What You Need To Kow About Your HECM Couselig Sessio 1. Why do I eed couselig? The US Departmet of Housig ad Urba Developmet (HUD) requires a certified couselig sessio for a federally-isured reverse mortgage, also kow as a home equity coversio mortgage (HECM). 2. Does everyoe eed couselig? Reverse mortgage borrowers choosig the federally-isured reverse mortgage are required to get couselig before applicatio. Official couselig from a idepedet HUD-approved couselor is required. 3. What will the couselig sessio etail? I reverse mortgage couselig, you ll get iformatio o the pros ad cos of the reverse mortgage. You ll also discuss your other optios. You ll receive a projectio of how much you ca expect to receive from a reverse mortgage. Ad you ll compare the payout terms available to you. It will take about a hour. 4. What do I eed to brig to my couselig sessio? Before you do your couselig sessio, you may wat to make some otes about how much moey you re makig ad how much your expeses are. You do t eed to provide your actual pay stubs or bills or ay other documetatio, but the couselor IS required to do a budget with you. You ll also wat to kow if there are ay lies o your house. If a leder has give you a projectio of your reverse mortgage payout, you may wat to have it available as well, although it is ot required. 5. What is a certificate of HECM couselig? A certificate of HECM couselig is writte proof that you ve received couselig. The certificate caot be provided util your couselig is completed. I order to process your applicatio, your leder will have to have a faxed or emailed copy of the certificate siged by us, your reverse mortgage couselor. 6. What if I m actig as a legal guardia or have power of attorey? A legal guardia/power of attorey is required to be couseled.
Use Your Home to The official reverse mortgage cosumer booklet approved by the U.S. Departmet of Housig & Urba Developmet
The Natioal Coucil o Agig (NCOA) is committed to helpig older persos to maximize all resources, public ad private, so that they ca be as idepedet as possible i the residece of their choice. As people grow older, more ad more of them face health or ecoomic challeges that ca make it more difficult for them to cotiue to live i their ow homes. For may seiors, their homes are their biggest fiacial asset. This booklet is desiged to help older adults to uderstad ad assess the potetial rage of optios, icludig reverse mortgages, that may be available to them for payig for the services ad supports they may eed. James Firma, CEO The Natioal Coucil o Agig is a oprofit service ad advocacy orgaizatio headquartered i Washigto, DC. NCOA is a atioal voice for older Americas especially those who are vulerable ad disadvataged ad the commuity orgaizatios that serve them. It brigs together oprofit orgaizatios, busiesses ad govermet to develop creative solutios that improve the lives of all older adults. NCOA works with thousads of orgaizatios across the coutry to help seiors fid jobs ad beefits, improve their health, live idepedetly ad remai active i their commuities. For more iformatio, visit www.coa.org. You are free to copy, distribute, ad trasmit this publicatio for couselig-related purposes. The limits for reuse or distributio are spelled out at http://creativecommos.org/liceses/by-d/3.0/ 2013 Natioal Coucil o Agig. All Rights Reserved.
Overview Like most Americas, you probably wat to stay i your home as you grow older. However, as it gets harder to do thigs o your ow, you may eed a helpig had with everyday tasks. It ca be costly to pay for help at home, alog with home modificatios ad other health eeds. For may people, these extra costs are a real burde. Older Americas ofte hold oto their home as a est egg i case they eed extra moey. But whe that raiy day arrives, how do you tap the equity i your home? Some people may tell you to sell the house ad move to assisted livig or a ursig home. There is aother optio. If you ve owed your house for may years, it could be worth a lot more tha you paid to buy it. Home equity is the differece betwee the appraised value of your home ad what you owe o ay mortgages. A reverse mortgage ca help you covert some of your home equity ito cash ad cotiue to live at home for as log as you wat. Usig the equity i your home ca seem like a good idea. But is it right for you? It is a decisio you should cosider carefully, because the house may be your most valuable fiacial asset. This booklet will help you uderstad the beefits ad challeges of this fudig optio. After readig this booklet, you should be better able to: Decide if stayig at home is right for you. Uderstad the differet ways you ca pay for help at home. Kow where to go for more iformatio. 3
People who eed help at home face may challeges. A ogoig health problem ca make it hard to kow how much loger you ca cotiue to live at home. You should also be aware of govermet beefits ad commuity programs for seiors, ad how a reverse mortgage may affect your eligibility for these programs. This booklet will give you the tools you eed to make wise choices. It will help you ask the right questios ad pla ahead so that you ca stay at home as log as possible. Talkig with family ad a kowledgeable fiacial advisor also ca help. 4
Challeges of Agig i Place Livig at home ca become difficult as you grow older. Ogoig health coditios such as arthritis or poor eyesight ca make it hard to do household chores, drive a car, or climb stairs safely. People who are forgetful may ot take their medicie o time. Without extra help, older people ofte struggle with everyday tasks after a serious heart attack, stroke, or fall. I the past, whe a older perso had trouble livig aloe, that was a sigal that it was time to move i with family or go to a ursig home. But for most people this is o loger the case. Today, you ca receive a wide rage of services ad supports i your home or commuity. New advaces i medicie ad techology are helpig eve people with complex medical problems to stay i their ow homes for may years. This is ofte called agig i place. Choosig to live i your home whe you eed extra help ca be a big decisio. There are may practical ad fiacial factors to cosider. You will eed to balace health ad safety issues with your desire for idepedece ad a familiar settig. It is crucial to pla ahead as much as possible. Aswerig these questios ca help you get started: Will livig at home work for me? What resources do I have to help me stay at home? How log ca I cotiue to live at home? It is importat to remember that every situatio is uique. What may work for oe perso might ot be the best choice for someoe else. 5
Will Livig at Home Work for Me? First, make sure that your home is safe ad comfortable, ad fits your eeds. Check that the services you wat are available i your area. If it is difficult for you to live by yourself, you should cosider other optios, such as a retiremet commuity or assisted livig. The right housig for you Where you live ad the house itself ca keep you from agig i place. Thik about these factors to see if stayig i your ow home makes sese: Chagig eeds A house that was ideal 30 years ago may ow be too difficult to hadle aloe. Older houses ofte eed a lot of costly maiteace, improvemets, or repairs. Safety A house with cluttered furiture or steep stairs is a accidet waitig to happe. Usafe eighborhoods may make you afraid to go shoppig or atted social activities. Isolatio A trip to the grocery store, pharmacy, or place of worship ca be a problem whe you caot drive. It is easy to feel loely or trapped whe family ad frieds are far away. Ease of use If you eed a walker or a wheelchair, it helps to have a bedroom o the first level, grab bars i the bathroom, ad ramps for the etrace of the house. You ca fix some of these coditios by modifyig your home. If you wat to live i a safer eighborhood or closer to your family ad frieds, you will have to move. Adequate help Most older people who have health problems get help i their ow homes. Family or frieds who give this help are called caregivers. There are also may professioal services. A homemaker ca provide trasportatio, do household chores, ad assist with daily activities. A urse ca check your medicatios ad give medical care, while a therapist ca provide rehabilitatio i your home. Adult day ceters may 6
offer social activities, health checks, ad rehabilitatio therapies. They provide a safe ad fu place to be while family caregivers are at work or take a break from caregivig. Relyig o paid services may ot work if you do ot wat a strager i your home. It ca also be hard to fid the services you wat at a price you ca afford. Without good quality ad reliable help, people with health issues ofte fid it hard to live at home. Cost of supportive services Whe you get help at home, usually someoe comes ito your house from a home health agecy. Professioal services i your home ca be expesive. Some service providers charge by the hour, while others charge for each home visit. While services i the home ad commuity may cost less tha i a ursig home, these expeses ca add up over time. If you eed a few hours of help from a home health aide i the morig ad at ight, you could easily sped $76 per day, or $2,280 per moth. Media atioal cost of services, 2012 Homemaker: Home health aide: Adult day health care: Assisted livig: Nursig home: $18/hour $19/hour $61/day $3,300 per moth $200-$220/day Source: Geworth Fiacial 2012 Cost of Care Survey. 7
You also may eed to make chages to the house to make it easier ad safer to stay at home. Home modificatios ca rage from a hudred dollars to istall a grab bar to thousads of dollars to istall a lift or add a bathroom to the mai floor. Costs vary i differet regios of the coutry. They ted to be higher i areas where the cost of livig is high. What Resources Do I Have to Help Me Stay at Home? Look at all the resources you ca use to help you live at home. You likely have three major sources of help: support from family ad frieds, persoal icome ad assets, ad the equity i your home. Support from others Most older Americas who have difficulty doig everyday tasks deped o family ad frieds for help. Childre ca ru errads, provide trasportatio, ad maitai the house. Neighbors may help with yard work or home repairs. A spouse or adult childre ca also provide a high level of lovig care. Family caregivig ca be a rewardig experiece. But thik about this carefully if you expect to rely o your spouse or childre as your oly source of help. It ca be very tirig to help someoe every day, especially if they have trouble walkig or have Alzheimer s disease. Caregivers may develop health problems because of the strai of these activities. Workig caregivers may have to give up their job or cut the umber of hours they work to give help at home. Persoal fiaces Payig for i-home services ad other health-related expeses ca quickly use up a big part of a retiremet est egg. Review your fiaces carefully. They will be a importat part of your decisio to remai at home. Your fiaces iclude your icome, savigs, ad ivestmets. 8
Estimate your household budget. Work out your icome ad livig expeses, alog with the mothly cost of ay loas ad credit card debt. You also have to budget for home repairs ad maiteace, ad keep up with isurace ad tax paymets. Keep a eye o cash flow. Make sure you have eough moey readily available each moth to pay for expeses. Your eed for help may vary as your health chages. If you have fiacial resources such as stocks, bods, or property other tha the home, you could sell those assets to get more moey ow. If you ow a life isurace policy, you may be able to use part of the death beefit to pay for supportive services ( accelerated beefit ). If you have very limited fiaces, you may be eligible for govermet programs. Home equity Home equity is the differece betwee the appraised value of the home ad what you owe o ay mortgages. If you ve owed your house for may years, it could be worth more tha you paid to buy it. Tappig the equity i your home ca quickly give you extra cash for a ramp or lift, or to help pay day-to-day expeses. A home loa may also be less costly tha high iterest rates from credit cards. It ca be a very emotioal decisio to tap home equity. May people see their house as a place to live, ot as a resource to pay for everyday expeses. For some, it is importat to leave a iheritace for their childre. You must balace your desire to preserve home equity with the risk of ot havig eough fuds to cotiue to stay at home. Pichig peies ca lead to poor utritio, health complicatios, or a serious accidet that ca put you i the ursig home. 9
Other Housig Optios Livig with a ogoig health coditio ca be hard. You may eed to chage your livig situatio whe you: Caot take care of yourself or maage the home o your ow aymore. Have had several falls or other accidets. Need roud-the-clock supervisio (such as i the later stages of Alzheimer s disease). Oe optio may be to live with your childre. First, thik about how this will work. How easy will it be to live together? Will your kids have to make chages to their house, such as addig grab bars or buildig a ramp? Who will pay for expeses such as ret? You may ot wat to move because you are afraid of losig your idepedece. However, today there are may attractive housig choices where you ca get the help you eed. For example, seior housig makes it easier to live idepedetly by offerig services such as trasportatio ad social activities. I assisted livig, you ca live i a private apartmet ad get help with everyday activities. Cotiuig care retiremet commuities (CCRCs), or life care commuities, offer a full rage of services from idepedet livig, to assisted livig, ad ursig care. 10
Your House As A Resource Oce you decide to cotiue livig at home, the ext step is to make sure that you have eough moey to pay for the help you eed. This sectio describes your choices for tappig home equity. Typically, you would take out a loa that uses your home as the collateral to guaratee that you will repay the loa. To help you decide which optio may be best for you, aswer these questios: Why do I eed the moey? How much cash ca I get from my house for help at home? Am I prepared to tap home equity? The equity you have built up over may years should be used wisely. It is importat that you uderstad the costs, beefits, ad risks of the differet type of loas. Why Do I Need the Moey? Sice home loas ca be costly, you eed to be clear about how you pla to use the moey. Some homeowers like to pla ahead by takig out a lie of credit. These fuds give them the flexibility to pay for expeses as they arise. Others wat a lump sum to deal with a specific, oe-time cost such as addig a bathroom or payig off a existig mortgage. How log you will eed the loa will also make a differece i your decisio. Are you tappig home equity to solve a immediate problem? Or do you eed fuds for may years to pay ogoig household expeses? Whe you take out a loa to tap a portio of your home equity, you usually caot use the remaiig equity for other eeds util you pay off the loa. It is importat to look at your overall fiacial situatio, or you may fid yourself stuck with a loa that does t fit your chagig eeds. 11
Short-term solutios for immediate eeds If you wat to use home equity to deal with a emergecy or for specific problems that eed attetio right away, you ca use several fiacial optios. Sigle purpose loas May states ad commuities offer special loas to help older homeowers who are strugglig to live at home. These loas are desiged to meet specific eeds: Home repair ad improvemet loas: Borrowers get a oe-time, lump-sum paymet that ca be used oly for the specific repairs or improvemets that each program allows. Property tax deferral loas: These programs allow older homeowers to defer paymet of some or all of their property taxes util they move out of the home. Borrowers do ot eed to make paymets o these sigle-purpose loas for as log as they cotiue to live i the home. Advatages Sigle purpose loas usually cost less tha covetioal home equity loas. You may ot have to pay back all of the loa if you cotiue to live i the home for a certai period of time. Disadvatages Most programs require borrowers to be at least 65 years old. Ofte, oly homeowers with low or moderate icomes ca apply. These loas may ot be available where you live. The remaiig equity i your home may ot be available to use for other eeds. 12
Covetioal home equity loas These loas ca be useful if you are usure how log you ca cotiue to live at home or how much help you will eed. Covetioal home equity loas ca also help families who have other assets they do ot wat to sell right away. Util you have a good sese of what s goig o with your health situatio, you ca get extra fuds from these loas without payig large fees or makig drastic chages. There are two types of home equity loas: Home equity lie of credit: This loa works like a credit card. You ca borrow up to a certai limit for the life of the loa. Durig that time, you ca withdraw moey as eeded. As you pay off the pricipal, your credit revolves ad you ca use it agai. Home equity loa: You receive the moey i a lump sum. You pay off the loa over a set amout of time, with a fixed iterest rate ad the same paymets each moth. With these loas, you will pay poits, appraisal fees, closig costs, ad loa iitiatio fees. Closig costs iclude attorey s fees, fees for preparig ad filig a mortgage, fees for title search, taxes, ad isurace. Advatages If you qualify ad your credit is good, you may be able to get a home equity loa quickly. With a lie of credit, you oly pay iterest o what you borrow. Sice you pay for the loa from icome, your home equity does ot go dow. 13
Disadvatages You may ot qualify for these types of loas. Leders look carefully at your icome, other debt, ad credit history. You must be able to make mothly paymets o the home equity loa. If you ca t make these paymets, you could lose your house. Whe your lie of credit eds, you must pay off the etire loa. A leder may ot let you reew the loa. Usig a covetioal home equity loa to solve cash-flow problems ca be risky. If your health declies, mothly loa paymets alog with other expeses may become more tha you ca hadle. Log-term solutio Reverse mortgage If you expect to live i your curret home for several years, you could cosider a reverse mortgage. Reverse mortgages are desiged for homeowers age 62 ad older. These types of loas are called reverse mortgages because the leder pays the homeower. To qualify for this loa, you must live i the home as your mai residece. Ulike covetioal mortgages, there are o icome requiremets for these loas. You do ot eed to make ay mothly paymets for as log as you (or i the case of multiple homeowers, the last remaiig borrower) cotiue to live i the home. Whe the last borrower moves out of the home or dies, the loa becomes due. There are two types of reverse mortgages available i the market. These iclude: Home Equity Coversio Mortgage (HECM) This program is offered by the Departmet of Housig ad Urba Developmet (HUD) ad is isured by the Federal Housig Admiistratio. These are the most popular reverse mortgages, represetig about 95% of the market. There are two types of HECM reverse mortgages the traditioal HECM Stadard loa, ad the HECM Saver loa. With a HECM Saver loa, borrowers pay lower upfrot costs, but do ot receive as much moey as they would with a HECM Stadard loa. 14
Proprietary reverse mortgages Some baks, credit uios, ad other fiacial compaies may offer reverse mortgages desiged for people with very high value homes. Depedig o the type of loa, borrowers may be able to receive paymets as a lump sum, lie of credit, fixed mothly paymet for a specific period or for as log as they live i their homes, or a combiatio of paymet optios. The moey you receive from a reverse mortgage is tax-free, ad ca be used for ay purpose. Reverse mortgages have uique features: All homeowers must first meet with a govermet-approved reverse mortgage couselor before their loa applicatio ca be processed (HECM program). Older borrowers may receive more moey, because leders iclude life expectacy i calculatig loa paymets. The atioal limit o the amout you ca borrow uder the HECM program may chage from year to year. You ca check the curret atioal limit at http://portal.hud.gov/hudportal/hud?src=/ program_offices/housig/sfh/hecm/hecmabou. You ow may use a HECM reverse mortgage to buy a home. This ca make it easier for you to dowsize to a house that better suits your eeds, or to move closer to family caregivers. Loa closig costs for a reverse mortgage are the same as what you would pay for a traditioal forward mortgage. These iclude a origiatio fee, appraisal, ad other closig costs (such as title search ad isurace, surveys, ispectios, recordig fees). HECM borrowers also pay a mortgage isurace premium. Most of these upfrot costs are regulated, ad there are limits o the total fees that ca be charged for a reverse mortgage. The origiatio fee for a HECM loa is capped at 2% of the value of the property up to the first $200,000 ad 1% of the value greater tha $200,000. There is a overall cap o HECM origiatio fees of $6,000 ad a miimum fee of $2,500. You ca fiace these costs as part of the mortgage. 15
Advatages You (or your heirs) will ever owe more tha the value of the home if you sell the property to repay the loa, eve if the value of your home declies. If your heirs choose to keep the home, they will eed to pay off the loa at 95% of the fair market value of the home, as determied by a third-party appraiser. You cotiue to ow your house ad ca ever be forced to leave, as log as you maitai the home ad pay your property taxes ad isurace. Depedig o the type of loa, you may be able to get your loa fuds through a combiatio of paymet optios (such as lump sum ad lie of credit). You ca chage the paymet pla for a small fee. For HECM loas, the available balace o the lie of credit may icrease over time, depedig upo iterest rates. If there is i a existig mortgage o the property, the proceeds of the reverse mortgage are typically used to pay off the loa. This ca icrease the cash you have available each moth, because you o loger have to make paymets o your regular mortgage. Disadvatages Closig costs for a reverse mortgage (origiatio fee, mortgage isurace premium, appraisal ad other upfrot costs), ad the servicig fee ca vary a lot by the type of HECM loa, ad by leder. Closig costs ca be fiaced ito the loa. You may use up a large part of your home equity over time ad have less to leave as a iheritace to your family. If you are the oly homeower ad you stay i a assisted livig or ursig facility for more tha a year, you will be required to repay the balace of the loa. Reverse mortgage borrowers must keep their home i good repair, ad pay property taxes ad homeowers isurace. If you do ot have eough moey for these expeses, you could face foreclosure ad lose your house. 16
The loa amout ca vary by thousads of dollars amog differet reverse mortgages. So it will be importat for you to cosider your optios carefully whe selectig a loa. How Much Cash Ca I Get From My House? Several factors cotrol how much you ca borrow. These are the value of the home, the type of loa you select, ad the curret iterest rate. The age of the yougest homeower is also a factor for reverse mortgages. To fid out how much moey you may be able to get from a reverse mortgage, use the simple, olie calculator from IBIS (http://rmc.ibisreverse.com/default_rmla.aspx). The coditio of the home ad property values i your area may also determie how much cash you will have to pay for help at home. If you ve lived i your house for may years, it will have aged cosiderably. The house eeds to be i good repair to qualify for a reverse mortgage. Property values may icrease over time. A home that appreciates by 2% each year will icrease i value from $150,000 to over $165,000 i five years. If you ca cotiue to live at home safely, it ca be worthwhile to use some of your growig equity. 17
How log will the reverse mortgage last? Reverse mortgages make the most sese for you if wat to stay i your curret home for may years. If you have a ogoig health coditio, it is importat to uderstad how much moey the loa will give you to pay for help over time. Let s cosider the situatio of three families who take out a adjustable rate HECM reverse mortgage. They live i a house that is i good repair ad worth $200,000. They ow their homes free ad clear of ay debt. Sceario #1: Bill Smith (age 63) recetly retired ad struggles to pay his curret mortgage. At his age, Bill receives over $115,000 from his HECM Stadard reverse mortgage which he uses to pay off his existig mortgage. This frees up extra cash for mothly expeses. He eeds to be sure that he ca pay property taxes ad isurace each year. He also has to pla ahead, because iterest paymets add up over time, which ca leave him with little or o home equity. Sceario #2: Joe ad Liz Aderso (ages 75 ad 73) built their 2-story dream home after retirig. Recetly, Joe had a mild heart attack ad has difficulty climbig the stairs. They opt for a HECM Saver with its lower closig costs. Based o Liz s age, the Adersos receive about $105,000 from their reverse mortgage. They take $20,000 of the loa to istall a lift ad make other home modificatios. They keep the rest ($85,000) i a lie of credit for future eeds. Sceario #3: Melba Joes (age 80) has lived i the same tow all her life. She kows she ca rely o family ad frieds for help with her arthritis. Her big cocer is usig up all her retiremet fuds. She receives over $134,000 from the HECM Stadard loa ad selects a teure paymet pla. This gives her $925 per moth for as log as she stays i her house. This gives her peace of mid, kowig that she ca pay for extra expeses ad wo t be a burde to her childre. Iterest rates chage frequetly, so oly a mortgage leder ca tell you how much you may get from a reverse mortgage. 18
Am I Prepared to Tap Home Equity? Whether you are cosiderig a loa or decide to sell the house, chaces are that it will take time to get the equity i your home. Pla carefully to make sure that these fuds will be available whe you eed them. These problems could slow the process: Legal issues Make sure that you have a durable power of attorey that icludes real estate. This allows your family or trusted fried to make decisios if you caot do so. Title to the home Uderstad who ows the home. If you add childre or gradchildre to the title, you may ot be able to qualify for a reverse mortgage (sice all homeowers have to be at least age 62), or sell the house without their coset. Home repairs For major repairs, it ca take up to several moths to fid a cotractor, get the ecessary permits, ad complete the job. Fidig a ew place to live If you sell the house, you must fid somewhere else to stay. Your childre may eed time to prepare their home if you pla to live with them. Retiremet commuities ad seior housig apartmets ofte have log waitig lists. Trasactios ivolvig the home usually ivolve may, differet people. These may iclude your baker, a real estate aget, lawyer, appraiser, ispector, ad cotractors. To avoid delays, pla ahead as much as possible. 19
Govermet Programs Govermet programs provide a importat safety et. They help older Americas who have limited fiacial resources, ad who caot pay for help at home. Several public programs help older people cope with a ogoig health coditio. If you qualify for these programs, you may ot eed to use your home equity. Medicaid Medicaid is a joit Federal-state program. It pays for log-term care for older Americas with low icomes ad resources, ad those who have high health care expeses. Medicaid may cover case maagemet, homemaker services, home health aide, persoal care, adult day programs, respite care, ad ursig home care. These services ca vary by state. To qualify for Medicaid, you must meet the icome ad asset requiremets i your state. To get help at home, you also eed to have a serious physical or metal coditio. If you receive Medicaid services ad you pass away, the state must try to recover the moey it spet o your care from your estate. The rules for Medicaid eligibility ad treatmet of the house are complicated ad vary from state to state. Takig out a home loa may affect your eligibility for Medicaid or other meas-tested public programs. To lear more, talk to a seior couselor or kowledgeable fiacial advisor. 20
Departmet of Veteras Affairs (VA) The VA provides log-term care services primarily to veteras with a service-related disability, low-icome veteras, ad former prisoers of war. Veteras may be eligible for ursig home care, assisted livig, or help at home icludig respite care, homemaker services, home health care, or adult day care. If you are a vetera, you ad sometimes your spouse may receive low-cost care i state veteras homes. You may also be able to pay for home repairs ad modificatios by refiacig your house with a low-cost VA loa. Medicare Medicare, the atioal health isurace program for seiors, maily covers medical care (doctors ad hospitals). If you have Medicare, it will pay for a home heath aide, but oly while you get skilled ursig care or rehabilitatio therapies at home. Oce you o loger eed skilled care, Medicare will stop payig for home health care. This is true eve if you still eed help with everyday activities. 21
Other Resources to Help You Live at Home Your local Area Agecy o Agig offers a wide array of services. These ca iclude help with household chores, meals served i commuity locatios, adult day care programs, seior ceters, protective services, ad legal couselig. You may be able to get these programs free or at very low rates. May commuities also provide low-cost services so that seiors ca cotiue to live at home. These programs may iclude special trasportatio programs, friedly visits or telephoe checks to seiors who live aloe, light housekeepig, ad help with home modificatios or repairs. Faith-based orgaizatios ad charities ca also help. Your pharmacy or grocery store may offer free home delivery. 22
Where to Go for More Iformatio Home Equity Advisor is a free website where you ca fid iformatio, tools, ad cosumer advice o how to use ad protect the value i your home: http://www.homeequityadvisor.org BeefitsCheckUp is a quick, cofidetial, ad free web service that helps you fid federal, state, local, ad private beefit programs for which you may be eligible: http://www.beefitscheckup.org/ Eldercare Locator ca help you fid services ad programs i your area: Call 1-800-677-1116 or check the web at http://www.eldercare.gov The Fall Prevetio Ceter of Excellece offers tips o how to check if homes are safe for elders ad how to pay for home modificatios: http://www.homemods.org/ The Family Care Navigator ca help to fid resources for families who are carig for a loved oe: http://caregiver.org/caregiver/jsp/fc_ cotet_ode.jsp?odeid=2083 The Cosumer Fiacial Protectio Bureau s Ask CFPB website provides aswers to may cosumer questios about reverse mortgages: http:// www.cosumerfiace.gov/askcfpb/search?selected_facets=category_ exact:mortgages&selected_facets=tag_exact:reverse%20mortgage The Natioal Reverse Mortgage Leders Associatio has publicatios ad a reverse mortgage calculator. Visit http://www.reversemortgage.org 23
Tips for Older Homeowers Look at the big picture Your ability to live at home is likely to chage over time. It is importat to look at your fiacial situatio beyod what you eed right ow. Short-term solutios could be risky if you require ogoig fuds for several years. It helps to save some of your home equity so you have the optio of movig to a better livig situatio. Do t wait util the last miute Timig is critical whe makig decisios about the home. You or your family could ed up facig a serious cash cruch if you wait util a crisis to start thikig about how to tap home equity. To avoid stress, disappoitmet, ad costly delays, pla i advace. The loger you wait, the harder it ca be to fid a good solutio. Have ready cash for emergecies It helps to have a three-moth emergecy fud of cash you ca access easily, such as a moey market accout or short-term certificate of deposit. If this is ot possible, make plas ad prepare for how you would pay for a emergecy. If you ru short, use credit cards sesibly. Avoid salespeople who show up at your door with a quick fix to your fiacial problems. 24
Create a family budget A sudde chage i health ca disrupt the best laid fiacial plas. You will eed to moitor your fiaces each moth to keep family affairs ruig. The best way to uderstad your family s cash flow eeds is to create a budget. Talk to your family It ca be hard to discuss persoal fiacial matters. However, good commuicatio ca brig a family together ad reduce cofusio. Talk with family or other heirs before takig out a loa. They will eed to pay off the loa balace or repay Medicaid if they wat to keep the house. Do t rush ito ay decisio If you decide to take out a home loa, weigh all the optios to fid the best solutio for you. Shop aroud with differet leders to check that the iterest rate ad fees are competitive ad fair. Oly sig papers that you uderstad. Ask questios if you are cofused. Get help from a trusted family member or fried who uderstads fiacial matters. Agecies that offer reverse mortgage couselig ca give you idepedet advice. The oly time you eed to act fast is if you decide you do ot wat the loa. Federal law gives you three days to get out of a reverse mortgage or home equity loa cotract. You may cacel the loa for ay reaso, but you must do it i writig withi three days. 25
Notes 26
About NCOA The Natioal Coucil o Agig is a oprofit service ad advocacy orgaizatio headquartered i Washigto, DC. NCOA is a atioal voice for millios of older adults especially those who are vulerable ad disadvataged ad the commuity orgaizatios that serve them. It brigs together oprofit orgaizatios, busiesses, ad govermet to develop creative solutios that improve the lives of all older adults. NCOA works with thousads of orgaizatios across the coutry to help seiors fid jobs ad beefits, improve their health, live idepedetly, ad remai active i their commuities. For more iformatio, please visit: www.coa.org, www.facebook.com/ncoagig, www.twitter.com/ncoagig.
1901 L Street, NW, 4th Floor Washigto, DC 20036 202-479-1200 www.ncoa.org www.facebook.com/ncoagig www.twitter.com/ncoagig
1 Preparig for Your Couselig Sessio The decisio to get a reverse mortgage is a importat oe. The Departmet of Housig ad Urba Developmet (HUD) ad the Federal Housig Admiistratio (FHA) wat to esure you are able to make a iformed decisio ad that you are able to choose a course of actio that will meet your eeds. For this reaso, housig couselig for HUD s Home Equity Coversio Mortgage (HECM) is required. The purpose of this overview is to provide itroductory iformatio o couselig ad the HECM program, to help you prepare for your couselig sessio. After your couselig sessio, you will have a better uderstadig of the features of a reverse mortgage; the impact a reverse mortgage will have o your particular circumstaces; ad whether services or programs other tha a reverse mortgage might better meet your eeds. What You Ca Expect from Your Reverse Mortgage Couselor Uderstadig what to expect from reverse mortgage couselors is a importat first step i settig your expectatios for your couselig sessio. Remember, oly you ca decide if a reverse mortgage is right for your situatio. The couselor provides iformatio to assist you i makig that decisio. The couselor is resposible for helpig you uderstad reverse mortgages ad the appropriateess of a reverse mortgage to meet your particular eed as well as alteratives to a reverse mortgage. Reverse mortgage couselors will discuss your fiacial ad other eeds for remaiig i your home, the features of a reverse mortgage ad how it works, your resposibilities with a reverse mortgage, the impact of a reverse mortgage o you ad your heirs, ad the availability of other assistace you may eed. The job of the couselor is ot to steer or direct you towards a specific solutio, a specific product, or a specific leder. Couselors will help you uderstad your optios ad their impacts. Reverse mortgage couselors are required to follow specific practices, which are desiged to esure you receive quality couselig services ad are protected agaist fraud ad abuse. HUD requires that HECM couselors do the followig: Sed you required materials( i.e., this packet) prior to you couselig sessio, Follow established protocols whe coductig the couselig sessio, ad Follow-up with you after the sessio has cocluded. Departmet of Housig & Urba Developmet: Reverse Mortgage Couselig Protocol - Revisio 1 March 2009
2 What You Ca Expect from the Reverse Mortgage Couselig Process Step 1 - Schedule a appoitmet. The couselig process begis whe you schedule your appoitmet for a couselig sessio. You must schedule a appoitmet directly with the couselig agecy. Your leder caot iitiate or participate i the couselig sessio. This sessio is coducted i perso or over the telephoe; however, HUD advises that, if possible, you meet with your couselor face-to-face to gai greater beefit from your sessio. Step 2 Couselor will cotact you ad sed iformatio. Oce you have set up a appoitmet, the agecy seds you a packet of iformatio so that you ca prepare for your sessio. Before you begi, you should also kow that some agecies charge a fee for couselig; if you caot afford to pay this fee you should discuss your iability to pay with the agecy at the outset of your sessio to uderstad your optios. Step 3 The couselor will collect from you: Your ame, cotact ad other key iformatio, icludig your iterest i obtaiig a reverse mortgage, for the couselig sessio. Step 4 - Couselig sessio: The couselor will discuss with you your eeds ad circumstaces; provide iformatio about reverse mortgages ad other alterative types ad sources of assistace that might be available to you. Step 5 Certificate of Completio: Oce you complete your sessio ad you ad your couselor are comfortable that you uderstad the essetials of a reverse mortgage, the couselor will issue a certificate, which verifies for a leder that you have successfully completed couselig. Step 6 - Follow-up: Your couselors will follow-up with you to lear if you eed further assistace ad to uderstad the outcome of your couselig sessio. You may also call your couselor to seek further assistace after your sessio. How a Reverse Mortgage Works Before you begi your couselig sessio, it is helpful if you uderstad a few basics about a reverse mortgage. Reverse mortgages eable homeowers age 62 or older to covert their home s equity ito available cash a leder advaces you moey (the loa) based upo the equity i your home. The amout of moey you are eligible to receive geerally depeds upo the amout of equity i your home ad your age at the time you get the loa. With a reverse mortgage, you remai the ower of your home. As with ay home, you must cotiue to pay property taxes ad homeower s isurace. You are also resposible for maitaiig your home i good coditio. You will ot have to repay your loa balace for as log as you live i your home. You must repay a HECM loa i full whe the last survivig borrower dies or sells the home. You ca Departmet of Housig & Urba Developmet: Reverse Mortgage Couselig Protocol - Revisio 1 March 2009
3 choose to pay off the loa through the sale of the property or prepaymet of the loa at ay time without pealty. Your estate may retai owership of the property ad must pay off the loa i full or the property ca be sold to a urelated party for the lesser of the upaid mortgage balace or 95% of appraised value. Types of Reverse Mortgages There are three types of reverse mortgages show i the chart below. Sigle purpose reverse mortgage Proprietary reverse mortgage Home Equity Coversio Mortgage (HECM) Typically offered by state ad local govermet agecies to be used i oly oe specific way, for example, home repairs Ca be used for ay purpose ad may be suitable for borrowers with high cost homes Ca be used for ay purpose ad is isured by the Federal govermet. Paymet Pla Optios There are several types of HECM loa plas available, icludig mothly ad aually adjustig iterest rate loas as well as fixed iterest rate loas. Borrowers ca decide to take a lie of credit with flexible draw dow optios, a term loa with fixed mothly paymets for a specified umber of years, or a teure pla with guarateed paymets for life or a combiatio of these optios. Choosig a Reverse Mortgage to Meet your Needs HECM paymet plas are flexible. The best paymet pla for you will deped o your curret ad future fiacial eeds ad circumstaces. For example: If you have a small balace o your existig mortgage ad would like to pay it off with the reverse mortgage, a lie of credit pla would allow you to draw all the fuds at loa closig ad pay off the curret mortgage; If you eed a set amout of moey every moth to supplemet your icome to help meet mothly expeses, the a teure or term paymet pla might be a suitable optio for you. If you kow you will have some large health care expeses i the ear future ad wat to have the fuds available whe eeded, a lie of credit may also meet your eeds. Your reverse mortgage couselor will discuss your goals for a reverse mortgage with you ad will explai the differet optios available to help meet your eeds. Departmet of Housig & Urba Developmet: Reverse Mortgage Couselig Protocol - Revisio 1 March 2009
4 Costs to Obtai HECM Costs associated with HECMs are geerally higher tha those for forward mortgages used to purchase a home. Although, the cost categories are the same as you would see for a traditioal forward mortgage. These costs iclude leder fees to origiate the mortgage, servicig fees for ogoig admiistratio of the loa ad iterest o the moey you use from the loa. There are also closig costs, which iclude all the usual ad customary expeses associated with obtaiig a mortgage, for example, the appraisal, title searches ad isurace. HECMs also iclude a fee for FHA mortgage isurace. Impact o Tax/Social Service Beefits Reverse mortgage loa advaces are ot taxable ad do ot affect Social Security or Medicare beefits. However, you must be careful that ay loa proceeds you retai do ot exceed the mothly liquid resource limits for Supplemetal Security Icome (SSI) ad Medicaid, which may be impacted by your HECM paymets. Alteratives to a Reverse Mortgage Your HECM couselor will also help you cosider optios available to meet your eeds other tha a reverse mortgage. These optios iclude: sellig your home ad movig to a more suitable residece, retig as well as other fiacial optios, ad support services ad public beefits that may be available to you i your commuity. HUD ecourages you to lear as much as possible about your optios, before you decide o a reverse mortgage. Listed below are resources you ca access to lear more about reverse mortgages ad elder care. AARP s web site at www.aarp.org/moey/revmort provides more iformatio o reverse mortgages ad calculators that will provide geeral estimates of the amout of moey you might receive from a reverse mortgage. You may also cotact AARP at 1-800-424-3410. The Natioal Reverse Mortgage Leders Associatio provides cosumer iformatio at www.reversemortgage.org/default.aspx ad ca also be reached by callig 1-866-264-4466. Departmet of Housig & Urba Developmet: Reverse Mortgage Couselig Protocol - Revisio 1 March 2009