Learn how a reverse mortgage can help increase your retirement income and give you a better quality of life.

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Reverse Mortgages

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A reverse mortgage is a way to receive cash from the equity in your home.It is designed for homeowners ages 62 and over.You retain full ownership of your home and can not lose your home to the bank!

What Is A Reverse Mortgage?

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Sell your homeRefinance the existing mortgage to take out extra cashTake out a home equity loan and make payments

Traditional Ways to get Money From Your Home

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It lets you get immediate cash out of the equity in your homeYou never pay it back for as long as you live in your homeThe income is 100% tax-free

How Does a Reverse Mortgage Provide Money?

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Supplement your retirement incomeBuy a new carMake home repairsUse it as a financial planning toolTravel more frequentlyHelp pay for a grandchild’s educationCover medical expenses.

Typical Uses For a Reverse Mortgage

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In a lump sumAs a series of monthly paymentsAs a home equity line of credit (with possible annual increases)Any combination of the above methods

How You Get the Cash

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When you pass awayIf you sell your homeIf you convert the home to a rental propertyIf you permanently move out of the homeIf you fall behind on your property taxesIf you let your homeowners’ insurance policy lapseLet the condition of your home deteriorate

When is the Loan Paid back?

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You rent out your home or a portion of itYou add another person to the title of the homeYou change the zoning classification of your homeYou take out another loan and use your home equity as collateral on the loan

Additional Payback Criteria

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The debt grows as you take out more cash and as interest is added to the balanceAs the amount you borrow gets bigger, your remaining equity gets smallerYour equity can increase if the value of your property goes up at a faster rate

What Happens to the Borrowed Money?

Debt Vs. Equity

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

1 3 5 7 9 11 13 15

Years

Am

ou

nt Value

Debt

Equity

Initial Home Value: $300,000Amount of Loan: $200,000Appreciation Rate: 6%Mortgage Interest Rate: 6%

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Your home is worth $200,000Your existing mortgage balance is $50,000You receive $120,000 as a lump sum from the reverse mortgageYour new equity is now $30,000

Example of a Reverse Mortgage

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You and any other co-borrower must be at least 62You need to own your home (there can still be a mortgage on it)There needs to be significant equity in your home (you can’t take out cash if you have a high LTV mortgage)You need to live in your home at least 6 months out of the yearYou must agree to accept mortgage counseling from a HUD-approved counseling agency.Outstanding liens and existing mortgage balances must be paid off at closingMobile homes typically are not eligible

How Do You Qualify for a Reverse Mortgage?

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Available cash is based on:

Age (more cash to older home owners)The value of your homeThe condition of your homeAvailable equity in your homeCurrent interest ratesHow you choose to take your money (lump sum, payments or credit line)

How Much Money Can I Get?

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Age: 77Home Value of $312,895 or moreInterest Rate: 6.48%You get a credit line of approximately $218,000*. The unused balance credit line increases at the current interest rate

Amount is based on standard guidelines of the HECM program at the time this presentation was developed, and may change at any time.

Credit Line Example

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You will owe the amount of money borrowed plus the total accrued interestYou will never owe more than the value of the homeYour heirs will have no payment liability if you owe more than the home is worth (the lender assumes the risk)The lender can NEVER take your home from you!

How Much Will I Owe?

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The only out of pocket fees are an appraisal (average cost of $350) and perhaps a credit checkOther costs and fees are typically financed in the loan amountThe financed costs are included in the loan balance

How Much Does it Cost?

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The costs are typically the same as those in a traditional mortgage:Lender feeLoan origination feesTitle search and title insuranceLoan escrows of taxes and insuranceRecording feesAnnual mortgage insurance premiumAnnual service fee (added to your loan balance)

What Are the Financed Costs?

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The HECM is insured by the federal governmentThe FHA tells the lenders how much they can lend to you, based on your age and the value of your homeThe amount you or your heirs will owe can not exceed the value of your homeIf you home is worth more than the amount owed, you or your heirs keep the differenceIf your mortgage balance exceeds the value of your home, the FHA insurance pays back the lender

Home Equity Conversion Mortgage

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1) Term Option: You will receive equal monthly payments for a fixed period of time selected by you.2) Tenure Option: You will receive equal monthly payments for as long as you occupy your home as a principal residence.3) Line of Credit Option: You may draw up to a maximum amount of cash at times and in amounts of your choosing, as long as you occupy your home as a principal residence. (Option not available in Texas.)4) Modified Tenure Plan: Allows you to set aside a portion of loan proceeds as a line of credit and receive the rest in the form of equal monthly payments.5) Modified Term Plan: Allows you to set aside a portion of loan proceeds as a line of credit and receive the balance as equal monthly payments for a fixed time period as specified by you.

The 5 Types of HECM Payment Options

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HECM payments do not affect your Social Security or Medicare benefits because those benefits are not based on your assets, and the payments are not considered to be income. For the federal Supplemental Security Income program, beneficiaries must keep their liquid resources under certain limits. If you do not spend HECM advances in the month received, then such funds are considered part of your liquid resources and may adversely affect your eligibility for SSI.

How Do HECM Payments Affect My Benefits?

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Learn how much cash you qualify forLet us help you put together a financial analysis worksheet to see how you will benefit from a reverse mortgageSchedule an appointment with family members so we can educate them on how you will benefit from a reverse mortgageObtain a copy of the Fannie Mae publication- Money from Home: A Consumer's Guide to Reverse Mortgage Options

Take the Next Step

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A reverse mortgage can provide you with cash to improve your quality of lifeA reverse mortgage can eliminate the current mortgage payments you may be making on your homeYou can never lose your home to the bank or lender with a reverse mortgageYou or your heirs can never owe more than your home is worth

Conclusion

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