states. We believe that borrowers will get more benefit from counseling that is done in person, where borrowers can have more control over the pace of the conversation. They will be able to hear better, and are more likely to feel more comfortable asking questions than they might be in a phone conversation. Also, a counselor is better able to tailor a presentation to your personal needs if he or she can see your face and observe your reactions to what is being said. Meeting face-toface also makes it easier for you to look at detailed financial information like loan estimates with the counselor

9 In some cases you may get more cash from a proprietary plan than from an HECM plan. What s in the Marketplace? Many financial institutions offer reverse mortgage products. The most popular reverse mortgage programs currently on the market are the Home Equity Conversion Mortgage (HECM) and the HECM Saver loans. Both are ensured by the Federal Housing Administration (FHA). While the upfront and total costs are significantly less with an HECM Saver loan, although the amount of funds available to the borrower is also reduced. There are also other options for reverse mortgages. Generally, the only reverse mortgages that cost less than HECMs or HECM Savers are those offered by state or local governments. These public sector loans, referred to as Deferred Payment Loans or Property Tax Deferrals, are typically used for one specific purpose, such as making home repairs or paying property taxes. These loans are also only available to homeowners with low to moderate incomes. Proprietary reverse mortgages are another option. These are typically offered by financial institutions, mortgage companies and private lenders, and underwritten by the companies that develop them. While these can be an expensive type of mortgage, in some cases you may get more cash from a proprietary plan than from an HECM or HECM Saver plan. LGFCU has developed a proprietary reverse mortgage product and aims to distinguish itself in the marketplace as a consumerfriendly, low-cost provider. Key Costs Below are the key costs associated with a reverse mortgage. You should fully understand each of these costs and compare them among lenders. F Standard Closing Costs: These loan documentation expenses include the attorney s fee, recording fees, an appraisal fee and title insurance. F Origination Fee: This is designed to reimburse the lender for the cost of processing the loan. F Mortgage Insurance: A fee paid by the borrower to protect the lender from loss in the event that your loan balance becomes larger than your home value. This AGE fee is typically charged as a lump sum fee at closing or as an up-charge on the loan s interest rate each month over the life of the loan. F Service Fee: Many lenders charge a monthly fee to cover their costs of managing your loan. Such a cost is referred to as a service fee and is typically charged even if there is no monthly disbursement. F Interest Charges: Interest charges on a reverse mortgage loan will differ between lenders. While most reverse mortgage lenders add monthly interest charges to your loan balance, thereby charging you interest on the interest (otherwise known as compound interest), an LGFCU reverse mortgage loan will simply charge you interest on the outstanding loan balance, using a fixed rate for the life of the loan. The interest charges simply accumulate until the loan is paid in full. This is known as simple interest. Below is a comparison of interest charges paid on an LGFCU reverse mortgage loan, an HECM loan and an HECM Saver loan. This chart is intended to provide a general idea of interest costs through life expectancy for members of various ages and with varying home values. Find your closest approximate age in the left-hand column and then your home value on the top row. The simple interest charged on an LGFCU loan is substantially less than the compounding interest with an HECM or HECM Saver loan. Table B: Comparison of Reverse Mortgage Interest Charges HOME VALUE Age $100,000 $200,000 $300,000 LGFCU HECM SAVER LGFCU HECM SAVER LGFCU HECM SAVER 62 $40,900 $86,200 $79,000 $81,800 $185,700 $162,900 $122,700 $303,300 $279, $35,500 $66,600 $59,600 $70,900 $137,000 $123,100 $106,400 $207,400 $186, $29,900 $46,800 $40,300 $59,700 $96,100 $83,300 $96,100 $145,400 $126,400 This table is for illustrative purposes only. The calculated interest charges assume the interest rate on the LGFCU reverse mortgage is 5.00% (fixed) and uses the prevailing rate as of September 2012 for the HECM and HECM Saver. The interest rate on the HECM is a variable rate and may increase, while the HECM Saver is a fixed rate loan

10 The LGFCU Difference LGFCU is aware that many of our members face financial dilemmas common among retirees. After investigating the standard reverse mortgage products available nationally, LGFCU determined that the Credit Union could do better. The LGFCU reverse mortgage addresses many of the concerns about standard reverse mortgages, HECM and HECM Saver loans raised by counselors and consumers. And best of all, an LGFCU reverse mortgage allows most members to keep more money in their pockets than they would with a competitor s product. Some of the member-friendly features of an LGFCU reverse mortgage include: A fixed interest rate Simple interest accrual A loan origination fee substantially lower than the industry standard No mortgage insurance requirement The table below compares LGFCU s reverse mortgage product to the industry standard HECM and HECM Saver products, further emphasizing the advantages of the Credit Union s proprietary reverse mortgage loan. Table C: Comparison of LGFCU and Industry Standard Reverse Mortgages LGFCU Industry Standard Interest Rate A stable, fixed rate of interest Variable and fixed rates. Fixed rate loans only allow for lump sum disbursements. Interest Accrual Origination Fee Counseling Simple interest accrual (interest is not charged on interest) 1.00% of the appraised value of the home Requires that all counseling be done in face-to-face sessions Interest charges are added back to the loan balance, thereby interest is charged on interest Typically, 2.00% of the appraised value of the home Generally, counseling is conducted face-to-face, but phone counseling is permitted Disbursement Options LGFCU Advocates that borrowers take a monthly disbursement for life, but offers three options: Option 1 - a single lump sum disbursement at origination Option 2 - fixed monthly disbursements for life or for a set term Option 3 - a combination of lump sum disbursement and fixed monthly disbursements Industry Standard Three Options: 1. Lump sum disbursement 2. A credit line to be used at borrower s request 3. A fixed monthly disbursement Service Fee None As much as $ $35.00 per month Repayment Events Mortgage Insurance Death of member Member moves out of home Member does not pay taxes and insurance Member sells home None Death of borrower Borrower moves out of home Borrower does not pay taxes and insurance Borrower sells home Typically 2.00% of the home s value due at closing for HECM and HECM Saver; 1.25% is added to the interest rate charged on your loan balance 18 19

11 The LGFCU Difference cont. John is 62 years old and owns his home, which is currently valued at $200,000. His wife unexpectedly passed away several months ago, and he is left without her parttime income to supplement living costs. John wants to stay in his home. His life expectancy is 21 years, and the home s appreciated value at his life expectancy is just over $372,000. He researches reverse mortgage options and finds the following: Table D: Monthly Advance and Cost Comparison HOME VALUE Home Value $100,000 $200,000 LGFCU HECM SAVER LGFCU HECM SAVER A local lender is offering a reverse mortgage loan with total closing costs and fees of $33,800. This loan will provide John with $520 per month for the rest of his life. If John lives out his full life expectancy, he will receive $131,040 from his reverse mortgage loan. 62 Monthly Disbursement Total costs plus interest through life expectancy $195 $260 $220 $395 $560 $500 $30,800 $90,900 $83,200 $59,500 $164,400 $132,200 (21 years) John s other option is an LGFCU reverse mortgage loan with closing costs and fees of $3,500. The LGFCU reverse mortgage will provide him with $670 per month for the rest of his life. Should he reach his full life expectancy, John will receive $168,840 from the LGFCU reverse mortgage loan. 68 Monthly Disbursement Total costs plus interest through life expectancy $280 $295 $250 $570 $635 $550 $25,900 $57,700 $51,500 $49,900 $104,700 $92,200 The following table demonstrates the potential savings available to members who choose an LGFCU reverse mortgage over an HECM or HECM Saver loan. The comparison includes the monthly disbursement amount and the total cost of the loan, including interest, for borrowers of different ages and varying home values. For illustrative purposes only, the table assumes a 5.00% interest rate. Individual rates may vary. AGE 74 (16 years) Monthly Disbursement Total costs plus interest through life expectancy (12 years) $405 $345 $280 $825 $740 $620 $21,500 $38,300 $33,000 $40,900 $68,000 $57,400 Monthly Disbursement $575 $420 $340 $1,170 $890 $ Total costs plus interest through life expectancy $17,500 $27,000 $22,900 $33,200 $47,200 $38,900 (9 years) As this table demonstrates, an LGFCU reverse mortgage can provide you with a comparable monthly disbursement while potentially saving you money in interest charges and associated costs over the life of the loan

12 Some Points to Remember LGFCU wants to make sure you have made a fully-informed decision to borrow against your home s value with a reverse mortgage. While this booklet outlines the complexity of reverse mortgage loans and the need for consumer education on the product, there are some important points that should be reiterated: F North Carolina homeowners are required to receive face-to-face counseling, and LGFCU strongly encourages members to take full advantage of this resource. While counseling by telephone may be convenient, it is likely inadequate, and ultimately may prove to be costly as well. Face-to-face counseling sessions, which last about an hour, are your best opportunity to ask questions. F Remember that with a reverse mortgage, you are still responsible for your homeowner s insurance and property taxes. It s a good idea to contact your local tax office to see if there are programs to reduce your tax bill based upon your age and reduced retirement income. F Take advantage of all the information on reverse mortgages available. See page 10 for the list of key contacts who can provide you with more information about reverse mortgages. It is always appropriate to review your options with at least one or two additional lenders. F Unfortunately, scam artists are everywhere, including in the reverse mortgage market. If a potential lender encourages you to use loan proceeds for complex investments, tries to sell you additional products, or is using high-pressure tactics to close the deal, end the discussion at once. That lender is likely more interested in additional commissions for himself than your best interest. Finally, never use a reverse mortgage to purchase an annuity product. F Many lenders offer highly-regulated loan products like the HECM and HECM Saver loans through FHA, but some lenders have also developed their own proprietary loan products. Regardless of where you get your loan, it is always appropriate to review your options with at least one or two additional lenders. F Reverse mortgages have many associated fees. The more fees you pay, the smaller the remaining loan balance that is available to you. Pay careful attention to the amount you will be charged in fees at loan closing and over the life of the loan. F A reverse mortgage is not always the best choice, especially if you re only planning to live in your home for a few more years. Be sure to explore all of your options to find the most beneficial solution

13 Your Information The reverse mortgage products available in the marketplace can vary tremendously. That s why it is so important to compare all costs and interest charges associated with any reverse mortgage loan product. Use the following chart to assist you. To learn more about reverse mortgages, or to obtain an LGFCU reverse mortgage loan, visit call the Contact Center at , or contact your local branch. Calls may be recorded for quality assurance. As a member-owned non-profit cooperative, LGFCU strives to keep money in our members pockets. This objective was a guiding principle in establishing LGFCU s reverse mortgage loan. Fees or Costs LGFCU Lender #2 Lender #3 Standard Closing Costs Origination Fee Upfront Private Mortgage Insurance Monthly Private Mortgage Insurance Monthly Service Fee Total Fees or Costs: Monthly Disbursement Fixed or Adjustable Interest Rate Anticipated Interest Rate Anticipated Interest Charges 24 25

14 Notes 26 27

15 / To improve the lives of our members / REV The Quorum Center 323 West Jones Street, Suite 600, Raleigh, NC / / f: